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Congress should avoid penalizing workers whose income fluctuates because they lose their jobs by reinstating income averaging in the federal tax code.

Before the 1986 Tax Reform Act taxpayers could average their income over three years, enabling them to avoid lower taxes in years when their incomes were temporarily low. The current federal tax code lacks this provision, penalizing workers who lose their jobs. Taxpayers should be allowed to average their income over three years and be able to take a tax credit for prior taxes paid if their tax liabilities fall because their incomes drop.