Working from home is an advantage that should be taxed, says report
Saturday, November 14, 2020
Remote work has been among the many COVID-related challenges of 2020.
Many employees have appreciated the added flexibility and no commute. Those who aren't that social say they've been more productive since they haven't had to spend time schmoozing with coworkers and bosses.
The experience has many workers and companies exploring whether widespread working from home will — or should — continue once the coronavirus pandemic is under control.
It's also raised tax questions, including an intriguing and unexpected one.
A major European bank says that employees who work from home (WFH) should pay for the opportunity via a new tax.
Making at-home workers pay: The WFH tax is part of a new Deutsche Bank report exploring, as its title says, "What We Must Do To Rebuild."
"The sudden shift to [work from home] means that, for the first time in history, a big chunk of people have disconnected themselves from the face-to-face world yet are still leading a full economic life," according to the German financial institution's report.
"That means remote workers are contributing less to the infrastructure of the economy whilst still receiving its benefits," wrote research analyst Luke Templeman in the report, which was released last week.
The revenue raised by taxing the more privileged WFH employees then could be used to help with global economic recovery and, more specifically, to offer relief to lower-income workers who have taken on greater risk because their jobs can't be done remotely.
Rebuilding post-COVID: The tax, notes Templeman, would affect higher-income workers, since they are the ones who tend to be able to take advantage of this option. The Deutsche Bank report looks at the tax's per-worker effect in Europe and the United States in the following example:
"If we assume the average salary of a person who chooses to work from home in the US is $55,000, a tax of five per cent works out to just over $10 per working day. That is roughly the amount an office worker might spend on commuting, lunch, and laundry etc. A tax at this rate, then, will leave them no worse off than if they had chosen to go into the office. If we apply the same tax rate to workers in the UK with an assumed average WFH salary of £35,000, it works out to just under £7 per day. In Germany, a WFH salary of €40,000 leads to a tax of just over €7.50 per day."
Templeman argues that the WFH tax makes sense as a way "to support the mass of people who have been suddenly displaced by forces outside their control." Many of these workers worldwide, he says, will have to take low-paid jobs while they retrain or figure out their next steps.
"From a personal and economic point of view, it makes sense that these people should be given a helping hand," write Templeman. "It also makes sense to recognise that essential workers that assume covid risk for low wages. Those who are lucky enough to be in a position to ‘disconnect’ themselves from the face-to-face economy owe it to them."
Ways to deal with WFH, with or without a tax: While Templeman's humanitarian argument will no doubt cause so to at least look at his proposal, the WFH tax proposal is not being widely embraced.
Such a tax would punish progressive companies that have adapted to employees who have children and other caretaking responsibilities, Andrew Hunter, co-founder of job search engine Adzuna.co.uk, told the Associated Press.
"Let's be honest, there are many better ways to raise taxes!" added Hunter.
Still, Templeton's WFH tax idea and the Deutsche Bank report earns this weekend's Saturday Shout Out.
And as for better ways to raise taxes, the WFH tax got me thinking about voluntary taxes to accomplish Templeton's goals.
Many companies already allow workers with excess vacation to donate those days to coworkers who've used all their leave time caring for family members. Could similar donations of income be established under a more formal workplace structure?
Yes, there are tax and labor laws to consider. But as WFH tax opponents note, forward-thinking employers are always pushing the envelope when it comes to company benefits.
And innovative approaches to find ways to make employee treatment more equitable company-wide would be a good long-term business move for all, during and post-pandemic.
You also might find these items of interest:
- Work from home pros, cons and home office tax tip
- Homeowner's insurance is sort of tax deductible in some home office instances
- Home office tax deduction still available, just not for COVID-displaced employees working from home
|Coronavirus Caveat & More Information
In 2020, we're all dealing with extraordinary circumstances,
both in our daily lives and when it comes to our taxes.
The COVID-19 pandemic and efforts to reduce its transmission
and protect ourselves and our families means that,
for the most part, we're focusing on just getting through these trying days.
But life as we knew it before the coronavirus will return,
along with our mundane tax matters.
Here's hoping that happens soon!
In the meantime, you can find more on the virus and its effects on our taxes
by clicking Coronavirus (COVID-19) and Taxes.
So personal income taxes aren't complicated enough? Employers will now have to report the WFH people so that a "non-commuter" tax can be levied?
Yet wages are now and will continue to be taxed at a rate higher than non-wage passive investment income?
Posted by: Ray in Bowie MD | Sunday, November 15, 2020 at 10:37 PM
Sounds like targeting a portion of work force. Some companies are adjusting wages for workers who opt to wfh permanently.
Govts need to regain Lost revenue, and also fund rebuild efforts. This particular tax increase is not the way to go.
Posted by: Robert Mandel | Sunday, November 15, 2020 at 06:16 AM