Why not? The argument is that someone sitting on a $2 million house isn’t “really” rich and shouldn’t have to pay taxes on their house. But they are “really” rich and can easily access that wealth. They’d just prefer not to.
Banks have lending limits. You're assuming the $2mm house isn't leveraged to begin with.
I’m sure you can find some obscure edge case somewhere but by and large people that own things that are worth a lot of money are rich and don’t especially need our sympathy. Let’s save that for all the actual poor people out there that don’t own houses, much less multi-million dollar houses.