This is it, unfortunately git is "too dumb" for this. In order to merge code, it would have to either understand the AST.

What happens when you stage the line `} else return {`? git doesn't allow to stage specific AST nodes. It would also mean that you can't stage partial code (that produces syntax errors)

Git can use arbitrary merge (and diff) tools. Something like https://mergiraf.org/introduction.html works with git and gets you ast aware merging. Do not underestimate gits flexibility.

Smudge and clean filters work on text, git would not need to change at all.

You would still store text, and still check out text, just transformed text. You could still check in anything you want, including partial code, syntax errors, or any other arbitrary text. Diffs would work the same way they do now.