Understanding the Wealth of Private Business Owners in America

<p>Terry Taylor is worth about $2 billion and is based in Florida. He does not publicly associate his name with the car dealerships he acquires and reportedly attends conferences only if his identity is not announced. Taylor gained attention in 2023 when he paid $76 million for a mansion in Aspen, marking the highest home sale in the town's history.</p><p>In 2024, Forbes magazine ranked Taylor at No. 1,694 on its World Billionaires List and published a profile titled “The Car Dealership Billionaire No One Knows.” A source described him as “like Batman,” noting that while people admire his work, few have seen him in person.</p><p>When Americans envision the ultrarich, they often think of tech billionaires like Elon Musk and Mark Zuckerberg, whose wealth is largely tied to publicly traded companies. However, a significant number of wealthy individuals are owners of successful privately held businesses. Economists studying taxation and inequality estimate that approximately 1.7 million Americans have a net worth of at least $10 million due to private business ownership. For every CEO of a public company, there are over 1,000 private-business owners with a net worth exceeding $25 million.</p><p>These individuals, referred to as “everywhere millionaires,” are found across various industries. Some are involved in investment firms or medical practices, while others include a repo man from Henderson, Nevada, a car-wash owner from Milwaukee, and a treated-lumber magnate from Alabama.</p><p>The research conducted by the authors highlights a shift in the perception of inequality. During the Occupy Wall Street protests following the 2008 financial crisis, the focus was on executives at major banks. Today, proposals from Senators Elizabeth Warren and Bernie Sanders to tax the wealthy often target Wall Street and Silicon Valley, but the influence of everywhere millionaires is more significant in shaping tax policies. The tax code reflects their interests more than those of high-profile figures like Musk.</p><p>For instance, the One Big Beautiful Bill Act passed last year eliminated electric-vehicle and clean-energy credits, negatively impacting Tesla, while making permanent a 20 percent deduction that effectively reduces the top tax rate for private-business owners from 37 percent to 30 percent. Additionally, it preserved a loophole allowing business owners to fully deduct state and local taxes, a benefit not extended to salaried employees.</p><p>House Speaker Mike Johnson defended the permanent tax cuts for high earners by stating, “This is not giving tax cuts to millionaires; it’s the opposite. The people in the tax bracket that you’re referring to, many of them are small-business owners.” While many top-bracket taxpayers own businesses, the advantages of these tax provisions primarily benefit the wealthiest among them.</p><p>Another loophole allows private-business owners to avoid Medicare taxes, often justified as a benefit for small businesses. Exemptions to the estate tax have been expanded under the guise of preserving family farms, allowing a married couple to pass on $30 million to heirs tax-free. This strategy of masking wealth behind small business ownership has proven effective for the affluent.</p><p>The financial situations of many wealthy Americans remain unclear. The Forbes 400 list began in 1982, and while public company owners must disclose their holdings, many private business owners keep their financial details confidential. Kerry Dolan, a Forbes editor, noted that the magazine’s efforts to identify billionaires may overlook those who have quietly accumulated wealth through private business sales.</p><p>The U.S. government also has limited visibility into this sector. The Federal Reserve’s Survey of Consumer Finances includes a small sample of ultrarich respondents, but obtaining accurate data is challenging. The IRS collects extensive confidential information about businesses, but it is stored in separate systems, complicating efforts to answer basic questions about private business ownership and wealth accumulation.</p><p>After completing graduate school in 2014, the authors worked as analysts for the U.S. Treasury’s Office of Tax Analysis, tasked with determining tax contributions from various business owner categories. They analyzed anonymized records to create a detailed map of American enterprise and observe how business owners accumulate wealth.</p><p>Through their research, they recognized the significance of everywhere millionaires and sought to understand their decision-making processes. They identified some individuals through public sources and gathered information from trade publications, industry experts, and databases like Dun & Bradstreet.</p><p>As they pursued leads, they discovered notable businesses, including Dot Foods, the largest food redistributor in the U.S., founded by a dairy farmer and his wife. They also found less glamorous businesses, such as a regional distributor of garbage trucks and street sweepers.</p><p>Everywhere millionaires share a common trait: they own pass-through businesses, where profits bypass corporate taxes and are taxed at individual rates. This structure gained popularity following the Tax Reform Act of 1986, which lowered the top individual tax rate below the corporate rate for the first time. Since then, lawmakers have created multiple loopholes, allowing business income to be taxed at lower rates than wages, and business owners can underreport income more easily than wealthy CEOs.</p><p>While entrepreneurship has traditionally been viewed as a path to wealth, the rise of knowledge industries has overshadowed this narrative. The authors initially pursued careers in tech and finance, but their research revealed that entrepreneurship is a viable route to prosperity.</p><p>According to their analysis of the 2022 Survey of Consumer Finances, most American households worth over $100 million are business owners, with fewer than half holding advanced degrees. They found that individuals with average SAT scores were more likely to build successful businesses than to achieve similar wealth as salaried workers. This suggests that ownership often provides greater financial rewards than traditional employment.</p><p>Despite the advantages of entrepreneurship, everywhere millionaires benefit from U.S. government policies that they influence. During the drafting of the 2017 tax law, an auto dealer member of Congress warned that the bill would harm his industry. Although the bill initially limited interest deductions for businesses, auto dealers secured an exemption.</p><p>Recognizing the influence of these business owners is crucial for understanding the economy and society. While they may not receive the same attention as tech titans or celebrities, acknowledging their presence is the first step in comprehending the broader economic landscape.</p>