More-dangerously, it is taxing theoretical money that you haven't yet made.
There is no guarantee that the current market-clearing price for a given object is equivalent to that at which a larger inventory can be sold.
Taxing capital gains at the time of sale makes sense -- there is actual revenue available for taxation. Taxing unrealized gains can be a path to really-negative outcomes. This is particularly so if the government doesn't give matching credits for unrealized capital losses.
There are some loopholes that should be closed however. You can go to a bank and borrow against your shares, using them as an asset without realizing capital gains. In my mind, if you use the shares (gains) as collateral for your benefit, you should have to recognize the capital gains as mark-to-market immediately payable.
Presumably the bank won't accept them as collateral for more than can be realized at the time of sale?
I'm no expert, but I would guess that, if shares are foreclosed upon, the bank's basis is zero (and their taxation short-term)?
(Edit: the downside here is that the government doesn't see any revenue from this approach, which it might otherwise. The shareholder must pay interest, though, which might not be to their advantage.)
There is no guarantee that the current market-clearing price for a given object is equivalent to that at which a larger inventory can be sold.
Taxing capital gains at the time of sale makes sense -- there is actual revenue available for taxation. Taxing unrealized gains can be a path to really-negative outcomes. This is particularly so if the government doesn't give matching credits for unrealized capital losses.