Home Budget & Tax News Economists Dispute ‘Work-from-Home’ Tax Proposal

Economists Dispute ‘Work-from-Home’ Tax Proposal

A federal tax on employees who work from home (WFH) could be used to compensate workers who don’t have that option, says Luke Templeman, an analyst at Deutsche Bank, an international financial services company based in Frankfurt, Germany.

“[R]emote workers are contributing less to the infrastructure of the economy whilst still receiving its benefits,” Templeman writes in an article in Konzept, Deutsche Bank’s research magazine, published on November 10.

Work at home has more benefits than costs to the individual, and those who do not have that opportunity lose out on those benefits, Templeman writes. Telecommuters should have to give money to those workers, Templeman argues.

“Those who are lucky enough to be in a position to ‘disconnect’ themselves from the face-to-face economy owe” such a tax, says Templeman, “to support the mass of people who have been suddenly displaced by forces outside their control.”

A 5 percent tax, averaging about $10 for each day of WFH, could be imposed on employers who do not offer a permanent desk at the office or paid by employees who choose to work from home, says Templeman. The self-employed and low-income workers would be exempt.

The revenue would be used to provide an annual grant of about $1,500 each to “workers who cannot work from home and earn under $30,000 per year,” Templeman writes.

Telecommuting was becoming increasingly popular before the COVID-19 pandemic hit, and it has exploded since, Templeman states.

‘Bad Idea’

Taxing WFH is not economically justified, says Seth H. Giertz, an associate professor of economics at the University of Texas at Dallas and a policy advisor to The Heartland Institute, which publishes Budget & Tax News.

“The proposed tax on working from home sounds like a very bad idea,” Giertz said.

“There are costs and benefits associated with working from home,” Giertz said. “Without such a tax, workers and employers are free to assess the cost and benefits from various work arrangements, and in fact have an incentive to do so. However, an economic justification for the tax would imply that the parties making the decisions are not bearing this tradeoff. One would need to argue that the costs from working from home are borne by others in the economy and not accounted for in market prices.”

‘Exercise of Economic Freedom’

A WFH tax would interfere with voluntary labor market arrangements, says R. David Ranson, president of HCWE & Co. and a policy advisor to The Heartland Institute.

“Working from home is a feature of the employer-employee relationship, and should be governed by mutual consent,” Ranson said. “Whether it’s justified by productivity considerations can only be determined at the micro level. I don’t see how it is any business of politicians to get involved.

“Even more generally, while I can see a basis for taxing harmful activities, I can’t see a basis for taxing the exercise of economic freedom,” Ranson said.

‘Want to Continue’ WFH

Surveys show many employees want to continue WFH after the pandemic. The reason is “WFH is financially rewarding,” writes Templeman.

“WFH offers direct financial savings on expenses such as travel, lunch, clothes and cleaning,” states Templeman. “Add to these the indirect savings via forgone socializing and other expenses that would have been incurred had a worker been in the office. Then there are the intangible benefits of working from home, such as greater job security, convenience and flexibility.”

COVID increased the number of Americans regularly working from home to 56 percent of the employed, states Templeman. A Deutsche Bank survey “found that, after the pandemic has passed, more than half of people who tried out WFH want to continue it permanently for between two and three days a week,” wrote Templeman.

WFH ‘an Economic Boon’

The propsed tax would reduce the benefits of WFH and increase the costs to the economy, says Edward Hudgins, a senior fellow at The Heartland Institute.

“Defenders … mutter about those workers needing to contribute to the ‘infrastructure of the economy,’ as if saving billions of dollars of various costs is not an economic boon,” Hudgins said. “The real motive of advocates of this plan is simply, ‘We want your money.’”

“The proposed ‘work-from-home’ tax is yet another example of the mentality of government power-wielders who will do whatever is possible to block efforts of individuals to better their own lives,” Hudgins said.

Among those whom WFH benefits are people who have limited employment opportunities, says Ranson.

“Work from home also opens up the possibility of employment to millions of people who, through disability or family constraints, are unable to commute or work away from home,” Ranson said. “This opening up of work opportunities should absolutely not be discouraged.”

Joe Barnett
Joe Barnett was managing editor of Budget & Tax News, a publication of The Heartland Institute. He now serves as a volunteer policy advisor.

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