The image of America’s wealthy often conjures up visions of tech moguls and Wall Street tycoons. However, a new book, The Everywhere Millionaire by economists Eric Zwick and Owen Zidar, paints a different picture. It reveals a vast network of Main Street millionaires who have amassed significant wealth through a variety of businesses, from car dealerships to tanning salons.
These millionaires, often overlooked in discussions about wealth and inequality, collectively control more wealth than the billionaires who dominate headlines. Their stories challenge the popular narrative of a new Gilded Age and shed light on the quiet revolution in the American economy.
The Rise of Pass-Through Businesses
The book’s authors trace the dramatic rise of these Main Street millionaires to the growth of pass-through businesses. These businesses, which include sole proprietorships, partnerships, and S corporations, have seen their share of U.S. business income grow from about one-fifth in 1980 to more than half by 2011. Unlike traditional corporations, pass-through businesses pay taxes on their profits through the personal income tax returns of their owners.
Zwick and Zidar estimate that there are about three million of these private business owners in the United States, each worth an average of around $25 million. These businesses have become a crucial part of the story of inequality in America, accounting for more than half of the rise in the top one percent’s share of income since the 1980s.
Who Are These Millionaires?
Contrary to expectations, the authors found that these millionaires were not primarily making their fortunes in high-tech or capital-intensive industries. Instead, they were often doctors, dentists, car dealers, lawyers, and consultants. These businesses are heavily dependent on the human capital of their owners, with profits often plummeting when an owner retires or dies.
The authors also highlight the role of tax policy in the rise of these businesses. The Tax Reform Act of 1986 created an unintended loophole that allowed business owners to structure their businesses as pass-throughs and pay lower taxes on their profits. This tax advantage has contributed significantly to the skyrocketing income of pass-through business owners.
The Political Power of Main Street Millionaires
Beyond their economic impact, Main Street millionaires also wield significant political power. They are often influential donors and constituents for politicians, and they are dramatically overrepresented in elected office. Business owners make up just 3 percent of the U.S. population, but they are more than ten times as likely to serve in Congress as their share of the population would suggest.
The authors provide examples of how being both a business owner and a politician can create potential conflicts of interest. They also highlight the political clout of these millionaires, who have successfully lobbied for policies that benefit their businesses, such as the Tax Cuts and Jobs Act of 2017.
Their stories challenge the popular narrative of a billionaire-dominated America and highlight the complex factors behind rising inequality.
