Can you deduct lost wages on your taxes due to an on the job accident and workers comp only paid you 60 percent of your normal pay?

No. You cannot deduct lost income when you never claim the actual income in the first place. You are only taxed on the amount of taxable income that you received. The reason that Worker's Compensation pays you at this level is that you are not paying income taxes, state taxes, social security taxes nor medicare taxes on this income.