America’s “everywhere millionaires” are more likely to run dental practices, heating and air-conditioning firms or restaurant chains than work in Silicon Valley or on Wall Street, economists Owen Zidar and Eric Zwick say.
The pair’s research suggests that wealth on this scale is often built through conventional businesses operated over many years, rather than through a highly paid salary or a high-profile technology venture.
They estimate that about five million US households have a net worth of at least $5 million, with their combined wealth exceeding 13 times that of the Forbes 400. Around three million private business owners form part of this group, with average wealth of about $25 million.
The findings are based on Treasury and Internal Revenue Service data linking tax records to individual businesses and their owners. They indicate that ordinary enterprises, particularly so-called pass-through businesses, have played a significant role in the accumulation of substantial fortunes.
“This is not just a story about wealth being on the coast, Silicon Valley and finance,” said Mr Zwick, an economics professor at the University of Chicago Booth School of Business. “This is a much broader phenomenon, and also much closer to home for a lot of Americans.”
Who are America’s everywhere millionaires?
The profile of the typical wealthy business owner is markedly different from that of a celebrity entrepreneur. Mr Zwick said the typical “everywhere millionaire” was 62, married and more likely than the general population to have a university degree, although not by a large margin.
About three-quarters started their own businesses, while the vast majority did not inherit their money. Many remain closely involved in their companies into their 50s, 60s and beyond, treating the business as their main occupation rather than retiring.
Some are far from modest in their spending, with large homes, yachts and other luxuries common among the group. Their companies, however, are often familiar local operations rather than businesses that attract national attention.
“You’re walking down the street, you look at a truck that’s delivering beer, and if you look on the door, you see the name of the beer distributor, and then you go look them up, and you’re like, ‘Oh, that’s an everywhere millionaire,’” Mr Zwick said.
One example examined by the economists is Dick Portillo, who grew up in a Chicago housing project and invested $1,100 in a hot dog stand in 1963. He expanded it into a large regional chain before selling the business to Berkshire Partners for $1 billion.
Mr Zwick said many owners were motivated initially by independence rather than the prospect of becoming rich. “Freedom, independence, is almost more important to a lot of them when they’re starting — Portillo similarly — than ‘Oh, this is going to make me hugely rich,’” he said.
How pass-through businesses help build wealth
Many of the businesses use structures such as limited liability companies, sole proprietorships and partnerships. Their profits pass through to the owner’s personal tax return, avoiding the double taxation associated with corporate profits.
The arrangements can also allow owners to deduct 20% of that income for tax purposes. Mr Zwick said the advantages had helped business owners become wealthier than they otherwise would have been, particularly over the past 40 years.
“You pay lower tax if you’re getting your income through one of these businesses, even if your labor is going into running the business,” he said.
The researchers distinguish these fortunes from the growing number of people who have become 401(k) millionaires through rising stock markets. Their focus is on households with wealth well beyond what even committed savers could generally accumulate through employment income and retirement saving alone.
Business wealth in the age of AI
Mr Zwick said the findings challenged the pessimistic view that the American Dream was no longer attainable. He argued that opportunities remained in businesses solving practical problems faced by people in their daily lives.
Artificial intelligence may change how those firms operate, he said, but it would not remove the underlying demand. “Technology will change what these businesses look like, but these tactile, real-world problems are still going to be there. HVAC is still going to be a need.”
He added: “There’s a lot of room for people to take new technology but solve these old problems.”
