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No, We Don’t Need a Federal Work-From-Home Tax

5 min readBy: Jared Walczak

Multinational banks do clickbait too. That’s my analysis of one of the proposals from a recent Deutsche Bank publication titled What Must We Do to Rebuild?—a proposal sure to work up those who work from home. Because, among other short pieces with titles like “The delivery dilemma” and “The case for post-COVID rural investment,” there’s something way more eye-catching: “A work-from-home taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. .”

Publications like these don’t normally attract attention. This is, after all, the nineteenth such collection of short papers in the bank’s “Konzept” research series. But a work-from-home tax proposal is perfectly designed to draw the attention of writers at MarketWatch, Bloomberg, and Yahoo! Finance. And, of course, you’re reading this on our website, so I’m not immune to the pull either.

Analyst Luke Templeman’s attention-grabbing proposal is already brief at three pages, but allow me to summarize it still further: Templeman figures that those fortunate enough to work from home, whether fully or in part, are saving money on their daily commute, on dining downtown, on dry cleaning, and the like—savings that the federal government could scoop up and transfer to some of those who aren’t working from home. Employees would be subject to a tax of 5 percent on income earned on days when they are working remotely. If they work from home of their own volition, they are responsible for the tax. If their employer is responsible for the decision, the employer bears the burden.

To say this concept isn’t fully fleshed out would be an understatement. Templeman’s notion is that the tax’s legal incidence—whether it is imposed on you or your employer—is determined by whether your employer offers you a desk. How this would work in open office plans or for other non-deskbound employees who could theoretically work remotely is unclear. An employer could, presumably, offer minimalistic shared workspaces where offices normally would have been. In the long run, moreover, we would expect the tax to be borne by employees regardless, much like payroll taxA payroll tax is a tax paid on the wages and salaries of employees to finance social insurance programs like Social Security, Medicare, and unemployment insurance. Payroll taxes are social insurance taxes that comprise 24.8 percent of combined federal, state, and local government revenue, the second largest source of that combined tax revenue. es are: either directly, as remitted by the worker, or indirectly, in the form of reduced compensation.

Suddenly, where you work each day has tax implications. Distinctions would have to be made between work performed out of the office for specific reasons (business trips, for instance) and work performed remotely for convenience or preference. Days would have to be logged, with taxes owed based on the number of days each employee works remotely. (“This can be audited by coordinating with company travel and technology systems,” writes Templeman, in a single-sentence description of what would doubtless be an enormous hassle for many companies and their employees.) Income would have to be allocated to each day, which would be simply arithmetic for salaried employees, but could prove considerably more complex for those with performance- or project-based elements of their compensation package.

The fundamental consideration, however, is less about the logistics than the logic of the tax. Templeman is concerned about unused infrastructure—vacant office buildings and underutilized city centers—but he doesn’t propose that the tax be levied by the cities and states losing workers to telework (which has its own problems). Instead, he wants a federal tax designed to strip away the financial benefit of remote work, confiscating employees’ savings by staying at home.

But why?

Remote work has both advantages and disadvantages, but it certainly isn’t hurting the federal government. It is not an undesirable activity to be curtailed by prohibitive taxation. The proposed remote work tax doesn’t fix a problem; it doesn’t even identify a problem worth fixing. It simply enacts a penalty on those able to work remotely. Templeman proposes using the revenue to write $1,500 checks to workers earning less than $30,000 a year in jobs that cannot be performed remotely, but the transfer almost seems like an afterthought.

Revenue assumptions are based on survey data about telework preferences, but they are specifically employees’ preferences, not their employers’. They reflect how often workers say they would like to work from home, rather than ascertaining how widely available such employment policies may be. And that’s before we consider how preferences might change if working from home is taxed.

The proposed grant recipient pool is based on equally hazy assumptions. It is not clear that Templeman distinguished between full- and part-time workers, and it seems unlikely that he took household income into account. The logic, in part, is built around the idea that low-income workers who can’t work remotely are assuming health risks during the pandemic, which is true, but Templeman also stipulates that the tax should only be collected when governments are not advising people to work from home. “It also makes sense to recognize that essential workers that [sic] assume covid risk for low wages,” he writes—about a transfer that, according to his own design, would only be available after pandemic-related restrictions and guidance were lifted.

While checks are nice, moreover, it is far from obvious that the beneficiaries will be worse off economically than some of those paying the tax. Why should a low-income remote worker be taxed to write checks to people who make the same or more than them, or who have massively greater earning potential, like graduate students with limited current earnings? And there is no particular reason why those working from home, either by their choice or their employer’s, should be responsible for supplementing the income of those who remain in offices, however deserving they may be.

“Some will argue against the tax,” Templeman writes in a model of understatement, observing that some will believe that working from home should not be penalized. “Yet, these people should remember that governments have always backsolved taxes to suit the social environment,” goes his counterargument.

But if this is the solution, what was the problem?

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