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Minimum wage debate insane, says 'Mr. Wonderful'

The American Dream of trying to succeed and make money has been vilified, and the push to increase the minimum wage reinforces that "unhealthy" message, especially for Main Street, venture capitalist Kevin O'Leary told CNBC said Tuesday.

"This minimum wage debate is insane," said O'Leary, who is known as "Mr. Wonderful" on the reality show "Shark Tank."

"Can you imagine any way that would help a small business? It's crazy," he said on "Squawk Box."

He called the minimum wage a form of taxation—arguing that when taxes go through "the meat grinder inefficiencies of government" a third of the money is "completely wasted."

(Read more: Showdown set on unemployment bill in Senate)

"Anything we do to try and vilify financial leaders, aspirations for wealth, I think is really unhealthy. And that's what's happened," he said. "The government doesn't create anything. It's the man and woman starting a business that pays tax that provides everything."

O'Leary knows a thing or two about starting a business. Like many entrepreneurs, he started with an idea and no money. He built SoftKey Software Products out of his basement into a company that he eventually sold in 1999 for $3.7 billion. He's currently on the investment committee of Boston's prestigious 200-year-old Hamilton Trust, and the chairman of O'Leary Funds.

As one of the hosts of "Shark Tank," which also features billionaire Mark Cuban and real estate mogul Barbara Corcoran, O'Leary said he's found that the entrepreneurial spirit is alive and well in the U.S., but government needs to get out of the way.

(Watch: Barbara Corcoran on three mistakes business owners make)

"In the last five years, ... we've gone through this turmoil in financial markets and people have woken up to their concerns about money, … remembering what made this country great in the first place: starting your own business. That's all that matters."

"You're supposed to aspire, to achieve, to become one of the 1 percent. That's what drives this whole economy," O'Leary said. "I think we vilify this whole thing. It's a huge mistake."

"That's not American," he concluded.

Programming note: "Shark Tank" makes its off-network debut on Tuesdays at 8 p.m. and 9 p.m. EST, beginning Jan. 7 on CNBC.

By CNBC's Matthew J. Belvedere. Follow him on Twitter @Matt_SquawkCNBC.

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