Sure, the primary goal of taxation is to fund the government, but understanding that is easy and simple. More intricate and thus deserving vastly more care and planning is how to extract those funds in a way that incentivizes good behavior and mitigates market failures. People are going to try to minimize their tax burden in any system, so the systems are put together with the intention that good practices lead to lower tax burden, because otherwise the rich will lean more heavily into bad practices to avoid taxes. So what is the effect of taxing people on unrealized capital gains on stocks, how does one avoid that tax? The government is going to come after the ultra-rich for their stock holdings, they'll certainly have to sell off assets for cash in order to pay the tax bill, so they're going to avoid that as best they can. How does one avoid that? They could avoid ownership entirely, find a way to entrench their power and revenue streams without actually having their name down on paper as owners, which is bad as now we've distanced the people in charge from legal culpability for their actions. Or they could avoid unrealized gains by making their stocks not worth owning, by siphoning the value out of companies in an indirect way that would not benefit other stockholders. That's not great, that just prevents anyone new from gaining wealth. The potential consequences aren't great here.
