It's important to note the distinction between small businesses/startups and businesses. Everyone is "business friendly" when it comes to their Peugots, Fiats, Mercedes, GM's, Toyotas and so on. Where you really notice the difference is in small businesses.
It doesn't seem that taxes have much to do with innovation, because people will innovate no matter what country they live in. I agree that SV is a unique place that attracts talent, and it is probably easier to find investors there.
But you also have to think about all the legal costs of doing business in the US. The risk of lawsuits and patent trolls are much greater than in Europe. The benefits of low tax is probably not as important for a startup as the legal bills that they may have to pay if they are unlucky enough to be noticed by an unfriendly lawyer
I have read statistics that show that the number of lawyers per US citizen is many times greater than the number for most European countries. In Germany there are 593 people for each lawyer, while in the US there are only 265 people for each lawyer.
I think taxes aren't quite as important as long as they're only applied to actual profit. What hurts in "Europe" (standard disclaimer) are all the fees, paperwork and associated crap to do before you even get something off the ground, and that you have to keep doing over the life of the company.
There is a lot of tech coming out of the Netherlands and we hear about it because their english is very good. There's a lot of tech inside Germany, France, Italy, etc obviously but most of it is in their mother tongue. Just a few links off the top of my head:
