Congress Finance

Stimulus Extends Transit Tax Benefits

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.

8 replies on “Stimulus Extends Transit Tax Benefits”

That’s a great way to bring the costs of transportation inline with reality. I’d also like to see federal highway expenditures covered by excise taxes in toto; if my quick figures based on semi-remembered numbers are correct, an 8-cent-a-gallon gasoline tax would do it.

Aren’t these transit tax breaks – just auto tax break – rather regressive? I mean, most people who are spending large amounts of money on transit transportation are probably commuters with monthly passes on commuter rail going from affluent suburbs to city centers. Most low-income workers are likely taking the bus or subway to work, which might not cost enough to qualify for the tax break Granted there, is some reverse commuting on commuter rail, which involves low-income workers but that brings us to the second problem but they are really a minority, right?

DingDong – in DC, where I lived for 8 years, you could get Metro (subway) passes through the MetroCheck program at a discount; at the time, I was unaware of any tax break available to me from the Feds. At the same time, I’m unaware of the specifics of the provision talked about in the original post.

So, to answer your question, in my experience, no, it’s not just subsidising wealthy suburban commuters.

Yonah, where are you basing your assumption that “few transit riders ever spend more than $120/month” on? I find that one hard to swallow.

In my particular D.C. case (and I’d consider myself around the “average Metrorail fare”), and assuming a 21-day work-month (factoring out weekends and holidays), it would cost me $165/month if I were to commute every day via Metro.

And that’s without any additional bus or park-and-ride costs.

Froggie –
You’re right, some transit riders do in fact spend more than $120 a month.
I was thinking about monthly passes (which don’t exist on the D.C. Metro) – in New York City, an unlimited Metrocard is $81 a month; $86 in Chicago; $62 in Los Angeles; $78 or $96 in Philadelphia; $59 in Boston. Washington monthly fares, assuming a 21-day work month, range from $69 to $189 a month, depending on how far one travels to work. On the other hand, people riding Metro-North from Stamford, Connecticut to New York must pay $259 a month or people riding NJ Transit from New Brunswick, New Jersey to New York must pay $289 a month… so some people will definitely appreciate this change.

So, in retrospect, I agree that what I wrote above isn’t completely fair.

That said, the increase in tax relief for transit users is more likely to benefit higher-income, suburban commuters than inner city riders whose monthly passes are cheaper… so do those people deserve tax relief? I guess that’s an open question. Nonetheless, I reaffirm my statement that a better way to go about this is simply to lower the tax-free amount for drivers.

I’d think, at least down here in DC, that it would benefit middle-income folks just as much, if not more. Take a look at some of the responses on GGW (thus far). General feeling is that raising the tax-free amount for transit is justified.

My commute costs $252 every month from New Brunswick, NJ to downtown New York.

For people in the tristate area, it’ll be a huge boon.

Froggie, you’re lucky. I metro to work every day here in the DC region, too. $4.50 to park at the metro station (not all of us live within walking distance of one), $3.05 each way on the train. For a 21-day work month, my public transportation costs are $222.60.

Yonah, in the DC area, the “inner city riders” still don’t have the opportunity to get a monthly pass. If they did, those of us who are riding in from outside the city would get them, too. DC Metro knows they can charge every rider full price for every ride and every time they park, so they do. No frequent rider/parker discounts. The only discounts available are for the elderly and disabled. They do have a daily pass, but it’s not that great a deal unless you’re riding all over the place (5-6 trips), and it’s not valid until well after the morning commute is over, anyhow.

I need to look into this, though. My company stopped offering pre-tax MetroChek years ago (even when it was offered, it covered only part of my commuting cost), and if I could have been deducting even SOME of my transportation costs on my own, I’ve been missing out big-time… and if so, shame on TaxCut for not asking me if I qualify for the supposedly-formerly-$120/month deduction.

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