It's perfectly possible. I mean... I didn't know that's not the case in USA, but in other countries that's exactly how it works. You are taxed annually for any assets value above a certain exempt limit (ie: around the first million total net worth in the case of Spain).
how in the hell?
is the government then on the hook if I have unrealized losses?
Nope. They just fuck you. Gotta love socialists!