Is It Time to Tax Telework?

November 12, 2020 1:31 PM
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Pink piggy bank next to vertical stacks of coins on a desk growing in size from right to left; a man is seen working on a laptop in the background

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Along with the outbreak of COVID-19 in 2020 came a sharp rise in telework (i.e. working from home or remote work). What began as a way to help navigate the pandemic to limit exposure to the coronavirus in crowded offices has emerged as a new trend with more people and companies choosing to work remotely.

A new proposal has emerged that argues that those who are working remotely are getting a free ride at the expense of the rest of the workforce who cannot work remotely.

In a research paper published by Deutsche Bank titled What We Must Do to Rebuild, author Luke Templeman says that “remote workers are contributing less to the infrastructure of the economy whilst still receiving its benefits.”

How should this discrepancy be rectified? By levying a new tax on telework.

Templeman goes on to make the case for a 5% tax on U.S. teleworkers to counterbalance the financial rewards they are reaping to redistribute their largesse to the workers in the country who do not have the same luxury.

Templeman says that remote workers are generally better off, earning higher wages on average than those who do not. He also argues that such a tax would not leave teleworkers any worse off.

“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 [sic] 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,” writes Templeman.

The burden of paying the tax would be shared by the employer and employee depending on whether or not the employer provides the worker with a desk.

“The tax itself will be paid by the employer if it does not provide a worker with a permanent desk. If it does, and the staff member chooses to work from home, the employee will pay the tax out of their salary for each day they work from home. This can be audited by coordinating with company travel and technology systems,” writes Templeman.

The idea of slapping a tax on a new societal trend is likely to lead to some criticism. One of those critics is Tax Foundation author Jared Walczak who opined in a rebuke of Templeman’s proposal that punishing the trend of telework through taxation is addressing a non-existing problem.

“Remote work has both advantages and disadvantages, but it certainly isn’t hurting the federal government,” writes Walczak. “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.”

He also said that workers are the ones who would ultimately bear the brunt of such a tax as proposed.

“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 taxes are: either directly, as remitted by the worker, or indirectly, in the form of reduced compensation,” writes Walczak.

FedSmith readers said in a recent survey we conducted that they have been working remotely much more during the pandemic, something that wasn’t surprising and mirrors the national trend. They also said, however, that they think telework is a viable long-term option that should be continued.

Would a daily tax on telework make you rethink your desire to work from home? Would it put a damper on the increasing trend we have witnessed towards employees working remotely, or is Templeman’s proposal something that would help the economy rebuild as we recover from the coronavirus pandemic? Share your thoughts in the comments below.

© 2020 Ian Smith. All rights reserved. This article may not be reproduced without express written consent from Ian Smith.

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About the Author

Ian Smith is one of the co-founders of FedSmith.com. He enjoys writing about current topics that affect the federal workforce.

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