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it's not just securities, all assets have appreciation taxed at capital gains rates, including speculative real estate. And yes, the basis step-up applies to all of that upon the owner's death. (The one-time home exemption from cap gains is capped at some level, I forget what; I think it's $500,000, certainly enough to shelter most people's appreciation. But I was talking about non-home assets. Surely you're not advocating getting rid of the one-time exemption?)
My argument was that currently some tiny percentage of estates gets hit with estate tax, but all estate beneficiaries get the step-up in basis whether or not the estate they inherited from is taxed. The result is that very large amounts of capital gains don't get taxed -- whereas if you eliminated the estate tax, and with it the step up in basis, the heirs would have to pay capital gains tax on the entire gain. That's a very big deal because chances are the dead person would have decades' worth of appreciation on the assets, whereas the heir upon sale usually wouldn't have held the asset as long before selling it.
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