> But by that logic, we should force people to pay taxes on everything they own that goes up in value, on a regular basis.

We don't really know the value of most things when a transaction isn't happening. Also, this would force people to sell things they otherwise wouldn't have merely in order to pay the tax on their value changing, which is six kinds of disaster.

And, that would imply that you would have a tax loss any time the value of something you own goes down, even if you don't sell it. Which would cause government revenue in recession years to be inverted, even though government spending in recession years is usually increased.

> It was more to point out that not forcing the sale doesn't magically make the taxes disappear. It just leave them unrealized in the same way they would if the original owner was still alive and owning them. They'll just get paid later.

They're unrealized gains. They may not ever be realized.

One of the more common ways for this to happen is for the business to eventually go under. Most of them do in the long run. What percentage of companies are over a hundred years old?

More to the point, that's exactly the problem. If you force a large tax event on sale, things get held longer than they ought to, and then (poorly) managed by someone not really interested in that line of business. Malinvestment leads to lower returns, which reduces tax revenue, often by more than the amount of the step up in basis.

In general, anything which is economically inefficient is also going to be bad for government revenue.