The federal tax code has a weird way of favoring people who drive to work over those who take public transit there. If you’re a driver, the federal commuter benefit allows you to spend up to $245 of your pre-tax income each month on parking at work. If you pay to take the bus or train instead, the benefit is only about half that — $130.
For several years now, transit advocates have gone back and forth with Congress trying to equalize the benefits (or remove the bias, depending on how you look at it). And for a brief and glorious period, the Recovery Act (and some extensions) temporarily did that. This year, however, for lack of action from Congress, the transit benefit shrank back to its old level. And now Chuck Schumer and several other members of Congress are trying to revive the issue during the lame-duck session.
Why the big deal if drivers get a bigger tax break than transit riders? If you commute by transit every day in a city like Washington, it’s entirely possible that $130 doesn’t cover your monthly expenses. WMATA officials even think they can detect evidence that the benefit cuts this year are partly to blame for a recent decline in ridership. Across the country, transit costs have also been rising as this benefit has fallen.
Aside from the practical argument — mass transit riders could use the money — there’s a larger policy issue at stake here, too. The federal commuter benefit is just one of many often hidden ways that government incentivizes people to drive cars (a few others: subsidized fuel, under-priced parking, an outdated gas tax). If we nudged more commuters toward public transit, we could relieve congestion, reduce pollution, and even improve commutes for those people who do continue to drive. Instead, federal policy does the opposite.
It effectively requires commuters who don’t use cars to pay what amounts to about $565 more in taxes every year, according to the American Public Transportation Association.
If we really wanted to make it cost-effective for more people to take transit instead of their personal cars, we’d make the transit benefit the larger one. For now, though, it’s hard to argue why the two tax breaks shouldn’t at least be the same size.