At our regional governance event at the City University of New York last month, Massachusetts Bay Transportation Authority chief Beverly Scott observed that the United States is trying to solve 21st century transportation problems with 20th century institutions. The same could be said for the incentives the U.S tax code gives to commuters.
The genesis of the transit commuter pre-tax benefit was a study conducted by the Port Authority of New York and New Jersey, analyzing the costs of employers providing free automobile parking. The thinking was that if car commuters got their parking costs subsidized, then surely transit commuters, with the benefits they provide in the form of cleaner air, less traffic, and support for transit ridership, should receive the same preferential treatment. Thus TransitChek was born. Without TransitChek, TransitCenter wouldn’t be here today.
Now that we’ve thoroughly landed in the 21st century though, we thought it would be good time to take another look at the very question that began our organization. We know that commute times have increased since the first analysis in the 1990s, but also that travel patterns have become more diverse. Gas prices have stayed the same, and parking remains undervalued. We partnered with Tony Dutzik at the Frontier Group and Phineas Baxandall at US PIRG’s tax policy program to take a fresh look at the transportation impacts of commuter tax incentives. You can read our new report, “Subsidizing Congestion: The Multibillion Dollar Tax Benefit That Makes Your Commute Worse,” here.
One finding was a surprise: the parking benefit, which was created with no transportation purpose whatsoever, makes U.S. taxpayers lose $7.3 billion in forgone revenue and adds more than 800,000 cars to our roads during peak hour. That price tag is even more surprising when you take into consideration that the cost of the transit pre-tax benefit is only about one-fifth the cost of the parking benefit, at $1.3 billion. Yet the federal government is continually re-evaluating (and recently cutting) the transit pre-tax benefit, without even thinking about the parking benefit which costs the Treasury so much more
The structural unfairness of the current tax benefits system is symptomatic of how biased our 20th century institutions are. Just as the transit pre-tax benefit is continually debated while the far larger parking pre-tax benefit is never even examined, funding for transit infrastructure and operations often has to be referred to the local ballot for voters to consider, while far larger amounts of tax money flow to highway expansion without a single resident’s opinion being sought.
We also found that the existing framework for parking and transit benefits benefit the wealthiest commuters the most. Though data on users wasn’t as robust as we would like (vendors tend to want to keep data private, for competitive reasons; another reason for open data guidelines on public services, like transportation) we found that because these benefits are set up through employers, they often don’t reach the majority of people who need them the most, such as Americans with part-time jobs or no job at all.
Finally, as much good as the transit benefit brings, there are plenty of other proven methods for the federal government to benefit riders, through individual tax credits, for example. We could also make the transit benefit inclusive of multiple modes, since most people don’t only take the train, they might ride a bikeshare and then catch the train. We need to accommodate today’s dynamic travel patterns, not the single-mode, old-fashioned ones.
Based on our research, federal policies for commuter incentives can more positively impact transportation, be more directed to those in need, and eliminate the current bias toward the automobile mode.