Is it not that the gains are unrealized? If they sold the house they would pay capital gains tax?

They aren't going to sell it, they'll pass it to their children and the cost basis will reset. Their children will then sell it and pay zero tax.

Property taxes are unrelated to income tax

I'm not a finance person but I think capital gains kicks in if you sell early. Otherwise, just regular taxes?

opposite, income taxes take place first. after a waiting period, its just capital gains. capital gains taxes are typically lower than income taxes so this encourage long term holding

I think not wanting to pay some yearly tax on that $1.4 million because the government pretends that the same as having $1.4M cash in the bank, or making $1.4M in a year, is fine.

Not wanting to pay the property taxes associated with a $1.5M home is the problem.

Which is why we also have things like a deferred property tax program! The way to "solve" the problems Prop 13 addresses would be to expand programs like that, but homeowners—disproportionately active middle- and upper-middle-class voters—want to have their cake and eat it too.

It wildly distorts the entire real estate market. Cool your home is worth 1.5 million. Your kids will never ever afford a home.

Without prop 13 that house would probably only be worth 600k. What difference does it make if it functions as a home.

Too late to fix it now.