After the House passed its version of Donald Trump’s One Big Beautiful Bill Act (OBBBA) last year – the one that paired a $5tn-plus tax cut with $1tn-plus of cuts from food stamps and Medicaid – the House speaker, Mike Johnson, explained that “this is not giving tax cuts to the millionaires”. The beneficiaries, he said, were “small business owners” that “provide the jobs in every community in America”.
Johnson was playing to the myth of the modest, sturdy Main Street job creator. It is an appealing story. It’s also the most consequential piece of BS distorting American policy that deprives the government of tax revenue, stunts American capitalism, twists regulations, thwarts competition and overwhelmingly serves millionaires’ interests.
The speaker was specifically talking about “pass through” businesses. About 95% of businesses in the country take this form. They employ half of all workers and generate more than half the nation’s business income. These creatures of the tax code are freed from paying the corporate income tax rate. Instead, their untaxed profits are distributed to their owners, who generally face lower individual tax rates, saving them billions.
Republicans have consistently gone to bat for pass throughs. In 2017 Ron Johnson, the Republican senator from Wisconsin, threatened not to vote for Trump’s Tax Cut and Jobs Act, relenting only after the Senate increased a tax deduction for pass-through business income from 17% to 20%. “I just have it in my heart a real affinity for these owner-operated pass-throughs,” Johnson said at the time.
That deduction, made permanent in the ”big beautiful bill” last year, will cost the budget $820bn over a 10-year period, almost as much as was cut from the Medicaid budget.
About 57% of the $1.3tn in pass-through income in 2022 went to 890,000 people in the richest 1% of the population, according to the Urban-Brookings Tax Policy Center. A study by economists at the Department of the Treasury, the Federal Reserve Bank of Minneapolis and Dartmouth University found that 35% of the total deductions in the year after the 2017 tax cut, a cold $54bn, flowed to taxpayers with income of at least $1m.
Johnson and Johnson know this. Senator Ron owned a stake in a pass-through, a plastics maker in Oshkosh, which he sold in 2020 for between $5 and $25m and upon which he built a fortune worth about $40m in 2018, making him the sixth-richest senator at the time. Speaker Mike, a man of “modest means”, lives in a $3.7m townhouse steps from the US Capitol owned by the millionaire Republican donor Lee Beaman, who made his fortune from a string of car dealerships.
Next month, economists Owen Zidar from Princeton and Eric Zwick from the University of Chicago will publish a panoramic profile of these “everywhere millionaires”. They are your dentist and doctor, the car dealer and the insurance salesman, the lawyer and the real estate developer, the accountant, the consultant and the building equipment contractor.
They have largely organized themselves as pass-throughs. Many are amazingly rich. Zidar and Zwick estimate that for every billionaire in the Forbes 400 list, there are more than 4,000 Main Street millionaires worth at least $10m. Their net worth adds up to $46.7tn, nearly 12 times as much as that of the Forbes plutocrats.
The political system is at their mercy. Consider Trump’s ”big beautiful” tax cut last year. The 20% deduction granted to pass-through profits means that the top income tax rate for their rich owners is only 29.6%. For people who earn wages, the top marginal rate is 37%.
Concern over the political power of the plutocracy has focused on billionaires. But Main Street millionaires flying under the radar might be more influential. Political action committees (Pacs) run by the National Association of Realtors, the National Beer Wholesalers Association and the National Automobile Dealers Association were among the top 10 by donations in the 2023-24 cycle.
And Main Street millionaires play in politics themselves, at the federal, state and local level. Car dealership millionaires Don Beyer from Virginia, Vern Buchanan from Florida and Mike Kelly from Pennsylvania sit on the House ways and means committee. They are probably not unhappy about the pass-through deduction, nor about the deduction for new auto loan interest that also made it into the OBBBA, which Zidar and Zwick estimate will cost the budget $5bn to $10bn a year for four years.
Though tax breaks may be their top concern, the damage to the republic runs deeper. In 1997, doctors got the federal government to freeze the number of residency positions funded by Medicare, a neat way to limit the availability of new doctors. That helps explain why there are only 2.7 doctors per 1,000 people in the US, compared with 3.7 across the other OECD countries, and why 26% of American doctors fit in the richest 1% of the population, compared with only 5% in Sweden, despite Americans’ comparatively tenuous hold on life.
Let’s not just pour hate on the doctors, though. Car dealers in 50 states benefit from franchise laws that prevent automakers from closing them down and stop new dealers from entering their turf. In 17 states they also benefit from a ban on direct sales by automakers. The income of real estate brokers is protected by privileged access to listing information and exorbitant, monopolistic fees of dubious legality that they extract from homeowners. Beer distributors have lobbied hard to prevent breweries from selling directly to retailers and to get ironclad territorial rights.
This is not the page to pity billionaires. But it’s worth pointing to the privileges of the rich below that status. Trump may love Elon Musk. But his signature bill – which stripped the EV subsidies turbocharging Tesla’s sales – shows much more love for the car dealers and the doctors and the real estate developers living a few floors below Elon but well within the 1%.
Eduardo Porter is a journalist focused on economics and politics. He writes the newsletter Being There on Substack
