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Congress tells Americans: Commute by car, not transit

About 6 percent of private sector employees, and 10 percent of state and local government employees, receive tax benefits for transit or parking.
Photo by Jeff Syme
About 6 percent of private sector employees, and 10 percent of state and local government employees, receive tax benefits for transit or parking.

The federal tax code is riddled with questionable provisions designed to encourage or reward certain kinds of behavior. And it only seems to get worse.

The latest example: As a result of congressional inaction, the feds will now provide a maximum tax benefit of $125 a month for people who commute to work by public transit or vanpools, only about half as much as the $240 monthly maximum  for commuters who incur parking costs.

For the past two years, Congress provided equal tax treatment for commuters who incurred costs for parking or public transit — $230 a month.

However, the two houses allowed the equal-benefits provision to expire at the end of 2011. As a result the maximum transit benefit reverted to $125 a month, while the maximum parking benefit automatically increased to $240.

Transportation for America — a coalition of local officials, transit advocates and environmentalists — complained: “The federal government is sending a message loud and clear to commuters: they’d like you to start driving to work.”

“Federal tax law should not have a bias in favor of one method of commuting over another,” said Michael Melaniphy, president of the American Public Transit Association. “It is time to get this country back to work. Every American deserves a fair opportunity to access jobs, including those who chose to take congestion reducing, environmentally responsible public transportation.”

About 6 percent of private sector employees, and 10 percent of state and local government employees, receive tax benefits for transit or parking, according to government surveys.

The impact of the change is likely to be greater in the nation’s largest cities, where commuting by public transit can be more costly. In the Twin Cities, the maximum cost of a 31-day Metro Transit pass is $113.50, less than the $125 maximum for transit tax benefits.

(The change could affect transit riders who use the Northstar commuter rail line, which has one-way fares of up to $7.)

Still, the failure to continue a level playing field for transit and parking is “poor public policy,” said Barb Thoman, executive director of Transit for Livable Communities, a Twin Cities advocacy group.

In the Twin Cities, the generous federal tax benefit for parking works to encourage people to commute by car and utilize the most expensive structured parking — which is generally priced in the range of $200 to $250 a month.

Current federal tax law works in three ways: Employers can provide parking or transit benefits up to the maximums and receive a tax writeoff,  employees can ask that a portion of their wages be set aside tax-free up to the same maximums or employers and employees can share the costs.

The Downtown Minneapolis Transportation Management Organization (TMO) actively encourages employers to offer these benefits and “most downtown employers do,” according to Dan MacLaughlin, the TMO’s executive director.

An estimated 40 percent of downtown Minneapolis employees commute to and from work via public transit, and about 20 percent of downtown St. Paul employees do so.

Before Congress went home in December, Sen. Charles Schumer, D-N.Y., unsuccessfully attempted to extend the higher tax benefit for transit. He has indicated he will attempt to revive the measure and extend the benefit, retroactive to Jan. 1.

Making it more expensive for Americans to get to work is “the last thing we should be doing in this economy,” Schumer said. “The fact that this transit tax credit expired as the clock struck 12 on New Year’s is unacceptable, and I’m going to do everything I can to see the full extension of these commuting benefits.”

Comments (19)

  1. Submitted by Thomas Swift on 01/12/2012 - 09:33 am.

    Steven misses the forest for the trees. It’s not congress’s job to tell We the People how to travel; period.

    Using our own money against us to manipulate our behavior is anethma to our God given right to Liberty. It is certainly not a legitimately endowed function of government found anywhere in our constitution.

  2. Submitted by Ray Schoch on 01/12/2012 - 10:16 am.

    Perhaps Mr. Swift should go back and read Steve’s first sentence in this piece.

    After that, I look forward to his announcement that he intends to forego the mortgage-interest deduction on his federal taxes in order to free himself from financial manipulation by the government.

    That, of course, would be followed by the announcement that, henceforth, he will travel only by foot, since any other means would require some sort of government action, be it a hay subsidy for the horse he might ride, or a gasoline tax for roads upon which his automobile might travel.

    In the financial arena, perhaps taxing capital gains at a lower rate isn’t such a great idea after all, so we can surely expect right-thinkers to advocate taxing all income at the same rate, lest the result be similar manipulation by the government.

    And so on…

  3. Submitted by Rachel Kahler on 01/12/2012 - 10:24 am.

    So…you’re saying no tax breaks?

    As for our “God given right to Liberty,” no one’s stopping you for paying more to drive. And no one’s liberty is revoked by being incentivized to do one thing over another.

  4. Submitted by Thomas Swift on 01/12/2012 - 11:47 am.

    Two words, kids: Flat Tax

  5. Submitted by Jeff Klein on 01/12/2012 - 12:15 pm.

    It’s so naive to pretend that the government can do *anything* and not influence peoples’ behavior. Just by building roads we encourage driving. If Mr. Swift wants real freedom, such places exist. We call them “Somalia”.

  6. Submitted by Dennis Tester on 01/12/2012 - 12:40 pm.

    Driving on a road paid for with the tax I pay on gasoline is not subsidizing my transportation.

    Giving me a tax deduction for expenses incurred to get to work, is. And paying more or less for one form of transportation over another is social engineering, also not the role of government.

  7. Submitted by David Greene on 01/12/2012 - 01:45 pm.

    So Dennis, what about this?

    1. The gas tax does not completely cover the cost of our automobile infrastructure. Far from it. We subsidize automobile transportation just as we subsidize transit.

    2. The federal government pays 80% of the cost to construct interstate highways and other federal road projects. It pays 50% of the cost for transit lines (LRT, BRT, streetcars).

    3. There are all kinds of things the government pays for that are not covered by user fees. What do we do about that? Are you advocating abolishing all taxes and going to a purely pay-per-use system? How would that be workable?

  8. Submitted by Dennis Tester on 01/12/2012 - 01:56 pm.

    David, then if that’s really the case, raise the tax so it does pay for it or put a toll on the road.

  9. Submitted by David Greene on 01/12/2012 - 03:03 pm.

    Some estimates put the gas tax at $15/gal to cover all the costs of providing our automobile infrastructure.

    You ok with that, Dennis? Republicans are not ok with even one cent more.

    You didn’t address my other questions. I genuinely curious what you would do about them.

  10. Submitted by dan buechler on 01/12/2012 - 03:04 pm.

    I am not pleased with the above comments. As they address each other and not so much the article. Where do many of the senators come from? Rural or oil controlled states. What would mass transit look like in Fargo or South Dakota? A few bike trails, no highrises as land is still cheap, and a few higher frequency bus stops.
    Has anyone noticed lately all the drum banging with Iran? We are at war and it is about time we elect Mitt Romney so we can rebuild our military and effectively control the middle east. China would probably have no problem with that, in fact they might loan us some money!
    And I am all for tax cuts to those who need investment dollars but are unable to get them. The problem is some of the private equity guys are able to get money and others are not.

  11. Submitted by dan buechler on 01/12/2012 - 03:08 pm.

    Oh and back to the article on this new post. Recently walked to Mpls from St Paul and took the bus down to Edina. There was a big gap in bus frequency and this is one of the more highly used lines. The gap may discourage further use and that is why you need a subsidy for mass otherwise next time I will probably drive unless I have more time.

  12. Submitted by Bob DeBoer on 01/12/2012 - 03:26 pm.

    Great example here by Steve Dornfeld. We need to know what is going on with these kinds of tax benefits. The government delivers benefits in many ways, not just spending programs and often they don’t make sense when you start looking at the broader policy.

  13. Submitted by Dennis Tester on 01/12/2012 - 03:31 pm.

    David: I’m a strong proponent of voluntary taxation. If the cost estimates are really $15/gal (which I kinda doubt) put a toll on the roads that is based on the actual cost of usage of that stretch of road. So if you want to use it, you pay for it at that time.

    But then you’d have to get rid of the gas tax since it’s obviously not transparent enough or sufficient to pay for the cost of the roads so why pretend it does.

    Oh, and then calculate the actual cost of bus and LRT transport and charge the correct amount for tickets to cover the trip.

    User fees = voluntary taxation.

  14. Submitted by Rachel Kahler on 01/12/2012 - 04:13 pm.

    User fees are not necessarily voluntary taxation. For example, tolls would be paid for usage. Not only does that increase the time on the road for everyone, but it increases the price of good shipped by road. We pay more for things we NEED, not things we choose. Relying on user fees for infrastructure would likely have an impressive impact on the cost of our basic necessities, including necessary travel (e.g., to work). It would likely strengthen local economies…where the local population was already comfortable, but leave poorer population centers without basic infrastructure because of decreased ability to pay for usage. Such a system would cripple our (already weak) national infrastructure and weaken the nation as a whole. What would happen then…well, let’s just say that China isn’t skimping on national infrastructure, lately.

    In order for user fees to work, someone will always have to subsidize someone else’s ability to pay. That is, a mileage tax will have to pay for upkeep on lesser used roads, rail use taxes will have to pay for long stretches of tracks in unhabited areas, etc. In the meanwhile, if we’re going to subsidize the ability of one person to get to work, we should be encouraging the use of the infrastructure that makes the least impact on the infrastructure. That is, subsidizing mass transit makes more sense than subsidizing driving because it makes a smaller impact on the cost of the infrastructure.

  15. Submitted by dan buechler on 01/12/2012 - 04:36 pm.

    # 14 that is one of the best comments I have ever read. You should publish an article on MinnPost.

  16. Submitted by dan buechler on 01/12/2012 - 06:27 pm.

    And I meant that sincerely.

  17. Submitted by Mike Hicks on 01/13/2012 - 08:36 am.

    I never put the monthly parking rates and the size of the commuter benefit next to each other before, but the numbers are close enough that there would seem to be a connection between the two.

  18. Submitted by Bernice Vetsch on 01/13/2012 - 10:45 am.

    Dan B: Your bus was probably late because of Tim Pawlenty’s yearly cuts in state support to public transit. Each year, the bus company had to decide which routes would have reduced frequency and which would be cut altogether.

    Highways/roads and transit are both aspects of the common good and benefit all citizens, not just drivers and not just riders. Therefore, they are subsidized by the government with taxes collected from all.

  19. Submitted by David Greene on 01/13/2012 - 03:14 pm.

    Dennis, you still haven’t answered the rest of my questions. Let’s concentrate on one. If you’re a fan of user fees, how would applying that concept across our government funding programs actually work?

    There is value in collective upkeep of society. That means some of your money goes to pay for things others use. That’s inherently good, morally and economically.

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