Meet The Millionaire Class That Really Runs America

SUMMARY

Economists Owen Zidar and Eric Zwick discuss the rise and impact of 'everywhere millionaires'—owners of private, often unglamorous businesses whose collective wealth and political influence rival that of the most famous billionaires. Their analysis explores how tax policy, regulatory frameworks, and evolving entrepreneurship shape wealth accumulation and the future of the American dream.

MAIN POINTS

• The concept of 'everywhere millionaires' is introduced, describing individuals who have built significant wealth through private businesses like dental practices and HVAC companies. [1:30]
• Data from the US Treasury reveals that private business owners account for a substantial portion of the top 1% of wealth in America, often surpassing the combined fortunes of the most prominent billionaires. [6:00]
• The rise of pass-through business entities is traced to 1980s tax reforms, which incentivized entrepreneurs to structure businesses in ways that minimize corporate taxation. [10:00]
• Local monopolies and regulatory protections, such as those for auto dealerships and beer distributors, are shown to entrench the wealth and market power of these business owners. [15:00]
• The ease of entrepreneurial success varies by industry, with some sectors remaining open to new entrants while others have become more protected and less accessible. [21:00]
• Business owners are overrepresented in political offices at local, state, and federal levels, influencing policies that often reinforce their own economic advantages. [27:00]
• Pass-through business income has driven more than half of the increase in the top 1% income share over recent decades, amplifying both economic and political power. [31:00]
• A distinction is drawn between 'earners' and 'owners,' highlighting how tax code loopholes allow business owners to pay lower effective tax rates than high-salaried employees. [37:00]
• Policy solutions are proposed, including closing ineffective tax loopholes, increasing competition by reducing regulatory barriers, and harmonizing tax rates across income types. [41:00]
• The pathway to becoming an everywhere millionaire is typically gradual, requiring decades of experience and ownership rather than quick technological wins. [48:00]
• AI is expected to complement or disrupt certain industries, with private equity increasingly shaping the landscape for business ownership and succession. [50:00]
• Despite systemic challenges, stories of incremental entrepreneurial success offer optimism for the continued viability of the American dream. [54:00]

DETAILED ANALYSIS

The discussion centers on the emergence and significance of 'everywhere millionaires'—a class of Americans who have amassed considerable fortunes by owning and operating private businesses across a wide range of industries. Unlike high-profile billionaires, these individuals often remain out of the public eye, yet collectively possess wealth that surpasses even the richest 400 Americans. Their average net worth stands at $25 million, and there are over three million such individuals in the United States.

This group has played a pivotal role in the expansion of the top 1% of wealth holders, accounting for about half of the increase in this segment over the past several decades.

The origins of this research trace back to work at the US Treasury’s Office of Tax Analysis, where Zidar and Zwick analyzed anonymized data linking businesses to their owners. This approach revealed that many of the nation’s wealthiest individuals did not inherit their businesses but instead built or acquired them, often in unglamorous sectors such as food services, HVAC, and dental practices. Notable examples include Dick Portillo, who transformed a modest hot dog stand into a billion-dollar enterprise, and others who grew businesses from humble beginnings into industry leaders.

A key structural factor in the rise of everywhere millionaires is the proliferation of pass-through business entities. Tax reforms in the 1980s, particularly under President Reagan, lowered personal income tax rates below those of corporations, incentivizing business owners to adopt pass-through structures. These entities, which include S-corporations, partnerships, and LLCs, allow profits to be taxed at the individual rather than the corporate level, often at a lower effective rate.

Subsequent tax cuts in the 2000s and 2010s further cemented these advantages, making pass-throughs the dominant form for private businesses. Today, more than half of all business income and nearly half of all private-sector employment are tied to pass-through entities.

The tax code, originally designed to support small businesses, has evolved to benefit much larger enterprises. Provisions such as the estate tax exemption have expanded dramatically, reducing the tax burden on inherited wealth. Other policies, like the 20% pass-through deduction introduced in 2017, have provided substantial tax relief to qualifying business owners with minimal impact on employment or investment, raising concerns about fiscal efficiency and fairness.

Regulatory frameworks at the state and local levels have also played a significant role in consolidating the power of everywhere millionaires. Industries such as auto dealerships, beer distribution, and real estate have established legal protections that restrict competition and maintain high profit margins for incumbents. These barriers often originated as measures to protect small operators from larger corporate threats but have since become tools for entrenching local monopolies.

Professional guilds in medicine and dentistry similarly use licensing requirements to limit entry and preserve income for existing practitioners.

Political representation further amplifies the influence of this group. Business owners are disproportionately present in elected offices, especially at the state and local levels, where they can directly shape regulations and tax policy. In Congress, deca-millionaires hold a much larger share of seats than their proportion in the general population.

Their status as prominent community members and significant employers gives them additional leverage with policymakers, often resulting in legislation that favors their interests, such as the preservation of advantageous tax treatments for pass-through income.

The trend toward greater concentration of wealth and influence among everywhere millionaires has accelerated over the past 30 to 40 years. While private business owners have always been part of the American economic landscape, changes in the tax code and the shift from manufacturing to service-oriented businesses have increased their relative power. Unlike in previous decades, current political discourse rarely targets this group for tax increases, focusing instead on the ultra-wealthy billionaires, despite the fact that the aggregate wealth of everywhere millionaires is much greater.

Addressing these disparities requires a multifaceted policy approach. The authors suggest closing tax loopholes that disproportionately benefit large pass-through entities without stimulating real economic activity. They advocate for harmonizing tax rates across different forms of income to reduce the incentive for tax avoidance through legal reclassification.

Regulatory reforms at the state and local levels could increase competition in protected industries, lowering costs for consumers and opening opportunities for new entrants. Additionally, reforms in labor market regulations, such as limiting non-compete clauses and raising the minimum wage, could help ensure that economic gains are more broadly shared.

The pathway to becoming an everywhere millionaire is typically long and incremental, often requiring decades of experience and a transition from employee to owner. Contrary to popular narratives of rapid wealth accumulation through technology or financial speculation, most success stories involve steady growth, hands-on management, and eventual ownership of established businesses. While AI and private equity are beginning to reshape the landscape, particularly in skilled services and succession planning, the fundamental model remains rooted in traditional entrepreneurship.

Private equity’s growing presence offers both exit opportunities for retiring owners and potential challenges for new entrants, depending on how these firms manage acquired businesses.

Despite systemic barriers and the risk of entrenched interests stifling competition, the authors express cautious optimism about the future of the American dream. They highlight inspiring stories of individuals who have built wealth by addressing real market needs and mentoring others to do the same. Ensuring that such opportunities remain accessible will require ongoing attention to policy reforms that promote fairness, competition, and broad-based economic growth.

LINKS

• Prof G Markets newsletter subscription page
• Order 'Notes On Being A Man' book
• Scott Galloway's Instagram profile
• Ed Elson's Instagram profile
• Ed Elson's X (Twitter) profile
• Ed Elson's Substack newsletter
• Prof G Markets on Spotify
• Prof G Markets on TikTok
• Prof G Markets homepage
• Information about VCX, the public ticker for private tech
• Upwork freelance platform
• Vanguard audio resources for financial advisers

KEYWORDS