Should unrealized capital gains be taxed?

The stock market does not go up in a straight line, which is a problem when you tax gains that can vanish. Imagine taxing a founder's portfolio at its 2021 peak, then watching it fall 40 percent in 2022: the government has collected cash on wealth that no longer exists, and now it owes refunds, or the taxpayer has paid real money for phantom gains. The Congressional Budget Office has repeatedly flagged how volatile capital-gains revenue already is; a tax on unrealized gains would multiply that instability. CBO. States would face the same whiplash. And the cruelty lands in downturns: to pay the tax, investors must sell assets into a falling market, the exact fire sale that turns a correction into a crash. We would be building a tax code that forces selling at the bottom and rewards it at the top. That is not redistribution. It is a machine for manufacturing panics.