Tax should be on real gains after inflation but Capital Gains should be taxed the same as wage income or interest.

If inflation is 2 percent and my savings account pays 2 percent in interest I should not pay a tax on that interest since I really did not make any money, I broke even. More realistic is inflation is 1.8 percent and my CD account pays 2.5 percent and my marginal tax rate is 24%, my inflation adjusted after tax return on investment is 0.1%