A popular tax benefit for public transit commuters has come to a sudden end, forcing bus and train riders to pay more out of pocket -- even though parking subsidies for those who drive to work remain untouched.
And despite bipartisan support for reinstating the transit benefit, it's unlikely that riders will get a break anytime soon. And if you don't like it, you can thank the House and Senate.
At issue is the Qualified Transportation Fringe Benefit, which was established in its current form in 1993. It allows employers to provide a certain amount of pretax income for employees to spend on parking, public transit, or vanpooling. If you buy a transit pass through your employer at a discount, that's likely where the savings come from.
Until 2009, transit riders received about half as much for their commutes as drivers got for parking. In 2008, for instance, you could be reimbursed as much as $220 for your parking expenses each month, but receive just $115 for bus, subway or rail passes. That gap closed with the passage of the stimulus bill, which provided $230 each month regardless of whether you parked, took transit, or rode in a vanpool.
The provision was designed to end in 2012, and it did just that. But it proved so popular that it came back in 2013 and was made retroactive to cover the previous year. The benefit, indexed with the cost of living, was $245 until it ran out on December 31, 2013.
A Question of Equity
Now the inequality is back. As of January 1, drivers can receive as much as $250 each month for parking, but transit riders receive just $130 a month to help cover commuting costs.
"The clear message is that people should drive, rather than take transit or vanpools," said Larry Filler, a transportation consultant who helped draft the Qualified Transportation Fringe Benefit in 1993.
>'The clear message is that people should drive, rather than take transit'
Larry Filler
Worse still, the instability of the benefit makes it difficult for employers to take advantage of it. Though studies haven't yet quantified the impact of the 2012 sunset on employers, the fact it came to an end, only to be reinstated retroactively, created a lot of extra work for employers, said Phil Winters of the Center for Urban Transportation Research.
"Certainly, when it was taken away and brought back and made retroactive, that did create some -- again, anecdotally -- concern from employers, about how do we do this," he said. Because the tax break requires employer participation -- commuters can't simply submit receipts for tax relief at the end of the year -- any hesitation by employers means fewer people can take advantage of the benefit.
Filler said that's exactly what's happened. "It's been very difficult for employers to know how to plan for their benefits for the following years, and it's discouraged employers from participating in the program," he said.
As a policy matter, the program has been successful in getting people out of their cars and into mass transit. A 2008 survey by BusinessWeek and TransitCenter found 18 percent of those using the public transit benefit drove solo to work before the program made reimbursement an option.
The benefit mostly helps people who work regular schedules at large companies on the coasts. And contrary to what many think about mass transit, it isn't entry-level or low-wage employees taking advantage of the benefit. Instead, it's "somebody in management downtown," Winters said. Such folks might otherwise drive to work and pay for parking, but a tax break keeps them riding the subway, bus, or train.
And they're price sensitive.
When the benefit ended in 2012, the Washington, D.C. metro saw ridership fall 2.7 percent -- 9.5 million riders stopped taking public transit. We still don't have numbers for this month, but Filler expects the reimbursement cut to have an effect.
"Those people who decided to try transit or use a vanpool because of the availability of that tax credit no longer had that incentive," he said.
That's bad news for everyone. Not only can switching from driving solo to riding transit cut 20 pounds of CO2 emissions per person each day, it can ease congestion for those behind the wheel at rush hour.
"All you need to do is remove a very modest number of drivers from the road and put them on transit or even put them into a vanpool, and you can affect a major decrease in traffic congestion," Filler said. "It's really a few percentage points of vehicles that can make an extraordinary difference."
Political Wrangling
There's broad bipartisan support for reinstating the transit benefit, but there's a big difference between support and action.
Two bills -- H.R. 2288 in the House, sponsored by New York Republican Michael Grimm, and S. 1116 in the Senate, sponsored by New York Democrat Chuck Schumer -- propose making transit and parking benefits equal and permanent. They would cut the parking benefit from $250 to $220 to finance the increase in transit reimbursements.
Unfortunately, even with political support, the very workings of Congress make it difficult to get any tax-related measures passed, especially when there's little congressional enthusiasm for dealing with taxes. That's why the provision expired at the end of last year -- it was lumped in with other credits and benefits that Congress couldn't agree upon before they all sunset.
"The difficulty is that there needs to be some kind of mechanism for these kinds of bills to be attached to," Filler said. "This is a tax provision, and you need to find some sort of tax bill to accompany it, and Congress has not really moved on any tax measures that need to be renewed."
It's possible that it could get tacked onto the reauthorization of the federal gas tax, which expires at the end of September. Or it could get lumped in with reauthorization for the transportation bill. It could even get reinstated temporarily. Either way, transit commuters likely won't see any savings for the first part of the year -- if at all -- in 2014.
"The benefit is sort of hostage to other activities in Congress," Filler said.
And commuters -- whether they be on the roads or on the rails -- are the ones who end up suffering.
