Time to park the commuter tax subsidy

Under new legislation, tax subsidies for mass transit commuters is cut in half for 2014, while drivers got a boost to their tax breaks. This makes no sense. 

Mike Blake/Reuters/FIle
Automobile traffic backs-up as it travels north from San Diego to Los Angeles along Interstate Highway 5 in California last month. Gleckman argues that commuter tax subsidies don't encourage people to drive to work less; in fact, he says, they have the opposite effect.

Am I the only one who thinks today’s commuter tax subsidies are nuts?

The issue is in the headlines because on January 1, thanks to yet another dose of congressional inaction, the amount of pre-tax dollars mass transit commuters can put aside fell from a maximum of $240 a month to $130. At the same time, people who drive to work got boost from $245 to $250 (don’t ask).

Mass transit supporters, not surprisingly, are furious. But the whole flap makes me want to ask: What’s the point of this crazy subsidy?

It can’t be to encourage energy efficiency, cut pollution, or reduce dependence on imported oil.  Using tax dollars to encourage people to drive to work has the opposite effect. And even if the transit tax break is restored to its higher level, the incentive would be roughly the same whether you drive or take the bus. So it is unlikely to change behavior very much at all.

In effect, we are merely giving people a tax break to go to work. Well, some people anyway. If you are an independent contractor or work for a firm that doesn’t offer this benefit, you get squadoosh. Same if you bike or walk to work.  And the less money you make, the less of a windfall you get.

As it stands, the program lards one more subsidy on top of all the other benefits we give drivers. It adds another cost to what society already pays for long commutes in gas guzzling cars–such as pollution and wear and tear on roads and bridges. And don’t tell me about the gas tax. In 2014, the Highway Trust Fund will be solvent only because of a $14 billion transfusion of general revenues, according to the Congressional Budget Office.

But we not only give outsized benefits to drivers, we give them to the richest motorists in the most expensive cities. A top-bracket lawyer can pull his BMW 760Li into the office lot,  pay the monthly parking max of $250, and reduce his costs by about $100 (what the heck, it pays for a round of golf at the club).

Note that the average cost of monthly parking in the U.S. is only about $165 so unless your commuting in a city such as New York, Boston, or San Francisco, you’ll never hit the $250 cap.

But the transit piece may not be much of a bargain either. A woman who cleans that lawyer’s office would save a monthly maximum of $13 under the current schedule—if she’s lucky enough to make it into the 10 percent tax bracket. Even if Congress raises the maximum pre-tax limit to $245 or $250, it wouldn’t do her much good since she’s unlikely to spend that much each month. A typical commuter bus ride in the U.S. is about $2.

Then there is the question of whether this incentive changes behavior in any significant way. Would that bus rider, who may not even own a car, change her mode of transportation without the incentive? Not likely. Better to ditch the subsidy and give her a bit more cash though a more generous Earned Income Credit.

And Beemer guy? He’ll happily pocket the $100 bucks, but would he stop driving without it?

Perversely, even if the subsidies do change behavior on the margin, they may do so in exactly the wrong way by encouraging people to live in more distant suburbs. This is even true for those who take public transit which, in many cities, charges more for longer trips.

There is a good chance the transit subsidy will be restored sometime in the next few months, along with 55 other expiring tax provisions. That will equalize the give-away for those who ride mass transit and those who drive—an improvement over the situation on New Year’s Day. But the whole thing still seems pretty stupid.

You've read  of  free articles. Subscribe to continue.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.