Since the pandemic outbreak, many professionals around the world suddenly found themselves working-from-home. Now, it looks like remote or at least hybrid work will be the norm going forwards. But should remote work come with its own tax bracket? That’s an idea proposed by a group of Deutsche Bank researchers, who suggest that people working-from-home after the pandemic should be subject to a 5% tax in order to generate money which could then be used to subsidize lower-income, frontline or essential workers who cannot work-from-home.
Paying for the Privilege
The report, entitled ‘What We Must Do to Rebuild,’ suggests that those working from home “should pay a tax for the privilege,” adding that their economic projections suggest “the amounts raised could fund material income subsidies for low-income earners who are unable to work remotely and thus assume more ‘old economy’ and health risks.”
How much could this telecommuter tax bring in? Based on their survey results, Deutsche Bank projects that, post-COVID, there could be around 4.2Bn new days worked at home a year. Based on average salaries of around $55,000, most people would therefore pay around $10 a day, generating around $48bn per year in the US, €20bn in Germany, and £7bn in the UK.
Clearly, this could bring a tremendous financial boost to those most in need. For example, in the US, researchers suggest the $48bn could go towards “a $1,500 grant to the 29m workers who cannot work from home and earn under $30,000 a year (excluding those who earn tips).” Or in the UK, for example, the £6.9Bn raised could provide a grant of £2,000 each to the 12% of those aged over 25 who are on minimum wage. As the researchers point out, many of these lower-income employees will be essential workers who have “assumed the health risks of working during the pandemic.”
Remote Work and the New Normal
Remote work has increased exponentially as a result of the pandemic. It’s estimated that around 56% of the US labor force is now working-from-home as a result of the lockdown, along with 42% in the UK. This summer, the number of companies with flexible work policies in place jumped from 15% to 76% as the virus took over globally. Huge companies such as American Express, Uber, Airbnb, Twitter and Google have all recently extended their work-from-home policies. Furthermore, it seems there’s no going back to how things were before when it comes to remote work. According to the Deutsche Bank research, 60% of those working from home in the outbreak would like to continue to do so for two or more days per week even once a working vaccine has been put into place.
Implementing such a tax is not an entirely new concept. In fact, the authors of the report said that a tax on remote workers has been needed “for years” and that COVID has simply made this need “more obvious.” In the report, thematic research analyst Luke Templeman said that “the sudden shift to [working 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. That means remote workers are contributing less to the infrastructure of the economy whilst still receiving its benefits.”
Expanding on this idea further, the report suggests that the economy will suffer enormously without the presence of commuters and in-person workers. “[I]t has taken decades and centuries to build up the wider business and economic infrastructure that supports face-to-face working,” report authors outline. “If a great swathe of assets lie redundant, the economic malaise will be extended.” The tax would be intended to address this financial loss to the market and would in theory, cost no more than commuting into the office everyday, paying for lunch and other associated costs.
How would it work?
Under the new proposals, there are a few stipulations:
- Low-income or self-employed workers would be exempt from the tax.
- If employers cannot provide a desk for their workers, they cover the tax.
- If employers can provide a desk, then the remote worker covers the tax.
Researchers also suggest this proposal would take some of the pressure off the government to provide long term subsidies or help for businesses that are no longer sustainable or profitable because of the pandemic. “If, for example, a city-centre sandwich shop is no longer needed, it does not make sense for the government to support the business in the medium term,” the report outlines. “But it does make sense to support the mass of people who have been suddenly displaced by forces outside their control. Many will have to take low-paid jobs while they retrain or figure out their next step in life. From a personal and economic point of view, it makes sense that these people should be given a helping hand.”
The report authors recognise that the proposals are likely to be met with resistance on various levels and predict that people will argue “engagement with the economy is a personal choice and they should not be penalised for making that decision.” In response, Deutsche Bank researchers say governments have “always backsolved taxes to suit the social environment.” Given the way society and the world of work has been transformed by COVID, the researchers argue our tax system must evolve to fit in with this new state of ‘human disconnection.’
The pandemic has led to a profound reconsideration of how and where we work, but has also exposed drastic income inequalities between the types of work we do. As is rightly pointed out in the report, the essential workers that society has leaned upon so heavily during this difficult time are oftentimes earning the least. Whether or not the work-from-home tax idea gains traction, Deutsche Bank’s report gives a fascinating glimpse into what the future of work, taxation and daily life might look like as large scale remote or hybrid work continues.
Click here to view the full report.