Tax cut portion of the bill includes benefits to transit users
The New York Times has a nice chart detailing all of the components of the stimulus bill. The legislation will allow commuters to spend up to $230 a month on mass transit tax-free. Formerly, transit users were only able to spend $120 a month doing so, versus the $230 allowed for drivers using parking lots or garages. The amount allowed to be spent tax-free will now be increased yearly according to inflation. This change is expected to cost the federal government $192 million in lost tax revenue over two years.
Attempts to equalize tax-free benefits for drivers and transit users have been made for at least the last two years. Senator Chuck Schumer (D-NY) proposed a bill in March 2007 that would have made the amount for both $200 a month, but that bill didn’t pass.
While I’m all in favor of equalizing benefits for transit users and drivers (if anything, people using public transportation should get more breaks…), the fact is that few transit riders ever spend more than even $120 a month on transportation, so few people will benefit from this tax relief.
Here’s an alternative solution: keep the transit tax break at $120 a month, and reduce the automobile user benefit to $120 from $230. The increased tax revenues for the federal government could then be transferred to needy transit agencies to cover operating costs. That’s a better way to reward public transportation ridership.