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Later, 11:11 p.m. CT: the tea leaves suggest a one-two punch. The sixth industrial revolution suggests that the US economy is going to be fascinating to watch over the next three or four years. The gap between the US and the rest of the world, particularly the EU, will widen significantly. But the immediate "pop" will occur when the tax and spending bill is signed by Trump -- or when passed by both houses of Congress.
Original Post
A must-read.
From the linked article:
Olson’s annual income running his flooring-equipment company puts him in the top 1% of earners in the U.S., or people who as of 2022 made at least $550,000, excluding capital gains. He expects Minnesota-based National to bring in roughly $50 million in revenue this year, after recently buying an Australian manufacturer. His family’s luxuries include two Land Rovers, private school for the kids and a month-long European summer vacation. [Derek Olson is the CEO of National Flooring Equipment; makes machines that rip up flooring, like carpeting in elementary schools.]
“We call it the stealthy wealthy,” said Owen Zidar, a Princeton University economist who has studied the group with University of Chicago economist Eric Zwick.
Their analysis of anonymized tax data from 2000 through 2022 suggests the importance of such business ownership to the U.S. economy has grown. The share of income that ownership generates has increased to 34.9% in 2022 from 30.3% in 2014 for the top 1% earners.
It has increased even more at the topmost levels. The top 0.1% highest-earners saw 43.1% of their income come from such business ownership in 2022, compared with 37.3% in 2014. (The minimum income threshold in 2022 to qualify for the top 0.1% of earners was $2.3 million, according to Zidar.)
Zidar and Zwick attribute the growth of this group to tax cuts in recent decades for such business owners and low interest rates that have boosted company valuations. The number of such business owners worth $10 million or more, adjusted for inflation, has more than doubled since 2001, to 1.6 million as of 2022.
One example:
David MacNeil, 66, founder of car-accessories maker WeatherTech, made his fortune on car floor mats. He worked as a tool-and-die maker, dropped out of college and sold luxury cars. He rented a car on a trip to Scotland in 1989 and immediately noticed its floor mats. Thick, and with a border preventing water and mud from running off, the rubber mats were superior to anything he had seen in the U.S.
MacNeil called the English manufacturer when he was back home in Chicago and eventually worked out a deal to buy a 20-foot shipping container of the black mats to sell in the U.S., taking out a second mortgage on his home to do so.
“By the end of ’91 I made $40,000. By the end of ’92 I made $160,000. By the end of ’93 I made $400,000,” recalled MacNeil, who by that time was married and a father. “While all this was going on, if you called my 800 number at three in the morning, you know who would answer it? I would.”
Another:
Larry Fleming, 80, a Wendy’s franchisee, made his money in burgers and then beer. The tipping point for focusing on beverages came when the Muskogee, Okla., beer distributor he had bought in 1977 started outearning the fast-food restaurants he had bought a little earlier. Fleming sold his fast-food business in 2017—it numbered 43 restaurants by then—for more than $50 million, including the real estate.
Fleming’s beverage distribution company, LDF Sales and Distributing, sells Coors, Miller and other products to roughly the eastern halves of Oklahoma and Kansas. He has grown LDF partly by buying distribution rights and other distributors. The company has about 64% market share in Oklahoma and annual sales approaching $250 million.
“Any time two out of three beers going out of a restaurant or grocery store are yours, that’s a good thing,” Fleming said.
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A Musical Interlude
