U.S. Government shuts down.

[Jester]

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

I don't understand this. 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.

If you tax wealth at a flat rate, you have no particular incentive to save or to invest - you have an incentive to consume. Which is why most economists think wealth taxes are a terrible idea, although for some, the distributional questions are beginning to outweigh the investment consequences.

-Jester