What's Happening?
A new book, 'The Everywhere Millionaire: Who is Really Rich in America and How They Got There,' by economists Eric Zwick and Owen Zidar, reveals that the majority of wealth in the U.S. is held not by Wall Street billionaires or tech magnates, but by approximately
3 million 'everywhere millionaires.' These individuals, defined as having at least $5 million in net worth and owning a single closely held operating business, are concentrated in mid-sized metropolitan areas rather than major financial hubs. Their research, which involved analyzing previously unlinked individual tax records and business filings from the Treasury Department, found that these business owners collectively hold 13 times the wealth of the entire Forbes 400 list. Examples include local auto dealers, dentists, and beverage distributors, who often accumulate wealth through pass-through entities like S-corporations and sole proprietorships, a structure significantly favored by the Tax Reform Act of 1986.
Why It's Important?
This research fundamentally shifts the understanding of wealth distribution and inequality in the U.S. It highlights that the 'American Dream' is still attainable, but primarily through business ownership rather than traditional salaried employment. The findings suggest that the current system of inequality is perpetuated, in part, because these 'everywhere millionaires' constitute a significant portion of federal and state elected officials (roughly a quarter of federal and 40% of state legislators). This representation allows them to maintain tax policies, such as the permanent 2017 pass-through deduction, that benefit their wealth accumulation, often at the expense of other economic priorities like clean-energy vehicle credits. The study also points to the unintended consequences of the 1986 tax reform, which inadvertently incentivized pass-through businesses and shifted business wealth onto individual tax returns, making it less visible and harder to track.
What's Next?
The insights from 'The Everywhere Millionaire' could influence future policy discussions regarding tax reform and wealth inequality. The book's argument that 'everywhere millionaires' essentially run American politics suggests that any significant changes to the tax code or economic policies would need to contend with the interests of this powerful, yet often overlooked, demographic. As Baby Boomer business owners begin to retire, there is a projected need for 6 million small businesses, worth approximately $5 trillion, to change hands over the next decade. This presents a critical juncture for the American middle class, as the next generation's willingness to acquire these businesses, rather than solely pursuing startups, could determine the future landscape of wealth distribution and economic opportunity. Platforms like Baton are emerging to facilitate these transitions, providing valuations and marketplaces for small businesses.
Beyond the Headlines
The study's findings challenge the popular narrative of wealth being concentrated solely among a few ultra-rich individuals and tech giants. It uncovers a more diffuse, yet equally influential, class of wealthy individuals whose economic and political power has largely gone unnoticed. This re-evaluation of who holds wealth in America has profound implications for how society understands and addresses issues of economic mobility and political representation. The shift towards pass-through entities, largely a result of the 1986 tax reform, has created a system where business ownership is the primary path to significant wealth, potentially making traditional employment a less viable route to the 'American Dream.' This also raises ethical questions about the influence of self-interested economic groups on legislative processes and the potential for policies to disproportionately benefit those already in positions of power.
