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With cuts to tax benefits for transit commuters set to be triggered at the end of the year, it is essential that Congress act to ensure that transit riders benefit from the same tax incentives available to commuters who drive to work.
Earlier this year, Congress made commuting to work more affordable for millions of Americans who rely on public transportation. Transit parity — or equal tax benefits for commuters who drive and for those use public transit — was enacted by Congress as a way to save money for public transit riders. Prior to parity, benefits for drivers and public transit commuters were unequal, resulting in an unfair incentive for drivers at a time when Americans should be encouraged to use public transit — a more efficient and sustainable transit option. The transit-parking benefit parity was sound public policy that resulted in less congestion, lower gas consumption and better air quality.
Unfortunately, the transit parity provision is set to expire at the end of this year. Without immediate action by Congress, millions of transit commuters will once again find themselves at a disadvantage that could cost them and their employers hundreds of dollars a year and result in more cars clogging rush-hour highways.
The current tax-free qualified transportation fringe benefit allows employees to set aside up to $245 per month in pre-tax dollars to pay their transit or parking fares. Employers are also able to pay workers’ transit or parking costs outright as part of their benefits program. Under both systems, the workers’ benefit amounts are tax-free and the employers are exempted from payroll taxes on the benefit amounts.
But because Congress has not taken action to make transit parity permanent, the public transit benefit maximum will be slashed almost in half on Jan. 1, to $130 per month, while the monthly parking maximum will be increased to $250. This is unacceptable to the millions of Americans who rely on commuter transit benefits to save money, get to work and avoid the high cost and congestion of commuting by car. The disparity between parking and public transit benefits is concerning, especially considering the expenses and pollution associated with driving.
With transit ridership up 9.1 percent over the past decade, this investment in transit benefits could not come at a more critical time. The demand for public transportation has increased because commuters and businesses recognize the financial benefits and time-savings of public transit. Unfortunately, at the same time that we see ridership levels on the rise, we see transit infrastructure falling into disrepair and rider benefits threatened by gridlock in Washington.
A recent study by the Texas A&M Transportation Institute documents that the cost of wasted time by drivers commuting in Washington, D.C., Los Angeles and San Francisco — 38 hours per commuter each year — plus the cost of fuel comes to $121 billion annually. According to the same study, congestion causes these urban Americans to travel 5.5 billion hours more and to purchase an extra 2.9 billion gallons of fuel. These facts show why it makes sense for Congress to encourage the use of public transit.