The problem with CGT is that it allows people to defer their tax obligations indefinitely while amassing wealth using untaxed “unrealised” gains. This can be a very effective tax-avoidance strategy.

This makes sense kind of, though. If you haven't realized any of your gains, what are you paying the tax with?

This feels like if you're a normal person who happens to own a painting that becomes super desirable and worth millions. If you sell it then tax away, but otherwise it's literally just the same painting you've always had.

Yup, but an unrealised gain is still a gain. A million dollar in shares or paintings or classic cars can be borrowed against, and you don't need to pay taxes on borrowing.

(And when you die, the capital gains base resets, which is the real travesty -- the heirs pay the loan with some of the capital at zero capital gains tax cost, and start borrowing again with the same strategy whenever they need to.)

> Yup, but an unrealised gain is still a gain.

How so though? If you're not selling or collateralizing something, you're not gaining any money from possessing it (unless you're counting the spreadsheet number going up as gains by itself).

> And when you die, the capital gains base resets

Yeah, this seems pretty ludicrous. I can understand why inheritance wouldn't cause a taxable event (e.g. you inherit the painting), but it seems pretty wild to allow that while also resetting the basis.

I could be missing something, but I don't know of a super reasonable defense for this part (other than potentially disincentivizing inter-generational hoarding of assets? Honestly not sure)

> you're not gaining any money from possessing it.

You aren’t gaining money, but you’re gaining wealth. And the compounding effects are exaggerated if you don’t pay tax until you sell.

For certain asset classes, especially liquid assets like shares/stocks this is dead simple. The value is easily and accurately determinable. If you don’t have the money to pay the tax, you sell assets to make the money. Property, especially residential, is basically on the same level. Ah, but what if investors don’t have the cash and are forced to sell their properties? God forbid these leeches stop treating housing as speculative assets and sell their portfolios onto owner-occupiers.

For other assets, yeah, I don’t know. But I don’t have a single iota of sympathy for millionaires/billionaires who may struggle to pay tax because their wealth isn’t generated via personal income.

> This makes sense kind of, though. If you haven't realized any of your gains, what are you paying the tax with?

True, but only in a philosophical sense. It's an issue of pricing, and pricing securities assets to original purchase value is a falsehood.

People are very happy when their stock price increases dramatically, or their home value increases; they don't say 'well, those aren't my assets; all I have is the $100 price I bought it at X years ago.' People are happy when it's securities for which they only have future options to buy.

What if we get rid of the step up doctrine? Then they can't avoid it indefinitely.