I recently read The Everywhere Millionaire: Who Is Really Rich in America and How They Got There by economists Eric Zwick and Owen Zidar, and I was left wondering something. Have the book’s own authors done the same?
At its core, the book includes dozens of supportive profiles of people who built up great family businesses, often in the most unlikely of places and industries. Who knew you could start a billion-dollar business with a hot dog cart in a parking lot? The founder of the Chicago restaurant chain Portillo’s did that. Other fun profiles include Buc-ees, Outback Steakhouse, and Bass Pro Shops.
The founders of these businesses, meanwhile, come in all shapes and sizes — college graduates, dropouts, immigrants, Native Americans. Just about every class and color is represented. It’s a veritable melting pot of entrepreneurialism.
It helps that the profiles are free of the smug, “you didn’t build this” attitude of former President Barack Obama. These people clearly did build this, often overcoming tremendous odds to construct enterprises that form the very fabric of our economy.
There’s good data here, too. The authors observe: “For every member of the Forbes 400, more than four thousand private business owners each have at least $10 million in net worth. For every large public company CEO, more than one thousand private business owners each have at least $25 million in wealth.”
That observation underpins our premise that the strength of America lies in Main Street, where the massive financial weight of millions of large, debt-free enterprises offers both jobs and a mature counterbalance to the “which bubble should we invest in next” attitude so prevalent on the coasts.
Having built up the Main Street community, however, the authors jolt the reader with a hard pivot from Horatio Alger to Sen. Bernie Sanders (I-VT), asking: “Does the rise of Main Street Millionaires prove that the American dream is alive and well? Or are these new millionaires seizing too much of the fruits of our economic growth, squelching the hopes and opportunities of almost everyone else?”
I’m sorry, whose economic growth? Did they miss the part where they described exactly where the growth came from? The jobs, the investment, the innovation? Apparently so. Meanwhile, the only visible squelching was the parts department manager who didn’t like being demoted to make room for a bunch of nepo babies. He promptly squelched that plan by building a more successful, competing business.
Seriously, why build up these businesses in specific only to tear them down in general? Sure, you built a billion-dollar business out of nothing, employed thousands of workers, and provided services and products people obviously want, but did you know some overpaid French economists think income inequality has gotten worse? It’s all very odd and unconvincing.
It’s also well-trod ground. Pass-throughs have been inaccurately blamed for income inequality for years, missing the basic truth that they are the solution to the inequality challenge. As the book makes clear, there’s no better path from poverty to success than starting your own business.
Then there is an entire chapter in which the authors applaud economic consolidation as private equity investors engage in widespread leveraged buyouts of Main Street businesses. They write: ”As PE’s reach continues to grow in the middle market, it will continue to provide succession plans for business owners and needed cash for their businesses, helping them prosper well into the future.” Let’s see how well that statement ages. As Warren Buffett noted, “Only when the tide goes out do you discover who’s been swimming naked.”
Other chapters critically highlight how pass-through business owners are politically active, underpay their employees, and pay less than other taxpayer groups. This paragraph pretty much sums it up: “Main Street Millionaires work hard and contribute significantly to the economy. But they also pay less in taxes than they should, and they sometimes take shortcuts to get rich. We can admire them for their success and still think they should give more back to the country that helped make their success possible.”
You’ll find little support for any of this in the book. No tax cheats, no shortcuts. The authors reference a database they built working with the IRS but never use it to calculate how much tax pass-throughs actually pay. Why is that?
Because it’s more than you think. Pass-through income is a large portion of top U.S. income shares, and top income earners pay almost all the federal individual income taxes. Our own work shows that large S corporations pay the highest rates of any business structure.
When progressives write about wealth, you can almost hear Robin Leach in the background, nasaling on incessantly about fancy weddings — the book opens and closes with one — private jets, yachts, and other tropes of overconsumption. One wedding, however, does not define a community that includes millions of businesses and owners. That’s the most frustrating aspect of the book — there’s lots of good here, it’s just that the authors’ obvious political biases can’t let the data and anecdotes stand on their own.
So when the authors ask, “What can we do to help more Americans climb the ladder of success?” our response is to read your own book. Learn the lessons imparted by people who built successful businesses from scratch, creating wealth and opportunity where none existed. That’s how America succeeded over the last 250 years, and that’s the solution to our current fiscal and social challenges.
Brian Reardon is the president of the S Corporation Association and a former White House official at the National Economic Council under President George W. Bush.