It is an article of faith among progressives that income inequality is getting worse in California. In fact, claims of a widening gap between rich and poor are used nationally to justify raising taxes and accelerate the redistribution of wealth.

But like other urban myths, such as how Prop. 13 supposedly starved local governments, it is easily debunked by critical analysis of the data. As it turns out, while the rich are in fact getting richer, so are the poor.

First, no one disputes the tautological argument that the wealthy have more money than the poor. But policy leaders need to ask some important questions. For example, is that gap actually expanding? How do we measure “income?” If the standard of living is increasing for those at the bottom rung of the economic ladder, does it really matter how rich the wealthy become?

In January of 2020, the Public Policy Institute of California issued a report on income inequality which found that the gap between rich and poor in California was in fact larger than in 45 other states. But PPIC also acknowledged that “current government policies substantially narrow the gap between rich and poor.” Those policies include heavy tax burdens on the productive sector of the economy and massive transfers of wealth to lower income individuals.

But in any discussion of income inequality, it is important to define the terms. Much of the most widely‐​cited work by mainstream media which “proves” increasing disparity is misleading because of the definitions they employ. Take, for example, the work of economists Thomas Piketty and Emmanuel Saez, two darlings of the left. How they defined “income” ignored several variables that substantially inflate U.S. income inequality. Those variables include whether corporate income should be attributed to individuals (it should), whether after-tax income is a better metric (it is), and whether the value of employee benefits should be counted (it should). In short, the work of Piketty and Saez has been substantially discredited by other economists. But it is unlikely that you’ll ever read about that in the New York Times.

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