At the same, the IRS raises it own army to combat tax evaders as well as tax cheats. The mess only gets messier. I haven't the faintest idea what Congress will do, if anything, to change the tax code. But here is what they should do. First, acknowledge that all income is income no matter the source.
Capital gains is an interesting concept.
Homeowners should be able to index for inflation the value of their homes when calculating capital gains. The homeowner, as just a homeowner, has done nothing to increase the value of his home. That incremental value really belongs to society. The homeowner should be happy to share just a minor part of the windfall gain produced by society rather than have it all revert to society. Another source of capital gains is stock market appreciation.