[holy_city]

>So in this example, half of the putative "gain" is actually inflation.

Is this an issue in practice? Like I get if I have an asset that meets inflation for a decade than I'll lose value through the taxation. But that would be a bad investment, wouldn't it?

[gnicholas]

Yes, plenty of people have assets that don't appreciate a ton over a long period of time. Even with stock — you don't know in January if it's going to be worth more in December. So you make some calculation and sometimes end up holding it. Also, people hold onto things for sentimental reasons (inherited from relatives, etc.). But the bottom line is that anyone who holds any asset for 20 years and then sells it is going to pay tax on the inflation that occurred during that period.