The American Dream isn’t what you think it is

A question has gripped economists studying inequality since at least 2011, when Occupy Wall Street split the country into the 1% and the 99%: who is actually wealthy in the U.S, and how did they get that way?

In 2014, Eric Zwick, Owen Zidar and Danny Yagan set out to find an answer. They weren’t the tenure-track economics faculty they are today (at the University of Chicago, Princeton University and UC-Berkeley, respectively) and all they had was a hunch and a key to the Treasury Department. Planet Money reported that they called themselves the “tax ninjas,” but they were essentially glorified interns: Zwick was living in his sister’s attic in Washington D.C. and going to work in the Treasury Department’s basement, where the ninjas attacked a trove of individual tax records that most academics never get to see.

The problem for economists had always been that the Internal Revenue Service kept individual tax returns and business filings in separate systems that had never been linked—there was no way to connect a company’s profits to the specific person who owned it and collected them. Zwick and Zidar spent months essentially making the two databases talk to each other. When they finished, Zwick told Fortune, he was stunned. 

When they made a table of total profits from pass-through firms for people in the top 1%, doctors were near the top, and so were auto dealers. “I’m like, this is not Jeff Bezos. This is not Stephen Schwarzman.” The American Dream still exists, in other words, but it isn’t the Wall Street billionaires or tech overlords who are mostly realizing it. It’s the everywhere millionaires all around you that you don’t even think about. 

Hence the title of Zwick and Zidar’s new book, The Everywhere Millionaire: Who is Really Rich in America and How They Got There. When I asked Zwick if he ever saw the classic high-school sports show Friday Night Lights, his eyes lit up as he named the local auto dealer who bankrolled the local Texas football team: “It’s the Buddy Garrity millionaire! It’s like, meet the real Buddy Garrity.” The book defines this class of millionaire as someone with at least $5 million in net worth who owns a single closely held operating business that generates most of their income. Their research found roughly 3 million of these in the U.S., concentrated not in Manhattan or Palo Alto but in mid-sized metros that rarely generate pitchforks in the press. They collectively hold 13 times the wealth of the entire Forbes 400, Zwick estimates. Put another way: for every member of the Forbes list, there are more than 4,000 private business owners who each have a net worth of at least $10 million.

The book’s favorite example is Dick Portillo, the Chicago food kingpin who opened a hot dog stand in 1963 having never cooked one before—and built the Midwest’s largest privately owned restaurant company by 2014—plus a 130-foot yacht he named Top Dog. Then there’s Karen Bentlage, who dropped out of Central Connecticut State University and built the nation’s second-largest tanning-bed distributor before reinvesting the proceeds into a regional waxing-salon franchise. The everywhere millionaires include a lot of dentists and beverage distributors, too, collecting profits through partnership structures that don’t appear in any billionaire index and rarely get a mention in political campaigns or cable television. 

One of the book’s more unsettling arguments is that the everywhere millionaire essentially runs American politics: pass-through business owners make up roughly a quarter of federal elected officials and about 40% of state legislators, compared with 2% to 3% of........

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