When you hear a diatribe about income inequality, you can bet that you’re listening to a left-winger describe what he believes is the inevitable result of economic freedom.
With the classic terminology of Karl Marx, he will describe a society in which wealth becomes unsustainably concentrated and the middle class is constantly squeezed out of existence between the owners of capital and the proletariat.
So, here’s how to cut the sermon short: Just remind your preacher that he’s describing the most left-wing states in America. New York and California placed first and second for income inequality, according to a 2018 survey of Bureau of Labor Statistics data by the personal finance website MoneyRates.com. Maryland, Illinois, and New Jersey round out the top five.
We put no stock in the idea that income inequality matters in itself. In fact, it has benefits to the broader economy. So long as the poor continue to improve their lot, the good fortune of the wealthy can never hurt them. But the giveaway that something bad is happening in these five states is that they have all been losing residents to other states in recent years, even though each is among the richest in America.
In California, the middle class really is disappearing, not into the proletariat or the ranks of the rich, but into sensibly run states such as Texas, Arizona, Idaho, and Nevada. Not only is the Golden State suffering negative domestic net migration overall, but every income group below $110,000 per year is leaving. The state’s middle-income earners are selling their homes and heading for cheaper and often safer and cleaner places. The fleeing middle class is being replaced on the one hand by new border-crossers, usually at the bottom of the income scale, and by a trickle of rich people from other states.
The immense cost of housing, due to NIMBY (not in my backyard) building restrictions, fosters this extreme inequality. In San Francisco, it’s gotten so bad that families making six-figure salaries there are now considered low-income and qualify for “affordable” housing.
So, you wouldn’t expect to see California create new policies that will further increase the cost of each housing unit by $10,000.
Except that it’s California, so of course that’s what it’s doing. The California Energy Commission has imposed a new requirement that residential solar arrays be included with all new housing. A set of accompanying energy efficiency regulations could increase new housing costs by up to another $15,000 beyond that.
As for the other supposed benefits of the solar panels, the commission has chosen perhaps the least efficient method for adding new electrical generation capacity to the grid. (Perhaps we should be thankful that it isn’t requiring each resident to spend 15 minutes on a treadmill every day — not to give them any ideas!)
Contrary to what some advocates have claimed, this housing price hike/solar installer subsidy will drive up the cost of all housing in California, not just of new buildings but also those too large to qualify for an exemption. The older and smaller homes competing with them will also become more expensive.
It adds insult to injury that taxpayers who don’t even live in California will be forced to help pay for all this nonsense through the federal tax code.
This decision about solar panels, which was taken without meaningful expert input or study, will accelerate the exodus of the state’s middle class. That’s the sad story of California, where the rich get richer, the poor get across the border, and those in between get moving trucks and head for Boise or Salt Lake.
