Capitalists in the Twenty-First Century
Have passive rentiers replaced the working rich at the top of the U.S. income distribution? Using income tax data linking 11 million ﬁrms to their owners, this paper ﬁnds that private business owners who actively manage their ﬁrms are key for top income inequality. Private business income accounts for most of the rise of top incomes since 2000 and the majority of top earners receive private business income—most of which accrues to active owner-managers of mid-market ﬁrms in relatively skill-intensive and unconcentrated industries. Proﬁt falls substantially after premature owner deaths. Top-owned ﬁrms are twice as proﬁtable per worker as other ﬁrms despite similar risk, and rising proﬁtability without rising scale explains most of their proﬁt growth. Together, these facts indicate that the working rich remain central to rising top incomes in the twenty-ﬁrst century.