Now, if the value drops, sure, maybe you’d pay lower taxes or get a tax offset, but it’s still odd. Think about it: you buy Bitcoin at $10,000, and over the next five years, it rises, so you’re paying annual taxes based on that value increase. But then, if the price tanks overnight and you sell in a panic, you’re at a loss - yet the government’s already pocketed tax from your unrealized gains.
Volatility is always going to pose some challenge towards taxing of Bitcoin. Models that would allow for income tax which would be based on increased allocation and time of sales would be a preferable option.
This would only lead to more and more tax evading and they aren't looking for a means to help Bitcoin development eventually, they hope to discourage it with unfair taxation.