Income Inequality · 1 hr

There's a Mind-Boggling Number of Rich People in America

Exploring the hidden wealth of America's private business owners and their economic impact.

Overview

In this episode, hosts Tracy Allaway and Joe Weisenthal interview economists Owen Zidar and Eric Zwick about their research on private business owners in America, particularly focusing on the tax implications of pass-through entities. They reveal that there are approximately three million private business owners, termed 'Main Street Millionaires,' with an average wealth of around $25 million. The discussion covers how these owners contribute significantly to income inequality, the complexities of the U.S. tax code, and the economic dynamics of various industries, including auto dealerships and dental practices. Zidar and Zwick also share insights on how their research challenges conventional narratives about wealth distribution and the role of small businesses in the economy.

Key takeaways

There are about three million private business owners in the U.S. with an average wealth of $25 million.
70% of pass-through business income goes to the top 1%, highlighting the concentration of wealth.
The rise of income inequality since the 1980s is closely linked to the growth of pass-through businesses.
Private equity plays a significant role in acquiring founder-owned businesses, often leading to substantial wealth creation.
Dentists and auto dealers are among the top earners in the pass-through sector, with their collective revenue surpassing that of major sports leagues.

Companies & tickers

Budweiser
Mercedes
Chrysler
Toyota
NFL
NBA
MLB

Topics

Publisher’s description

In 2014, the economists Owen Zidar and Eric Zwick were asked by the Treasury to conduct a study on the tax burden of private business owners. It was tricky to figure out how much these sorts of business owners — auto dealers, contractors, the like — actually owed in taxes: After Reagan's 1986 tax reforms, pass-through businesses and other accounting tricks became widespread enough to obscure this class of wealthy Americans hiding in plain sight. The research they conducted led to their new book The Everywhere Millionaire: Who Is Really Rich in America and How They Got There, and one of their central findings is that there are about three million private business owners who have an average wealth of around $25 million. They call this group “Main Street Millionaires” and their influence on the economy and politics in the US is considerable. We speak with Zidar and Zwick today about how they measured the actual number of rich people in America by sifting through reams of tax forms, why income inequality started to rise in tandem with the growing number of pass-through businesses, and how it's possible that the collective revenue of the nation's dentists far exceeds that of the NFL. Read more:Tech’s New Rich Are Suffering From ‘Sudden Wealth Syndrome’Jobless Tech Workers Are Being Left Out of San Francisco’s AI Boom Only http://Bloomberg.com subscribers can get the Odd Lots newsletter in their inbox each week, plus unlimited access to the site and app. Subscribe at bloomberg.com/subscriptions/oddlots Subscribe to the Odd Lots NewsletterJoin the conversation: discord.gg/oddlots See omnystudio.com/listener for privacy information.