America's richest aren't CEOs — they own car washes and HVAC companies
Three million private business owners in the US hold net worth above $5 million, and their combined wealth is more than ten times that of the Forbes 400 — they run car washes, HVAC companies and car dealerships, and they got there by owning, not by earning a salary.
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The IRS asked them to audit taxes and they accidentally built a wealth database
Both authors were recruited straight out of graduate school by the Treasury Department and the Office of Tax Analysis to solve a tax-policy puzzle: pass-through businesses don't pay tax themselves, so you have to link the business back to its individual owner to compute the tax burden. The project accidentally produced a panel database that tracks every business along with its owners and employees — far richer than the Fed's Survey of Consumer Finances, which is large in scale but nowhere near as granular as tax records.
— Owen ZedarWealth isn't in Silicon Valley or Wall Street — the whole map lights up
The authors assumed wealth was concentrated in tech and finance, and the data overturned that bias. When they plotted the "everywhere millionaire" on a map, the entire country lit up. These rich people are spread across a large number of unsexy industries — car dealerships, HVAC, dental practices, restaurants, distribution, sanitation. It isn't only the Forbes 400 getting richer; it's millions of people.
— Owen ZedarThree million private business owners hold ten times the wealth of the Forbes 400
The authors counted roughly 3 million "everywhere millionaires" — private business owners with net worth of at least $5 million. Their combined wealth is more than ten times the total of the Forbes 400. That number changes the inequality narrative: what drives inequality statistics is not a few hundred billionaires but millions of unknown business owners.
— Owen ZedarThe higher the income, the smaller the wage share and the larger the business share
Break open the top 10% of earners: people at the 90th percentile live mainly on wages. But moving up, the curves cross — by the top 0.1%, most income comes from business income. The authors say the main typical way to get rich in America is to own something, not to earn a wage. That is both a tax advantage (owning is taxed more lightly than earning a wage) and the actual path of wealth accumulation.
— Owen ZedarThe 1986 tax reform turned pass-through from a disadvantage into an advantage
The 1986 tax reform (Reagan as president, Democrats controlling Congress, a bipartisan effort) lowered the individual income tax rate below the corporate rate for the first time. Before that, pass-through was unattractive because of its tax disadvantage; afterward, being a pass-through became cheaper. The Bush tax cuts later lowered individual rates further, and the 2017 tax reform added a 20% deduction for certain pass-through categories. The result: more than half of business income is pass-through income, nearly half of employment is at pass-through businesses, and almost all small businesses are pass-throughs.
— Owen ZedarHalf of the top 1%'s income growth came from pass-through
The authors ran a counterfactual: if you held fixed the importance of pass-through business income as of 1985 (before the 1986 tax reform) and let it develop as it was, roughly half of the top 1%'s income growth would disappear. Looking at wealth growth, from 1989 to the latest SCF data, two-thirds of the top 0.1%'s wealth growth came from private businesses. This shows pass-through is absolutely central, in accounting terms, to the growth of wealth and top-end income.
— Owen ZedarEntrepreneurs earn only about 10% more on average, but failure isn't the end
Using data tracking roughly 10 million entrepreneurship events since 2000, the authors found that founders earn about 10% more on average than similar workers who didn't start a business — and that's before counting unrealized capital gains from selling the business, and the average already includes a large number of failures. About 20% of founders are serial entrepreneurs — it's the second or third venture that actually earns the yacht money. After a failure you can return to the labor market or start again and fix what went wrong last time.
— Owen ZedarEvery congressional district has a millionaire business owner
The authors say "every congressional district has an everywhere millionaire." Unlike Silicon Valley and Wall Street, which are concentrated in specific geographies, almost every district has a car dealer. These business owners employ many people, pay a lot of sales tax and are prominent in their local communities, so they wield a lot of influence — their approval ratings are higher than those of the military, the Supreme Court and Congress. About a quarter of members of Congress are private business owners; count law-firm partners and that share can reach 40% to 50%. At the state and local level, because the positions are part-time and low-paid, business owners make up an even larger share — mayors especially.
— Owen ZedarIn their own words · checked verbatim
we call it the everywhere millionaire because what we learned was that top wealth and income and just this wealth is like much more abundant and also closer to home for more people than we previously thought
Owen Zedar3:08
we have 3 million everywhere millionaires, we say have net worth of at least $ 5 million that are private business owners. And that's just, they collectively have more than 10 times the wealth of the Forbes 400 combined
Owen Zedar4:08
the main typical way you get wealthy in the country is by owning something rather than earning
Owen Zedar9:13
two-thirds of the wealth growth from 1989 to the most recent data in the SCF are coming from private business of the top 0.1%
Owen Zedar13:18
the typical private business owner that we're talking about rolls up their sleeves, has a lot of hard work, and it takes decades. These are not quick hits on a quick hit app
Owen Zedar18:27
there's an ever millionaire in every congressional district. So unlike Silicon Valley and Wall Street, which are very specific geographies, there's like a car dealer in almost every congressional district
Owen Zedar19:27
Figures
| Number of everywhere millionaires | 3 million | 4:08 |
| Net worth threshold for an everywhere millionaire | At least $5 million | 4:08 |
| Combined wealth of everywhere millionaires vs. the Forbes 400 | More than 10 times the Forbes 400 total | 4:08 |
| Founders' average income vs. similar non-founders | About 10% higher | 14:20 |
| Share of serial entrepreneurs | About 20% | 14:20 |
| Share of top 1% income growth from pass-through | About half | 13:18 |
| Share of top 0.1% wealth growth from private businesses | Two-thirds | 13:18 |
| Share of members of Congress who are private business owners | About one quarter | 19:27 |
| Share of members of Congress who are private business owners plus law-firm partners | Can reach 40% to 50% | 19:27 |
| Number of entrepreneurship events since 2000 | About 10 million | 14:20 |
Glossary
- pass-through business
- A business that pays no tax at the entity level; income passes straight through to the owner's individual tax return.
- Survey of Consumer Finances
- The Fed-led wealth survey, large in sample but relatively coarse in granularity.
- C corporation
- The traditional corporate form, taxed at the entity level; most public companies are this type.
- TCJA
- The Trump-era tax reform, which gave certain pass-throughs a 20% deduction.
How to listen
Founders, investors, tax and wealth-management professionals who want to understand the real distribution of American wealth and the returns to entrepreneurship.
The discussion of the pandemic and industry disruption from 20:33 to 22:37, which is lower in information density.