They have different problems - diverting investments into liquid cash to pay off tax bills. This is also bad, since rather than expanding a productive business cash is diverted to creating unnecessary liquidity.

There is also no "estate planning" for various other incidents of the same issue, e.g. employees cashing out stock options.

> diverting investments into liquid cash to pay off tax bills. This is also bad, since rather than expanding a productive business cash is diverted to creating unnecessary liquidity.

By that argument, all taxation is bad because it diverts funds from other purposes. Yet we must pay for government services. Government is an investment; what you are saying, in effect, is that there are opportunity costs to the investment - a truth of every investment.

Not all taxation is bad by this argument. Only demanding liquidity for taxes on illiquid transfers is.

If the government took 30% of the shares of the company in lieu of the same amount in cash, the issue would be completely resolved. There would be no reason not to invest in the business - the government takes 30% (or whatever the rate is) of shares regardless.

The problem is that turning illiquid assets into cash costs extra money.