It depends on the type of small business -- how it is incorporated. And yes I agree small businesses have it hard because of regulations and taxation, but I'm in favor of lowering all taxes.
But to claim that capital gains are the same as income is incredibly misleading. In the special case where you are a small business owner that works at the business then yes you are taxed as an employee. The money you invested will be recouped just as venture capital would -- when the company is sold or by paying dividends.
dividends don't help us, as to pay out dividends, I first have to pay corporate tax, which is usually lower than personal tax, but in California, I think, not lower than personal tax plus capital gains which I would have to pay on the dividends.
Sure, I recoup all the money I put in as well as my 'sweat equity' when I sell, and I pay the low capital gains tax rate on that, but like I said, this encourages short-term thinking. Hell, I could happily run my company for another 10 or 20 years. But the capital gains taxes being so much lower than the income tax I pay on money I take out without selling that it might make sense for me to sell out once I'm not doubling twice a year. It's sad, I think, as I think I'd be happier running the company, and the company would probably be better off with someone with a long-term view running it.
But to claim that capital gains are the same as income is incredibly misleading. In the special case where you are a small business owner that works at the business then yes you are taxed as an employee. The money you invested will be recouped just as venture capital would -- when the company is sold or by paying dividends.