Personally I disagree, because while the gain hasn’t been realized, you can act on the assumption that it can be realized at any point. There are really degenerate strategies once you get to this level of wealth, such as taking out loans with these “unrealized gains” as collateral and realizing the gains without paying taxes.
Anyway, here's the problem with unrealized gains. If stock go brrrrr up 10-fold, wow! Huge unrealized gains! Get taxed on it. Unexpectedly, now the stock crashes, or it's found the company was doing something illegal, or the finances were fraudulent, or it was a ponzi scheme, etc, etc. Now stock is worth -zero- dollars overnight. Now I don't exactly what the logistics are going to be, but even if you hit those unrealized gains in tax year 2023, and the stock collapses in tax year 2024.. you had better get those gains that you were taxed on (but never got!), you had better get them back, plus interest.
In your example, a stock went up 10x overnight. Mature stocks don’t do that, so you must be investing in something very risky.
What a tax would do is incentivize you to realize some of your gains to pay the tax. If you don’t want to do that and would rather keep gambling, then you’re free to do that. If the stock then crashes and you lose all your money that’s on you.
Obviously you have to think about implementation to make sure you’re not charging a tax that people can’t pay, but that can be figured out.
That big pile of sketches you made as a teenager? Well it says here that some person bought an “early Banksy” for $500k this week so we the government would like 20% of your $49,999,995.60 unrealized gain by next Tuesday please.
What? You burned them in an attempt to avoid the wealth tax? We have a dealer from on the line saying he’ll pay $2m for the ashes and $10m to remove the fire place for display in Brad Pitt’s private gallery. Tap tap tap 20% of $12m less $2k for your upfront building costs is… let’s just round it up to $2.5m. Please submit your check by next April.
Oh hang on, Elon Musk has tweeted saying he’ll pay $69m for the fireplace plus a $420k bonus payment if you throw in some vials of your own tears. He wants them to hand out in gift bags at his next toga party, apparently. Can you get back to us with how well hydrated you are so we can run the numbers on these unrealized capital gains?