A Tax on Remote Work: Yes or No?

My husband has been working from home since the pandemic struck in March. If you ask him about it, he’ll teasingly say he’ll never go back to the office. That’s because he now has what I’ve had since joining the Tax Policy Center remotely in 2014: Productivity with flexibility from the comfort of our home.

But one economist, being an economist, sees pleasure and responds with… a tax. His idea:  Those who work from home, or their employers, should pay a new tax to support lower-income workers who cannot work from home. 

Deutsche Bank says yes: It’s only fair. 

Deutsche Bank researcher Luke Templeman would impose a five percent wage tax on remote work not mandated by government. Employers would pay the tax if they don’t offer their employees office space. Employees would owe the tax if they choose remote work. 

Templeman estimates the tax would generate $48.7 billion per year in the US, He figures it would fund $1,500 cash grants to the 29 million Americans earning $30,000 or less who cannot work from home. Remote workers should contribute more, he says, given the benefits of their circumstances, to help the less fortunate.

Stanford economist Nicholas Bloom reports that more educated, higher-earning employees are far more likely to work remotely. These employees can continue to advance in their careers, while those who cannot work from home—due to the nature of their jobs or their home circumstances—may be left behind economically. 

But the costs and benefits of working from home may be more ambiguous than Templeman implies. Workers may no longer be buying lunch at a carry-out near their work but their grocery and home utility bills are higher. And these remote workers may need to upgrade their internet services and purchase office supplies.

My remote working friends say no: It’s unnecessarily punitive.

To better understand what working people think about a work-from-home (WFH) tax, I informally polled 48 friends and followed up with virtual conversations with a dozen who work remotely. A bit about the 48 respondents:

  • More than half work full time and two-thirds earn an annual salary. About half live in households earning between $100,000 and $200,000 a year, and just over a fifth earn between $50,000 and $100,000. 
  • About 25 percent choose to work from home, while 40 percent are required to do so by their employers.
  • About 85 percent are female, 72 percent live with a partner, and 60 percent live with  children under age 18.

Their experiences illustrate why they view a tax on remote workers as… a bad idea (several used more colorful terms).

Remote workers might be worse off with a five percent tax.

Templeman assumes the tax would cost an average remote worker $10 per day. Since that’s money the worker might have spent commuting, the economist argues she’s no worse off paying the tax.

But some of my WFH friends reported they are not saving money by working remotely, and one who worked remotely even before the pandemic says her expenses now are inexplicably higher. 

Eight in ten of those working from home are spending less on gasoline and two-thirds are saving by not dining out. More than half are spending less on clothing, a quarter are spending less for parking, and about 20 percent spend less on transit. But two-thirds spend more on groceries, half report rising costs for technology and internet services, and one quarter are paying more for office supplies. Several friends also reported higher utility bills. 

Remote workers might be contributing more, on net, to the economy.

Templeman contends that because remote workers have “disconnected” from the face-to-face world, they are “contributing less to the infrastructure of the economy while still receiving its benefits.”

But by commuting less they may be contributing to a healthier environment, by lessening pollution associated with transportation. Says one friend:  “Anything we can do to encourage [that] should be applauded.” 

And there are other costs to working from home.  Over a third of my respondents report working more hours than before the pandemic. While those who are parents say they are spending more time with their children, their professional and household obligations have increased as well. Two respondents took pay cuts so their employers would not have to lay off staff.

Bottom line: A work-from-home tax is too small a solution for a big problem.

The pandemic and ensuing recession have exacerbated the need for tax revenue at all levels of government and economic relief for those who need it. But as our virtual conversation went on, one friend confessed, “The whole thought of this work-from-home tax makes me sort of angry. I’m all for helping people who make less than $30,000 a year, but the ‘stay-at-home vs. not stay-at-home’ thing seems like really weird criteria.” 

Another summed up the problem with Mr. Templeman’s overall approach. The crisis of economic inequality, she notes, existed before the rise of remote work. “It’s a white-collar versus blue-collar” problem, not a remote work versus on-site work problem. She also wonders whether women would be disproportionately affected by a WFH tax.

I’m not an economist, but I think there is a more efficient, fairer way to raise revenue to support lower-income workers in the short run and reduce income inequality in the long run. Raise tax rates for all income, no matter where—or how—it is earned.

The Tax Hound, publishing once a month, helps make sense of tax policy for those outside the tax world by connecting tax issues to everyday concerns. Have a question or an idea? Send Renu an email.

https://www.taxpolicycenter.org/taxvox/tax-remote-work-yes-or-no