California Wealth Tax

  • Rauh, Joshua, Benjamin Jaros, Gregory Kearney, et al., 2026, “The Net Present Value of the California Billionaire Tax Act,” SSRN Working Paper no. 6340778, March.

The 2026 California Billionaire Tax Act is a proposed statewide referendum that will be on the ballot in November 2026 if enough signatures (about 900,000) are obtained. The referendum would amend the California state constitution to permanently remove the existing 0.4 percent cap on taxes on intangible personal property and enact through statute a 5 percent one-time excise tax on the worldwide net worth of individuals whose net worth exceeds $1 billion and who were residents or part-year residents of California as of January 1, 2026. If approved, it would be the first major tax on general wealth in US history.

Proponents claim the tax would raise $100 billion in revenue, estimated using the Forbes calculation of the total wealth of the state’s billionaires ($2.18 trillion). They assumed evasion and avoidance would eliminate 10 percent of the wealth and then applied the 5 percent rate to the remaining $2 trillion.

The authors of this Hoover Institution paper start with a slightly lower total wealth calculation of $1.9 trillion because of mistakes in residency in the Forbes data. But they claim approximately 51.6 percent of that billionaire wealth tax base would be lost through out-migration from California because six publicly confirmed departures have already eliminated nearly 30 percent of the base. Thus, the yield from the wealth tax would only be about $40 billion.

The Hoover paper also calculates the lost present value of future income tax revenue the out-migrating billionaires would not pay to California. The state’s 212 billionaires contribute an estimated $3.3–$5.8 billion annually in state income taxes. At a 4.5 percent real discount rate, the departure of just 41.5 percent of the billionaire income tax base would eliminate the net fiscal benefit of the wealth tax. Given the authors’ estimate of a more than 50 percent reduction in the wealth subject to tax, they argue that the tax proposal would reduce revenue for the state. Approximately 71 percent of plausible parameter combinations yield a negative net present value.—PVD

Gig Work Minimum Wage

  • An, Yuan, Andrew Garin, and Brian K. Kovak, 2025, “Delivering Higher Pay? The Impacts of a Task-Level Pay Standard in the Gig Economy,” NBER Working Paper no. 34545, December.

Despite evidence that increases in the minimum wage do little to reduce poverty (see Working Papers, Fall 2023), minimum wage policies are popular even among academics (see McKenzie, Winter 2025–2026). And these laws are being expanded to cover so-called gig work: Uber drivers and Door Dashers, for instance.

This paper examines Seattle’s January 2024 implementation of a per-task minimum pay standard for app-based delivery workers. What happened? Delivery pay per task increased but tips decreased. Also, the number of tasks completed by incumbent drivers decreased, thereby completely offsetting increased pay per task and resulting in no net effect on monthly earnings. The evidence is consistent with free entry of drivers into the delivery market reducing the task-finding rate until expected earnings returned to their pre-reform level.—PVD

Minimum Wage and Robots

  • Brynjolfsson, Erik, J. Frank Li, Javier Miranda, et al., 2026, “Minimum Wages and the Rise of the Robots,” SSRN Working Paper no. 6184798, February.

The minimum wage and its effects have been discussed in five previous Working Papers columns (Fall 2015, Winter 2016–2017, Winter 2017–2018, Summer 2022, and Fall 2023). The title of this paper is self-explanatory.

Their research design compares manufacturing employment and robot use over the period 1992–2021 in counties at the borders of states with different minimum wages. A 10 percent increase in the minimum wage increases robot adoption by roughly 8 percent relative to the mean.—PVD

Housing Affordability

  • Garcia, Manu, and Carlos Garriga, 2026, “When Houses Outrun Paychecks: The Lost Decades of Housing Affordability,” On the Economy (blog), Federal Reserve Bank of St. Louis, February 12.

  • Garcia, Manu, and Carlos Garriga, 2026, “America Underbuilt Inc.: The Supply Side of the U.S. Housing Challenge,” On the Economy (blog), Federal Reserve Bank of St. Louis, April 8.

From the start of the COVID pandemic in January 2020 to June 2022, the Case–Shiller US national home price index increased a stunning 45 percent. Since then, house price increases have moderated, but the annualized increase from January 2020 to January of this year is about 7.5 percent, double the annualized inflation rate over that time. This has prompted concern about housing affordability.

What has caused the house price increase? The simple explanation, of course, is that supply is not keeping pace with demand. In a pair of data-rich posts for the St. Louis Fed blog, bank senior vice president Manu Garcia and associate economist Carlos Garriga flesh out this idea.

In their first post, they focus on demand, beginning with the increase in house prices in the early years of this century. From 2000 to 2024, the median home price rose roughly 207 percent, while median per-capita income grew about 155 percent. The price increase was not limited to a few coastal hotspots; county-level data show that home values have outpaced local incomes almost everywhere, with especially sharp jumps in the West, Mountain West, Texas, and Florida, and meaningful increases even in the modest Midwest and Southeast.

Several factors are driving this price surge. Falling mortgage rates from 2000 to 2021 lowered borrowing costs and effectively expanded housing budgets even when wages grew slowly. Credit expansions added further demand pressure. Widening income inequality compounded the effect: Higher-income households captured most aggregate income gains and used them to bid up home prices.

Another demand factor, discussed in Garcia and Garriga’s second post, is the shrinking size of US households, which went from 3.37 people in 1965 to 2.57 in 2024. That means more units are needed to house the same population than before. As a result, household formation has frequently outpaced housing construction, and by especially wide margins in the years after the housing market collapse.

Garcia and Garriga’s second post focuses more on supply, describing how much new housing the construction sector has delivered. Building permits per capita in the United States peaked at 10.6 per 1,000 people in 1972, collapsed 74 percent during the 2008 financial crisis, and recovered to only 4.3 per 1,000 by 2024, still 35 percent below the 1960–2000 historical average of 6.6. Garcia and Garriga trace this persistent weakness to several structural constraints: a construction workforce that never fully recovered after the financial crisis, rising material and land costs, restrictive zoning and ponderous permitting processes, and scarcity of developable land near job centers. (In their earlier post, they noted that zoning rules and land-use regulations have constrained supply, especially in high-productivity metros, so demand shocks have translated into higher prices rather than more units.) Even the permits that are issued do not always become homes quickly; post-pandemic supply-chain disruptions and labor shortages have created a significant lag between permits and completions that has only recently narrowed.

Taken together, the posts describe an affordability problem that is neither transitory nor geographically confined. Various estimates put the cumulative housing shortfall at somewhere between 3 million and 5 million units. When housing supply cannot respond elastically to demand, higher prices are the inevitable result.

As Fed economists, Garcia and Garriga are careful to “stay in their lane” and not formulate policy responses, but they note that current zoning and labor conditions present structural constraints. The implicit message is that many of the demand-side interventions that policymakers push—housing subsidies, down-payment assistance, lower interest rates—cannot solve a problem whose roots lie in the persistent inability of American communities to build enough homes.—TAF