The investor really should be able to add $20k to each tax return over the previous 10 years so they only pay their marginal rate on the gain. But that's impossible to administer.

For example, you make $100k every year in income then make a capital gain of $200k for an investment you have held for 10 years. You pay 47c on the dollar in tax for the majority of that gain with no discount. .

The problem with indexation is the bracket creep effect. This is why the discount has some basis in my opinion, you can't spread the gain over the years of ownership.