Large lenders face looming questions about the fate of billions in commercial mortgage-backed securities in their possession should companies downsize office space post-pandemic.

A tax on people who work from home?  

You’ve got to be kidding me. 

Such is the brainchild of a team of Deutsche Bank analysts. 

In the latest installment of the bank’s “Konzept” research report, Deutsche Bank thematic strategist Luke Templeman proposed a 5 percent tax on remote workers, citing the supposed “privilege” of being able to work from home. 

Companies that rent office space would be the first to be targeted, with a penalty for each employee that works from home. 

That’s bad enough but it actually gets worse, for it would be individual employees who would be most likely to bear the burden of this noxious tax. 

To dodge the penalty, all a company would have to do is claim it has a desk available at its office and the bill would be sent to the remote worker instead.  

But no worries, the bank claims, for the proposed 5 percent – yes, 5 percent – tax amounts to “just over $10 per working day” based on average $55,000 salary for those whose primary office is at home, not in a downtown tower or suburban building. 

“That is roughly the amount an office worker might spend on commuting, lunch, and laundry etc.,” Deutsche Bank’s Templeman wrote. 

“A tax at this rate, then, will leave them no worse off than if they had chosen to go into the office,” noted the highly paid investment bank researcher and his team, each likely pulling down salaries in the hundreds of thousands of dollars for their efforts. 

How reassuring. 

Help for Service Workers? 

Effectively, people who work from home are freeloaders, in Deutsche Bank’s view, benefiting from all the wonderful retail, restaurant and commercial infrastructure supported by the office market, but not contributing to it. 

And with the number of remote workers have soared from a small but growing 5.4 percent last year, to a substantial proportion of the workforce in the wake of COVID-19, the issue has grown too larger to ignore, the Deutsche Bank researchers contend. 

“For years we have needed a tax on remote workers – COVID has just made it obvious,” Templeman writes. “Quite simply, our economic system is not set up to cope with people who can disconnect themselves from face-to-face society.” 

But it’s about far more than just making free riders pay their fair share – is about helping all those service workers who suddenly find themselves out of work, the Deutsche Bank researchers would have us believe. 

The estimated $48 billion the tax would raise in the U.S. would go towards supporting and retraining all the service workers in downtown restaurants and shops out of work now amid a sea of half–empty office towers. 

Indicators suggest working from home will be a much larger aspect of office work in the future.

…Or Self-Serving Pitch? 

Amazingly, the Deutsche Bank report and its proposed tax on remote workers has been generally taken at face value in the business press, as a controversial but well-meaning proposal. 

Yet strip away the window dressing about taxing the supposed haves – remote workers – to help have–not service workers, and you are left with something far less savory. 

Basically, you are looking at a clever ploy to support the reeling commercial real estate industry, advanced by a key player in one of the major sectors that stands to lose a bundle on all those empty office towers. 

Office building and tower owners saw a spike in rent relief requests in September number of commercial landlords reporting that most of their tenants were on-time with their payments slipped to 74 percent, with spike in requests for rent relief, according to NAIOP, the commercial real estate trade group. 

U.S. banks alone hold $2 trillion in commercial real estate debt, while Deutsche Bank has the largest slice of the commercial mortgage-backed securities market, standing at 20 percent, according to Market Watch. 

That’s up from 9 percent before the coronavirus pandemic struck, above JPMorgan Chase, at 15 percent, and Goldman Sachs, at 18 percent.  

An Odious Idea 

Needless to say, there’s a lot of money at stake for Deutsche Bank right now in the office market, and workers ditching grueling commutes to go remote is not a welcome trend for the global bank. 

And worse yet for Deutsche Bank and other bit commercial real estate lenders and investors, all signs point to the trend continuing even after the pandemic is eventually brought under control. 

The pandemic triggered a 10-fold increase in work-from-homers, with 56 percent of Americans having made the switch, as well as 47 percent of the workforce in the United Kingdom. 

Now a big chunk of those workers – more than 30 percent – say they plan to continue working from home at least two days a week, even after the virus has been reined in, according to Deutsche Bank. 

There’s something really odious about dressing up a proposal that penalize millions of average workers as progressive social policy – one that helps insulate Deutsche Bank and other big financial players from the consequences of their lending decisions, no less. 

Scott Van Voorhis

If push comes to shove and defaults in the commercial real estate sector threaten the stability of the world’s financial markets, there may yet come a time when government intervention is needed. 

Who knows, maybe the Federal Reserve or the federal government will have to wind up taking on some of that bad debt. 

In the end, that would have been a much better case for Deutsche Bank to make, for at least it would have been honest. 

Scott Van Voorhis is Banker & Tradesman’s columnist; opinions expressed are his own. He may be reached at sbvanvoorhis@hotmail.com.