The new Congressional tax deal establishes benefits parity regardless of mode, but it probably won’t stop people from driving to work alone.
Christmas came a bit early for taxpaying U.S. transit commuters.
The new tax deal reached by Congress includes a provision that creates parity between commuters who drive to work and those who take the train, subway, or bus. Under the existing rules, employees who ride public transit can get a maximum of $130 a month in IRS commuter benefits, while those who park at the office get up to $250. Beginning in 2016 the playing field levels out to $255 for both commute modes.
Parity among commuters is only fair—and ideally would stretch beyond cars and transit to bike riders, too. Given how difficult it’s been for transit riders to get the same benefits as drivers in the past, the new rule is certainly a win for major metro area residents. But the provision (which, it’s worth noting, still must survive official votes) falls short of a total victory for a couple reasons.
Retroactive parity doesn’t help that much
As part of the update, the deal applies retroactive parity to 2015, meaning transit commuters could be eligible for up to $250 a month (the same as the parking benefit). But in reality it’s hard to go back and get credit for that lost money, says Jason Pavluchuk, director of government affairs for the Association for Commuter Transportation, an advocacy group in Alexandria, Virginia.
Pavluchuk explains that IRS rules only permit retroactive benefits for employees who withheld above the allowable cap. So if you told your employer you want $200 put on your transit fare card each month in 2015, even though the official benefits cap was $130, you might be able to recoup some of the losses via an amended W2. But if you stuck to the official cap of $130 and topped off your fare card via cash or personal credit cards, you’re probably out of luck.
“If you go in and show your month’s worth of, ‘Hey, I bought it with my own credit card, and here’s the receipt’—that’s not good enough,” he says.
Nor does parity necessarily help traffic congestion
On a personal level, tax breaks for transit-riding Americans is a great thing. But at the city level, it’s not clear whether commuter benefits parity is enough to reduce congestion and car-reliance in major metros.
The best available evidence suggests that benefits parity won’t do much to change commuter mode choice. Research by Andrea Hamre and Ralph Buehler has found that when companies offer workers both parking and transit benefits, more people drive alone than when companies offer no commuter benefits at all. The lure of free or very cheap parking is so great, especially when paired with the convenience of driving in most U.S. cities, that few employees make the switch to bus or rail.
The only certain way to get commuters to stop driving alone and start taking public transport is to offer transit benefits but charge a market rate for parking—something Panasonic recently did following its move to Newark, with great success. In other words, you have to reestablish commuter benefit disparity, but this time tip the balance toward transit. And that’s not the sort of city-friendly policy you should expect from federal officials anytime soon.