Crossposted on CalWatchdog

The rich are getting richer and everyone else is losing wealth. This phenomenon supposedly would justify more aggressive government policies redistributing wealth.

At an Assembly hearing Wednesday about whether the state of California should be actively pursuing additional wealth redistribution policies, Legislators and academics said that the highest degree of inequality is because of a growing gap in incomes between the most wealthy, and everyone else. Because of this unfair disparity, they said that the government needs to step in and put an end to this income gap.

However, the hearing also turned out to be not very cleverly disguised as a way to promote tax hikes for expanding public education. Each academic invited to speak at the hearing promoted large tax increases, while insisting that California spends less per child in public education.

After sitting through more than two hours of the hearing where left-of-center academics had been invited to provide advice to legislators on how and why the state should do more wealth redistribution, it was apparent that legislators already believed that redistribution of wealth was necessary. Now they are pushing for more spending on the state’s schools, even though California already spends 40 percent of the state’s budget on education.

Income And Wealth Inequalities

The Assembly Accountability and Administrative Review Committee held an oversight hearing Wednesday to address the “income and wealth inequalities” in California. And they were in good company because the academics invited to the hearing actually advocated higher income and corporate taxes.

The academic presenters included Paul Pierson, a political science professor at the University of California, Berkeley; Ann Stevens, research director at the University of California, Davis Center for Poverty Research; Jeffrey Michael, director of the University of the Pacific Business Forecasting Center; and Sylvia Allegretto, deputy chairwoman of the U.C. Berkeley Center on Wage and Employment Dynamics.

Also speaking was Dan Schnur, director of the University of Southern California Jesse Unruh Institute of Politics and a longtime Republican adviser. Unfortunately, Schnur missed an opportunity to refute the class-warfare rhetoric by academics themselves well compensated with the taxpayers’ money. Instead, he just cited polls.

It’s Time To Increase Taxes

The academics promoted creating higher oil taxes, adding more progressive taxes, said that “Proposition 13 needs to be revisited,” project labor agreements need to be strengthened and capital gains and inheritance taxes need to be beefed up.

While they had impressive titles, and years of research under their belts, and several self-identified as economists, not one academic advocated free-market economic principles.

Instead, the academics criticized high-income earners and intimated that the wealth was ill-gotten.

Pierson called the top 1 percent of the U.S. economy “Richistan” and “economic oligarchies.”

“Even the mildest efforts to impose transparency were beat back by lobbyists,” Pierson said. And he wasn’t talking about transparency in government. “It’s a matter of public concern.” Pierson advocated government intervention in private sector wealth redistribution, as did Stevens and Allegretto.

“I am told that our legislation will cause people to leave the state for better business climates,” said the committee chairman, Assemblyman Roger Dickinson, D-Sacramento. But Pierson told Dickinson that there is no empirical evidence to back up the contention that people are leaving the state in search of states with business-friendly climates.

Pierson apparently has not read the many stories from Joe Vranich, a leading business relocation specialist.

For several years Vranich has chronicled why businesses leave California. The list is long and is largely due to state legislation and business-stifling regulations from state regulatory agencies.

Vranich has put together a “Top Ten” list of why businesses move out of the state:

10. Unprecedented energy costs;

9. Severe tax treatment;

8. Worst regulatory burden;

7. Unfriendly legal environment for business;

6. Most expensive business locations;

5. Provable savings elsewhere;

4. Unfriendly business climate;

3. Uncontrollable public spending;

2. More adversarial toward business than other states;

1. Poor rankings in surveys across the board.

Vranich states on his website that California is experiencing the fastest rate of disinvestment events. Throughout a three-year period, Vranich used the same tracking system to monitor California’s business losses.

From January 1 to June 16, 2011, Vranich found 129 disinvestment events, which occurred at an average of 5.4 per week. For all of last year, 2010, there were an average of 3.9 events per week. By contrast, from January to June 2009, the total was 51 events, essentially averaging 1 per week. Thus, Vranich found that California’s business departure rate was five times as much in the first half of 2011 as in the first half of 2009.

“Out-of-state economic development officials are traveling through the state to alert frustrated business owners and corporate executives to their friendlier business climate versus California’s hostility toward commercial enterprises,” Vranich wrote.

How Academics Would Reform California’s Economy

As I predicted yesterday in State’s Role About Your Wealth, the academics shared theories, most of which included how to level the playing field of wealth inequality.

Allegretto provided a list of ideas for legislators:

* More progressive state income tax structure;

* Institute progressive inheritance, gift and estate taxes;

* Revisit Proposition 13;

* Institute an oil severance tax;

* Invest heavily in K-12 and higher education;

* Strengthen job quality (“make work pay,” Allegretto said);

* Index the minimum wage to inflation;

* Get rid of enterprise zones;

* Strengthen project labor agreements;

* California bid preferences;

* Institute a rainy day fund;

* Close corporate loopholes.

“The wealthy and corporations avoid paying their fair share of taxes and thus starve our governments of needed funds to promote all that is just and fair in an economy as rich as ours,” Allegretto said. “Yes, they pay a large part of all taxes — but they have most of the money.”

But who and what determines “fair share”? An academic paid by the state?

Stevens told the committee that the state can’t just rely on the wealthy, “But since some of their wealth is coming back, it’s a good place to start.”

“That’s where the money is,” Dickinson said. “That’s why bank robbers go to banks.”

Expanding Existing Government Programs

Stevens, a poverty researcher, advocated the federal Earned Income Tax Credit, a refundable tax credit for moderate to low income individuals and families with children. Stevens said that with the tax credit, food stamp programs and the Women, Infants and Children programs, “the current level of inequalities means that a transfer of resources can have an effect.”

Stevens advocated for higher taxes from the wealthy in order to expand government programs for those who have moderate and low incomes.

Bashing the Private Sector

Legislators and the academics spent the entire hearing bashing private business, doing exactly what Vranich warns is causing businesses to leave California for more friendly pastures.

After sitting through this hearing, it is difficult not to see a dangerous trend with some legislators, state leaders and academics, where they see their role in the establishment of a classless, moneyless, statist society, based upon common ownership, even as the rest of the world is going in the opposite direction.