Steve Rosenthal (Tax Policy Center) & Robert McClelland (Tax Policy Center; Google Scholar), Taxing Capital Gains at Death at a Rate Higher Than During Life, 186 Tax Notes Fed. 2417 (Mar. 31, 2025):

In this article, Rosenthal and McClelland examine various proposals to tax unrealized gains, concluding that the best approach is to tax gifts and bequests of appreciated assets at death at a higher rate than during life.

Conclusion
Current tax law encourages wealthy investors to retain their appreciated assets throughout their lifetime to erase asset gains at death. It induces the rich to lock their capital into less productive investments, deprives our country of needed public revenue, and perpetuates dynastic wealth.

If the United States instead taxed the trillions of dollars of unrealized gains held by the wealthiest households, it could raise large sums of revenue, unlock capital for more productive uses, and stem the creation and maintenance of economic dynasties.

Designing a tax for these unrealized gains raises numerous challenges, starting with who should be subject to the tax. After comparing different approaches, we conclude that the best approach is taxing unrealized gains at death and at a higher rate than during life. This would encourage investors to sell (or mark-to-market) their assets well before they die. To minimize the financial and administrative burden of the new tax, we would apply the new tax only to the very richest Americans, since they hold a disproportionate share of unrealized gains and are best situated to pay the tax.

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