Tuesday, December 13, 2011

Mass Transit Incentive to be Cut While Parking Incentive Stays the Same

Obscured in the debate over whether to extend the payroll tax cut is the possible loss of an incentive to take mass transit. If Congress takes no action (and it appears it won't), the tax-free fringe benefit for taking mass transit will be cut in half, while the benefit for driving to work stays the same. That sends a bad message.

Currently, your employer can give you up to $230/month pre-tax to cover your mass transit costs, the same as they can give you to pay to park your car. The transit benefit is set to go back down to $120 on January 1. That's where it was before the stimulus bill increased it to its current level. Granted, a monthly subway pass in many cities is less than $120 ($95 in Atlanta, $104 in New York City), but the monthly expense for commuter trains like the Long Island Railroad can run hundreds of dollars. The bottom line is cutting a benefit for commuting while leaving the parking benefit the same sends exactly the wrong message when policies should be encouraging people to leave their cars at or near their home.

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