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By all accounts, Donald Trump used huge real estate losses in the early 1990s to pay little or no taxes in subsequent years.  In other words, he “income-averaged” his bad years and his good years. That seems to make perfect sense to many tax experts. And the eminently reasonable Megan McCardle of Bloomberg wrote a piece titled “Trump’s 1995 Return Shows Good Tax Policy at Work.”

But suppose you, as a typical American, took a big loss on your home, or had a bad couple of years because you lost your job? Could you cut your taxes by income-averaging, like Trump did?

No and no. First, if you buy your home today, and the value falls tomorrow, you are not allowed to write off your loss on your taxes. As the IRS says in its cheery way, a ” loss from the sale or exchange of a capital asset held for personal use isn’t deductible.”

But perhaps more important, the typical American wage earner who has a decent income one year (and pays lots of taxes!), and loses his or her job the next year, is not allowed to income average across years. That provision was taken out of the tax code in 1986 (there are some special situations where it still holds, but they don’t apply to most people).

Income-averaging would be a tremendous cushion to ordinary wage earners in times of economic tumult, like the recent deep recession. If you lost your job, those bad years could help lower your tax bill in other years where you earned more money. In an important sense, income-averaging is a protection against insecurity. (Full disclosure: I advocated income-averaging in my 1996 book, The High Risk Society).*

How much of a cushion would income-averaging prove in tough times? The amounts could be quite significant. Here’s an example. A married person earning $120K in a year with 1 small child and a non-working spouse would pay (after exemptions and the standard deduction) roughly $15,000 in federal income taxes. If they lose their job for two years, their income goes down to zero and they pay zero taxes.

But if this hypothetical person could income-average over the bad years–like Trump did–he or she would pay tax on $40K of income for three years, which would come to roughly $1500 per year, or a total of $4500 for three years. In effect, income-averaging would cut their three year tax bill by two-thirds, and give them $10K in their pocket–mighty handy to have when you are out of work.**

Now, not to belabor the obvious, putting income-averaging for ordinary Americans into the tax code could be expensive. Given all the other competing needs on the tax system, it’s not clear that allowing broad income-averaging is the best use of scarce fiscal resources. But as a philosophical matter of tax policy, income averaging both aids fairness, and helps cushion ordinary Americans against the ups and downs of a volatile economy.

So I ask the question:  If the ordinary American can’t income average, why can Donald Trump? Or to flip the question around, if Donald Trump can income average, why can’t you?

*The pre-1986 version of income averaging, unfortunately, was restricted to the wrong people. As I wrote in 1996, “under the pre-1986 law, people could only average if their incomes spiked up substantially–a lottery winner, say, or an author whose book was suddenly a best seller. Those restrictions ruled out the people who really needed the help, the ones whose income suddenly took a big dip down because of a job loss. People need to be insured against actual losses, not the possibility of sudden gains.”

**The gain would be even bigger if the family is eligible for the EIC.