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Let's Restore Parity for the Commuter Tax Benefit
Over its life, the popularity of the commuter benefits has grown; multiple employee surveys have ranked it—along with health, retirement, and disability insurance—among the top benefits offered by companies.
BY CARL SEDORYK
General Manager/Chief Executive Officer
About 30 years ago, a series of smart public policies was placed into effect allowing workers to defray public transportation costs through their employers’ benefits packages, helping to reduce public costs of traffic congestion and improving air quality.
In 1998, Congress amended the tax code to allow employees to take advantage of the benefit using pre-tax dollars, and in later years similar benefits were provided to both active-duty and civilian personnel with the Department of Defense. By 2009, the monthly tax-free cap commuters could spend on the public transit benefit was raised to $230, making the benefit equal to the automobile parking portion. In addition, bicycle commuting was incentivized through the addition of a $20 per month benefit.
However, equity between the benefit’s public transit commuter portion and the parking portions was short-lived. By 2012, the transit portion was reduced to $125, then raised to $245 in 2013, and then cut to $130 in 2014. Over the same time, the monthly parking benefit has steadily increased to $250 per month. The current tax policy unfairly penalizes both the commuters who use public transit and the companies that employ them, and it provides an incentive for automobile commuters, adding more congestion to overburdened highway infrastructure and increasing traffic congestion and emissions.
A lesser-known population that has been adversely affected by reductions in the commuter benefit is the hardworking men and women of our armed services and Department of Defense. Instead of a receiving a pre-tax benefit for commuting, qualifying military and DOD personnel receive a monthly cash stipend in the form of a check or debit card they can use to purchase a transit pass from their local public transit operator.
Dozens of military bases and installations have partnered with their local public transit operator in communities large and small throughout the U.S. Tens of thousands of active duty military and civilian defense employees are seeing their annual income reduced by thousands of dollars each year that Congress fails to extend the benefit.
High Value of Full BenefitMore than 1,000 military personnel signed up to use the bus service in its first month, and more than 122,000 passengers boarded the service during its first year. At its peak (when the commuter benefit program increased to $240 per month), MST had 16 new routes connecting military personnel and the general public to work, school, and shopping destinations, with ridership growing to more than 530,000 annual boardings.
Monterey-Salinas Transit (MST) provides just one example of how the increased public transit benefit positively impacted a community. When the commuter benefit program received a funding boost from the American Recovery and Reinvestment Act to increase from $110 to $230 monthly, MST was able to create a sustainable model to fund partnerships with local military bases and create express routes that serve the Presidio of Monterey, Naval Postgraduate School, and Fort Hunter Liggett.
In addition to dramatically reducing vehicle miles traveled, carbon emissions, and traffic congestion, this growth helped create and sustain 26 new jobs at MST, with wages adding $2 million annually to the local economy.
When the transit benefit was reduced overnight to $130, MST was forced to dramatically reduce service to our military community and the general public to close a $800,000 deficit that was created by the loss of transit-benefit-funded bus pass sales.
This scenario is being repeated in defense communities across the nation, decreasing the quality of life both the military members and the residents of the communities that support their activities. Every year, the continued success of these very popular programs is dependent upon Congress continuing the commuter transit benefit at a rate that is comparable to the current parking benefit.
Nonpartisan Support* Increase the maximum value of the public transit tax benefit to restore parity with parking tax benefits;
The Frontier Group, a nonprofit organization that provides policy guidance on a range of issues, including transportation, offers three recommendations:
* Require employers that offer tax-free parking to their employees to also offer transit benefits or empower their workers to “cash out” the value of the subsidized parking they receive by converting it to cash income; and
* Expand the scope of commuter tax benefits to include benefits for bike sharing and car sharing and to provide parallel benefits for workers who carpool.
The Joint Committee on Taxation—a nonpartisan committee of the Congress—issued a new “score,” or rating, of the cost of establishing parity. The score estimated that by equalizing the benefits at $235 a month, the nation would experience a savings to the federal treasury of $131 million over 10 years.
In addition, all of us—public transit leaders in the public and private sectors—know that the nation would also experience increased ridership, reduced traffic congestion, and improved air quality.
Now is the time for Congress to act—once and for all—to establish permanent parity between the transit and parking benefits, to eliminate subsidies that promote traffic congestion, and enact policies and incentives that support the nation’s transportation policy goals and fiscal priorities.
This “Commentary” section features different points of view from various sources to enhance readers’ broad awareness of themes and views that affect public transportation.