A new analysis by economists Owen Zidar of Princeton University and Eric Zwick of the University of Chicago highlights the significant role of so-called "Main Street Millionaires"—a group of approximately three million wealthy business owners whose average net worth is about $25 million—in shaping wealth and tax policy in the United States. Their findings underscore the vast collective wealth of this group, estimated at $54.8 trillion in 2022, which surpasses the combined net worth of the nation's billionaires on the Forbes 400 list by more than thirteen times.
Zidar and Zwick’s research challenges the prevailing focus on billionaires in discussions of economic inequality and tax reform. While billionaires have drawn considerable public attention and political energy, this broader class of multimillionaires includes owners of diverse small and medium-sized businesses such as car dealerships, dental offices, and manufacturers. These entrepreneurs often build their wealth through sustained effort and innovation rather than inheritance, with many rising from middle or lower-class backgrounds.
A key insight from their work involves the structure and taxation of these businesses. Unlike large publicly traded corporations that pay corporate income tax, many Main Street Millionaires own pass-through entities—such as limited liability companies, partnerships, and S-corporations—where business income is reported on individual tax returns. Pass-through businesses have been the primary beneficiaries of tax breaks originating in Republican-sponsored legislation since the 1980s, and their owners often enjoy lower effective tax rates than corporate shareholders.
In particular, the 2017 Republican tax overhaul introduced a deduction for pass-through business profits that effectively reduced the top marginal tax rate for these owners by seven percentage points. Initially temporary, this deduction was recently made permanent and is projected to cost the federal government around $800 billion in lost revenue over a decade. Zidar and Zwick warn that these provisions create substantial advantages that contribute to the growing wealth of the top 0.1 percent and complicate efforts to increase tax revenues from the rich.
The economists acknowledge that wealth taxes targeting billionaires, like proposals championed by Senator Bernie Sanders and Representative Ro Khanna, can generate significant revenue and political momentum. However, they argue that focusing exclusively on billionaires risks ignoring the larger, more diffuse fortune held by multimillionaire business owners who are embedded across congressional districts and often actively engaged in politics and lobbying. This dispersed influence makes tax reform politically challenging, as many lawmakers have personal or financial ties to pass-through businesses.
Zidar and Zwick further note that current tax policies have narrowed the estate tax base and allowed business owners to minimize payroll tax liabilities, while pass-through owners typically report less income than corporate executives. These factors, combined with the political power of the “stealthy wealthy,” complicate efforts to develop comprehensive tax reforms that adequately address income and wealth inequality.
Democratic policymakers have shown interest in taxing the wealthy but have largely focused tax increases on large corporations rather than pass-through businesses. Observers caution that reliance on wealth taxes aimed solely at billionaires could overlook substantial revenue opportunities and fail to address broader systemic incentives that benefit multimillionaires.
As the political landscape evolves ahead of forthcoming midterm elections and a new congressional session, Zidar and Zwick emphasize the importance of considering tax provisions affecting pass-through entities. They warn against letting the politically appealing focus on billionaires overshadow the need for a more inclusive approach to taxing wealth and income at the top of the economic ladder.