They would need to allow a lot of other refunds if that really does start becoming the case. Ex: All capital loss should also be deductible against regular income, carryover capital loss over the years should get interest from the government much like tax you don't pay gets interest on you, etc.
If that sounds crazy, it is, but it also makes something as crazy as tax on unrealized unliquid gains you cannot sell too somewhat possible. Many, many new businesses that are growing would essentially have to be liquidated to the government in a few years.
Well, capital loss carryover needs an inflation index in a bad way anyway. It was introduced into the tax code 45 years ago and it hasn't changed since. There was a proposal a year ago to bump it to $13,000 and index it to inflation but apparently did not get the necessary votes.
If that sounds crazy, it is, but it also makes something as crazy as tax on unrealized unliquid gains you cannot sell too somewhat possible. Many, many new businesses that are growing would essentially have to be liquidated to the government in a few years.