The Rise of ‘Main Street Millionaires’ in America

The Everywhere Millionaire is a revealing new book by economists Eric Zwick and Owen Zidar. It explores the wealth landscape in America, challenging the notion that billionaire oligarchs dominate this space. This research uncovers a larger group of wealthy Americans found throughout the country, dubbed ‘Main Street Millionaires.’ They have amassed wealth in seemingly ordinary ways, such as owning car dealerships, running salons, or selling metal products.

These millionaires, collectively, possess more wealth than the few billionaires often spotlighted. Their financial prowess has reached levels where they can afford luxury items like superyachts and expansive properties. Their political influence, too, is significant, showing how they have quietly shaped public policy to favor their interests.

The Rise of Private Business

The book identifies a shift in the American economy. Private businesses have risen to prominence, generating more income than traditional corporations by 2011. These firms now account for a significant portion of the top-income bracket’s earnings. There are approximately three million private business owners in the United States, each with an average net worth of $25 million.

“They are the protagonists, but some of them are protagonists in the same way Tony Soprano is a protagonist.”

While many of these millionaires represent the American Dream — self-made individuals who improved consumer services — others have manipulated their political influence for favorable policies, sometimes at the cost of higher prices for consumers.

Role and Impact of Tax Reform

Zwick and Zidar dissect how tax policy has significantly contributed to the rise of ‘pass-through’ businesses. Initiated by the Tax Reform Act of 1986, these businesses pay taxes through their owners’ individual returns rather than corporate tax rates. This provides substantial tax advantages.

These businesses, including law firms and restaurant chains, have vastly increased their share of total U.S. business income, now contributing more than half. The rise of pass-through entities has also been integral to increasing income inequality.

Who Are They?

Zwick and Zidar’s research examines the industries that have propelled individuals into wealth. Surprisingly, sectors such as legal services, auto dealerships, and consultancies top the list, not the expected high-tech or financial giants.

Data illustrates these industries involve significant skilled labor from their owners. When these owners step down, the businesses often see a dramatic decline in profits, indicating the importance of ‘human capital’ over financial assets.

The Power of Main Street

Many Main Street millionaires have profited from industries with competitive protections granted by the government. Examples include medical professionals limiting the supply of services and alcohol distributors benefiting from regulatory protection.

Auto dealers, often labeled as ‘money machines,’ are protected by franchise laws and have political clout due to their community involvement and employment numbers.

Political Influence

Main Street millionaires are not only powerful due to their wealth; they often hold significant political positions. Business owners are disproportionately represented in political offices, providing them with the ability to influence legislation directly.

Zwick and Zidar highlight examples like Bob Corker and Michael J. Madigan, who played roles in shaping tax laws for personal advantage while serving in government. This reveals potential conflicts of interest and highlights the need for transparency.

While billionaires command attention for their extreme wealth and influence, The Everywhere Millionaire encourages awareness of the widespread influence of private business owners and their role in shaping the American political landscape.