Many public transit commuters across the US received unwelcome news last January when it was announced that their monthly pre-tax transit benefit levels were being lowered from $245 to just $130 thanks to the expiry of a tax benefit at the end of 2013. Employees in many metropolitan areas are able to deduct commuting costs from their paychecks, tax free, through an employer benefit program up to the allowable monthly limit (for full detail read this SHRM brief). Meanwhile for those who choose to drive to work with a private car, their monthly limits rose from $245 to $250, which can be used for parking.
Public transit advocates, urban planners and many others with common sense all winced at the news. Not only do transit riders now have to pay more out of pocket each month to get to work, but car drivers are rewarded and even encouraged to continue opting for their inefficient method of commutation. According to findings in a Brookings Institute paper by Elizabeth Roberto, ‘working households—those with incomes between $20,000 and $50,000—in 28 metropolitan areas spend an average of 28 percent of their income on housing ($9,700) annually, on average, and nearly 30 percent on transportation ($10,400).’ (Roberto, 4). Yes, that’s right, millions of Americans spend more on transportation than they do on their housing expenses!
The United States Congress’ inability to formulate a permanent extension of this logical tax benefit is certainly disheartening for the many Americans who spend a hefty chunk of their paycheck on just getting to and from work, but it also has much broader implications. Higher expense burden aside, the inequity exhibited between car drivers and transit riders could have serious consequences. With a more attractive tax benefit for those who drive, more commuters might be compelled to switch from their typical bus or train commute to a car commute. They might do the math and find out that even with fuel prices included, it could benefit them to drive in order to claim the pretax parking benefit. So now the expressways have a noticeably higher number of cars during the rush hours, leading to further congestion and the accompanying pollution and frustration. Not to mention that with the added traffic more people will be late to work and more businesses will be taking a hit due to lost productivity. Let’s not even venture into the ordeal of trying to find parking spaces for all those extra cars.
One would think that our elected officials, many of whom constantly regale us with promises of how they will fight to improve the economy and help us keep more of our own money, would be keen on a tax scheme that does just that: improves the economy through less congestion and higher productivity and provides tax benefits to those who need them most. Then again, most of them probably don’t rely on transit nor do they benefit from the savings an average citizen can greatly benefit from. The annual savings could be used for disposable income (i.e. putting the dollars right back into the economy), or better yet, be deposited into long-term savings, something American households are notoriously bad at doing.
If it’s confusing to you that car drivers get a higher benefit than transit riders, take a moment and find your representative now. Write them a letter and ask them to explain their reasoning to you. I doubt it will make much sense.
Citations:
Roberto, Elizabeth. “Commuting to Opportunity: The Working Poor and Commuting in the United States.” Brookings Institute Metropolitan Policy Program (2008)
The Urban Observer 