If the presence of regulations and taxes destroys a portion of motivation to innovate, then that specific portion was likely harmful to society and I will not mourn that loss.
The more the government steals from you, the more sales you need early on to reach the same net income.
This isn't rocket science - there's a reason Britain was home to the industrial revolution after the liberal reforms of the Glorious Revolution, and that the USA is today with their nation literally founded on those principles of free speech, liberty and free competition.