U.S. Government shuts down.

[kandrathe]

If you have money in your bank account, that's wealth. If you have money in a small business, that's also wealth. Spending your bank account on a business is not changing your net wealth.

It would need to also factor in your liabilities. If I borrow a million, and invest it in a new venture, then effectively I'm zero. If my new venture becomes worth 5 million, then I'm 4 million in the positive, and that wealth should be taxed at a very low rate.

If one persons net worth is low, say due to starting a small business, then their effective tax rate is small. This strategy supports entrepreneurship.

One part of this needs to be addressed. The overwhelming majority of new business ventures fail within a year, and the new business owners become bankrupt. Creditors have to eat those losses, and those losses get passed to others down the chain.

Being a Creditor is a risk. If you can't afford to lose your money don't take risks with it, like borrowing it to someone who won't pay you back. This is no different.

Once their risk has paid off and the value of the asset grows, the tax grows.

And what happens when their risk doesn't pay off?

Then everyone remains poorer, and it was a bad investment. No profits, no income, no taxes.