>If you put a hundred dollar bill under your pillow, it will be worth less and less as time goes by thanks to inflation. And if you use that hundred dollar bill to buy an asset that hopefully keeps its real value, you pay capital gains taxes on the nominal increase in value (even if there was no real increase in value).

That's because capital gains taxes that don't account for inflation (which is most of them) are essentially a stealth wealth tax.

Yes, that's my point. It's already the case that most government indirectly tax wealth. So the proposal isn't some new outrage.

The shortcomings of modern monetary policy and the impact of inflation is a seperate topic. When inflationary systems are well controlled, they do create some positive incentives (primarily to spend money and put capital to productive use). As a tax they’re generally not a problem unless you go full Weimar mode. But you’re right that they can also represent a tax, especially in jurisdictions that have a capital gains tax (which the jurisdiction where I am a tax resident doesn’t incidentally).

My adopted home also doesn't have a capital gains tax. I agree that if you want to have a capital gains tax, it should be inflation adjusted. (You can put in place an explicit wealth tax, if that's what you want.)

> When inflationary systems are well controlled, they do create some positive incentives (primarily to spend money and put capital to productive use).

I find that those incentives are a bit silly. First, the central bank can print enough money to get any level of aggregate nominal spending they fell like. No need for inflation. George Selgin's book 'Less than Zero' even makes a convincing argument in favour of deflation. (He essentially argues for a fixed nominal GDP, and an economy that's growing in real terms would thus see the price of goods decline.)

Inflation is also not an incentive to put capital to good use. That's because money isn't real capital. If I have a factory or a piece of land that sits idle, that's a real cost to the economy. But if I have a hundred dollar bill that's siting idle under my pillow, nothing of value has been lost: hundred dollar bills are essentially free to print.

The central bank can put them in and out of circulation by buying and selling assets. So when I remove my bill from under my pillow to spend it, the central bank can react by selling assets. (They don't need to monitor my pillow. They can just go by statistical measures of spending or inflation.)

In fact, in order for me to have a hundred dollar bill under my pillow, it means I refrained from consuming some real goods earlier. So those real goods are available for investment by the wider economy while my pillow serving as a piggy bank.