Americans’ taxes subsidize congestion, study finds

The federal government is working at cross purposes with itself and local and state governments. In a study released last week by TransitCenter and Frontier Group, researchers discovered that federal tax subsidies are undermining transportation goals established by multiple levels of government.

Recent studies highlight American tax policies’ contribution to congestion and traffic problems. From ReneS.

This discovery came through a review of commuter tax benefits. Currently, employers can offer workers three monthly benefits that aren’t included in their taxable income:

1. Parking tax benefit. Up to $250 for employer-provided or employer-provided parking at or near the workplace
2. Transit tax benefit. Up to $130 for employer-paid transit passes or vanpool options
3. Bicycling tax benefit. Up to $20 for employer paid bicycle commuting expenses

These benefits lower the taxes paid by participating workers and organizations that can promote them as an employee benefit when recruiting staff.

But researchers uncovered three findings that suggest those benefits need a serious overhaul.

• The parking benefit promotes traffic congestion — and not at cost. It adds roughly 820,000 vehicle commuters to the roads each year and costs the public $7.3 billion in foregone tax revenue.
• The transit benefit reduces congestion but doesn’t reach enough people to offset the negative effects of the parking tax subsidy. Approximately 2% of American workers take advantage of the subsidy, but they numbers remove just a tenth of the vehicles that the parking benefit adds to our roads.
• The subsidies require consistent oversight. Because Congress doesn’t need to authorize them annually, the commuter tax benefits don’t receive close and regular examination, so they are rarely evaluated against transportation policy goals, such as lowering congestion and reducing pollution.

TransitCenter and Frontier Group have made three recommendations in light of those findings.

1. Abolish the parking tax benefit. The subsidy currently encourages single-occupancy vehicle commutes during rush hour, which flies in the face of national transportation priorities. Eliminating it would increase federal tax revenue that could then be funneled to the Highway Trust Fund or projects that improve the country’s worsening transportation infrastructure.
2. Improve federal support for transit. The existing benefits program privileges higher-income transit commuters over middle- or working-class users because many beneficiaries work for large organizations located in dense downtowns and earn higher incomes. Lower-income workers are less than one-fifth likely to have access to the commuter benefits that their higher-income counterparts do.
3. Expand with improvements the existing transit tax benefit. If the current commuter benefits remain in place, it is imperative that the transit benefit be improved and expanded to meaningfully counteract the unintended consequences of the parking benefit. At the least, parity between the two benefits could be restored. There’s already a congressional proposal that would reestablish the subsidy at $220 per month, a midpoint rate between the current parking and transit benefit ceilings. The program could also be revised to incorporate the growing number of multimodal commutes, such as carsharing and bikesharing, with workers even allowed to combine benefits, though under certain limits.

Tags: Commuter tax, Employee benefit, Employer transportation benefits in the United States, New York, parking, Traffic congestion, United States, United States Congress

Category: Legislation, Transportation