alt Hacker NewsI am describing a system where the government can take anything you have over a certain amount. (Or more precisely perhaps can take a proportion of what you have that asymptotically approaches 100% as your total wealth increases.) In my conception this money would then immediately be redistributed (as direct cash payments) to people with less. Government employees doing as you describe would also be subject to severe penalties. The purpose is to entirely eliminate massive wealth concentration.
As for why would anyone start a business? There's no disincentive to start a business in this scheme. I'd say the current system has greater obstacles to starting a business in many cases, due to high barriers to entry and regulatory capture by large players. The purpose of policies like the ones I describe is to encourage people to start small businesses and keep them small. You can grow your business up until its value is around that taxation threshold and then just kick back. We don't want people taking big businesses and making them bigger.
I think the major problem with your described system is how you quantify wealth. For example, you start a startup, get almost no salary, but you raise a 20M investment on 100M valuation — with your proposed method of calculation, the government already wants you to pay tax on your shares of a 100M enterprise, whereas you may not see a dollar of profit for another 10—20 years (or ever, if the startup fails). It's very difficult to quantify wealth, especially taking into account that a lot of it is risk-bound and long-term.
One interesting aspect of trying to quantify wealth and tax based on that — is that it gives enormous advantage to bearers of wealth that is difficult to quantify. For example, political followers is wealth that you can't tax, but one can turn into profit very easily and in many sneaky ways. Also power in general (power to collect taxes, power to control law enforcement and army, or people with guns in general) is wealth that isn't quantifiable in monetary amounts. So in this system powerful people will be much more powerful because they will start accumulating all other forms of wealth, and very difficult to restrict — why would they use their power to restrict themselves? They would use their power to remove any restrictions at the highest priority.
So instead of the current system (people willing to invent new things and work overtime for years to bring value to millions of people for a chance of outsized returns — and sometimes earning them) you get a system where political class seizes all power, removes all checks and balances, redistributes wealth production to themselves, and unleashes violence to rule forever. It has been tried many times.
> Government employees doing as you describe would also be subject to severe penalties
This only works in capitalistic open societies where wealth doesn't concentrate with government employees.
> The purpose of policies like the ones I describe is to encourage people to start small businesses and keep them small
Not all businesses can be small. How can a small business construct an airplane? Organize a nation-wide or international postal delivery service? Build millions of cars with spare parts available for decades? Make food, clothing, and shelter for millions? These things require economies of scale to be affordable. And yes, government-managed big businesses have also been tried, they tend to be very unproductive, and produce expensive and low-quality items (with tendencies to significantly decline over years).