The number of companies started in any number of countries around the world with substantially higher tax rates demonstrate that people clearly do still have incentive to invest in their own business even if they pay more.

this is not really a convincing response; starting a company doesn't have to be capital intensive and you could do it with someone else's money.

You did not make any claims about the amount of money invested. You made a blanket claim that closing this loophole would remove the incentive to invest in your own business.

This would translate to investing "someone else's" money too, as that investor or lender would presumably be looking for a return.

More personally: I've co-founded several companies. Never once was tax loopholes or tax levels at all any part of my consideration or the discussions I've had with co-founders or various VC's about whether or not the business was worthwhile. At most taxes would be some line item buried somewhere in a spreadsheet amongst other costs of doing business.

Maybe it affects amount of capital available in the market, but it certainly does not take away the incentive.