Working from Home Saves Money. Should Your Taxes Go Up?

We all agree that whether we work at home or in an office, we need roads. There are many other government services that we need (although many of us will debate what those are, so we’ll stick to roads here). But, when you have your employees work from home, what happens?

Well, they drive less. Yay! They spend less money on clothes. Yay! They spend less money on restaurant meals! Yay! You spend less money on office space. Yay! It sounds like a winning situation–for everyone but the government (fewer gas taxes), clothing stores (fewer business-appropriate outfits), and restaurants (fewer customers).

Deutsche Bank has a solution: More taxes for the work-at-home crowd. They propose that if your company doesn’t have office space available for employees, the company has to pay a tax to support businesses, such as restaurants, that have really taken a hit during Covid. If you provide a working space for your employees and choose to work from home, they pay the tax directly.

Is this a good idea? Deutsche Bank Analyst Luke Templeman estimates that such a tax would raise “$48 billion per year in the United States, along with £6.9 billion ($9.1 billion) in the United Kingdom and €15.9 billion ($18.8 billion) in Germany.” That seems like a great revenue stream. But, there are some issues that you should think through before throwing your support at this “painless” tax.

• Many businesses have taken huge financial hits. Your business may be prospering during Corona times, but many others are not. During the shutdowns, many are paying rent for office space, even as it sits empty. If you have to pay taxes on top of that useless rent when revenues are already down, it may destroy more businesses than it saves.
• Taxes are seldom temporary. Once a tax is required, will the government (any government!) say, “Okay, the crisis over! Keep your five percent!”
• This shift to telecommuting will be somewhat permanent. While there are plenty of people who will happily return to the office, eventually, there are plenty of businesses who will stay with the work-from-home model. It doesn’t make sense to prop up businesses like restaurants that may never recover–because fewer people will be going into the office.
• Your employees will hate this. Just go ahead and tell your employees that you will cut their pay by five percent and watch them run screaming due to telecommuting. They will still scream if the government does it but be unable to run.
• This proposal doesn’t account for differences in situations. My commuting costs are identical, pandemic or not, because I work from home all the time. But, I (like many, many Germans) use public transportation and have an annual pass. My transportation costs remain static in a pandemic. US residents are far more likely to be driving.
• The incentives are wrong. One thing that has unified the world’s response to Covid-19 is that everyone who can work from home should be working from home. This encourages people to go back to the office. As we’re not out of the woods yet (and in Switzerland, where I live, our numbers are worse than they’ve ever been), it’s not a good idea to encourage people to go back to work.

Overall, it’s an interesting idea that could help provide taxpayer dollars to some businesses and damage others. My recommendation is to leave it alone for now.