How NOT to Encourage Less Driving

By Conrad deFiebre, Transportation Fellow, December 14, 2011 at 8:30 am

Unless Congress acts soon, a tax break for transit and van pool commuters will be slashed nearly in half while a matching one for drivers automatically increases. You read that right.

Under current law, employees can set aside up to $230 a month in tax-free earnings to pay for transit fares or workplace parking. Hard as it may be to believe, come Jan. 1 the maximum monthly amount for parking gets a cost-of-living raise to $240 while the transit benefit shrinks to $125. Employers would take a hit, too, in extra payroll taxes on transit riders' formerly exempt income — unless they can persuade them to switch to driving to work.

If this sounds goofy to you, you're not alone. "We should be encouraging public transit ridership for the environmental, energy, economic and quality of life benefits it provides," Michael Melaniphy, head of the American Public Transit Association, told the National Journal this week. "The transit commuter benefit should be maintained at a level of parity with the parking benefit."

Several bills in Congress would do just that, but they are languishing amid debate over larger issues of unemployment benefits, payroll tax holidays and overall fiscal policy. A revenue-saving proposal to drop the top tax break for both driving and transit to $200 a month has gotten little attention as well.

More than 2.7 million American families take advantage of the transit tax break. Overall, the commuter benefit saves employers $300 million a year in payroll taxes. "Take away the enhanced transit benefit and it's like a tax hike on employers as well as on commuters," Ashlea Ebeling wrote on Forbes.com.

A coalition of transit advocates is pushing to keep commuter tax breaks for both driving and transit at parity. The group claims that more than 40,000 letters have been sent to Congress urging action by year's end. You can add your voice to the debate by clicking here.

Photo credit: Dawn Easterday, creative commons

Posted in Transportation | Related Topics: Public Transportation  Federal Government  Traffic Congestion