This might be unpopular but I think there are ways that taxing unrealized capital gains could work without being super radical.
1. Allow unrealized losses to be deducted.
2. Once a certain percentage of the gain is taxed, step up the cost basis by the amount of tax paid. That way you avoid double taxation (once under the unrealized value and again when the asset is sold).
3. (optional) Keep the tax rate on unrealized gains low. Even 3% would be significantly higher than what we have today.
Under this logic, it almost seems like a no brainer. People who have a ton of wealth in unrealized gains would pay taxes progressively over time instead of being hit with a massive tax bill when they sell (or potentially no tax bill when they die due to the step up in cost basis). Feel free to poke loopholes in this idea.
1. Allow unrealized losses to be deducted.
2. Once a certain percentage of the gain is taxed, step up the cost basis by the amount of tax paid. That way you avoid double taxation (once under the unrealized value and again when the asset is sold).
3. (optional) Keep the tax rate on unrealized gains low. Even 3% would be significantly higher than what we have today.
Under this logic, it almost seems like a no brainer. People who have a ton of wealth in unrealized gains would pay taxes progressively over time instead of being hit with a massive tax bill when they sell (or potentially no tax bill when they die due to the step up in cost basis). Feel free to poke loopholes in this idea.