Garodnick Bill Would Give Transit Riders a Tax Break

A City Council bill from Dan Garodnick could save a lot of transit riders a nice chunk of change.

Hundreds of thousands of NYC commuters could save $443 a year by buying a monthly MetroCard with pre-tax dollars. Photo:##https://www.flickr.com/photos/36217981@N02/5460212022/in/photolist-9jv1NA-bDQkXm-bWoBRH-dwvtkn-9K5XbZ-7FUuE-5XKoqA-jFDLr9-5S4TWT-5SkBj3-4g2GLm-8m3q1D-dwvv2e-4Ea5iS-e32iSn-617i6v-7Hucq1-5SzRcs-bXdFu6-5SHxsX-diocNN-5S9f37-5SwWRW-4TesNy-4kEKU3-5TTjiV-9PgYp6-pxmEh-5S9f1L-82TkQ3-dbLJRp-e32iun-e32iC2-e37ZKY-e32iMc-e3811N-4T9hkr-7LLc2L-fwqqCg-9yhssj-fwEH7Y-o4GnR-dbLLxC-68EQcr-dyxMPa-e3819q-5QXy5T-5QwG7h-6nTYHQ-5QAB8N##Tim Adama/Flickr##
Hundreds of thousands of NYC commuters could save $443 a year by buying a monthly MetroCard with pre-tax dollars. Photo: ##https://www.flickr.com/photos/36217981@N02/5460212022/in/photolist-9jv1NA-bDQkXm-bWoBRH-dwvtkn-9K5XbZ-7FUuE-5XKoqA-jFDLr9-5S4TWT-5SkBj3-4g2GLm-8m3q1D-dwvv2e-4Ea5iS-e32iSn-617i6v-7Hucq1-5SzRcs-bXdFu6-5SHxsX-diocNN-5S9f37-5SwWRW-4TesNy-4kEKU3-5TTjiV-9PgYp6-pxmEh-5S9f1L-82TkQ3-dbLJRp-e32iun-e32iC2-e37ZKY-e32iMc-e3811N-4T9hkr-7LLc2L-fwqqCg-9yhssj-fwEH7Y-o4GnR-dbLLxC-68EQcr-dyxMPa-e3819q-5QXy5T-5QwG7h-6nTYHQ-5QAB8N##Tim Adams/Flickr##

Federal law lets commuters spend up to $130 in tax-free income a month on transit fares. For a New Yorker earning an average wage, buying a monthly MetroCard with pre-tax dollars adds up to $443 in annual savings, according to Riders Alliance, which issued a report backing the benefit. But it’s only available through employers who offer the program.

Garodnick’s bill would require companies with a staff of 20 or more to make the benefit available to employees. The bill would make the benefit available to 605,000 New Yorkers, and commuters who work in the city but live elsewhere can also sign up. 

Garodnick was joined by council colleagues Ydanis Rodriguez and Helen Rosenthal, along with Riders Alliance, at a Sunday presser announcing the measure.

“It’s not just a savings for employees, but for the employers themselves,” said Garodnick. “Dollars come out before they pay their payroll taxes for their employees.” The Riders Alliance report says companies that offer the program can save $103 per year per participating employee.

Riders Alliance estimates that the benefit would reduce city and state tax revenues by at least $6 million and $10 million, respectively. However, the report says, “not only would tens of millions of dollars be saved each year by New Yorkers, but it would also enter the economy in a way that directly encourages increased use of — and spending toward — public transit.”

With the lower tax burden, transit riders would collectively have $85 million to inject into the local economy, the report notes.

“Fares keep going up and this is something the city can do to help riders save money,” said John Raskin, Riders Alliance executive director.

  • Mark Walker

    But who will give self employed transit riders a break?

  • Joe R.

    They can already deduct their carfare as a business expense on Schedule C. That essentially means they’re paying with pre-tax dollars. The only caveat is the rules say if someone is working at the same place every day, they can’t deduct these expenses. However, such a person can’t legally be considered self-employed unless they’re the business owner, not someone who just works there. If the employer has control over your hours of work, and where the work is done, then they have change your status to that of an employee, and you’ll be eligible to pay for transit with pretax dollars.

    What I would like to see is to take this to the next level. Yes, it’s nice allowing employees to pay for carfare with pretax dollars but I would like to see the $130 a month given as a tax-free fringe benefit in addition to wages, not simply deducted from the employee’s taxable salary. I would also like to see legislation which requires companies with over a certain number of employees to pay their employees for their commuting time. Since this varies widely, perhaps standardize on one hour per day as the amount which is paid. This might give employers an incentive to offer telecommuting whenever it’s feasible. In the end, it’s better for everyone if we just eliminate unnecessary trips, whether on transit or by auto. That frees up transit seats or roads for those who really need to travel. Telecommuting is an underused solution which could greatly mitigate the need to add transit capacity in the future.

  • qrt145

    I love a tax break for myself as much as the next person, but I’ve never really understood the motivation for this one. The vast majority of employed people spend money to commute. Taken to the extreme: if you give everyone a tax break, the net effect is the same as not giving it to anyone and adjusting the tax rates to compensate.

    Seen from another angle, the minority who don’t spend any money on commuting are subsidizing the majority who does. Is that fair?

    (I realize that not everyone who spends money on commuting has access to the tax break because it also depends on the employer, so this is a somewhat idealized argument…)

    Or is it that we want to subsidize commuting because commuting itself is seen as a good thing? You could certainly argue that it stimulates the economy. But you could also argue that it stimulates sprawl, congestion, pollution, etc.

    And of course, a tax deduction (or paying something with pretax dollars) is regressive, because the effective discount depends on the marginal tax rate. We offer more discount on transportation to the rich than to the poor. How is this fair?

  • Joe R.

    You make some good points. I tend to agree that in a perfect world where commuting was a choice, not a necessity, we shouldn’t subsidize it. Unfortunately, that’s not the world we live in. I would love instead of subsidizing commuting with tax breaks to subsidize it via the employer. This could include requiring an employer to pay for an employee’s transit fare (but not his/her auto costs), requiring them to pay for time spent commuting at the employee’s normal hourly rate, etc. The net effect of all this will be to discourage the employer from having people physically come in unless absolutely necessary. Many jobs these days are quite amenable to being done at home. In fact, I might say any job which involves sitting at a computer all day doesn’t require a commute. That’s probably in excess of 50% of jobs. However, employers are stubbornly entrenched in the mindset that they need employees on site to watch over them. If employers have to pay commuting costs and time by law, that attitude would quickly change.

    The same set of rules would also help those who can’t do their jobs off site. We’ve been entrenched in a 5 day a week, 8 hour a day mindset when I feel 3 or 4 longer days would be healthier for everyone. If it costs extra money to have someone come in, the employer will tend to make them come in as few days as possible. Longer workdays would be especially good for working couples. With a three day work week, both would get four days off each. By staggering the days off, you would have someone home every day to care for children. Perhaps eventually even schools would follow suit and have 3 or 4 longer school days instead of 5 shorter ones. Again, this benefits everyone in the form of more days off to do what you want. In my opinion it isn’t healthy or beneficial to be working or going to school 5 days out of every 7. It’s a grind which quickly wears you down for lack of free time. Two lousy days off a week, often filled with errands, aren’t enough time to recharge your batteries for the coming week.

    Longer days and more varied hours would also have the effect of staggering, perhaps even eliminating, rush hours. Transit agencies spend lots of money on extra capacity which is only used during rush hours. If we could eliminate the traditional rush hour, it would save a small fortune.

    Anyway, that’s my take on it. If we could get about half of the workforce to telecommute, and most of the rest on 3 or 4 day work weeks, our transportation problems would decrease dramatically. The way to do that is to penalize commuting on the employer’s end, rather than to subsidize it on the taxpayer’s end.

  • Bolwerk

    I approach it this way: it’s more a subsidy for transit than transit riders. Yes, it makes it a little cheaper to commute for the commuter, but I think the more socially positive outcome is that it guarantees some revenue for transit agencies – whether the trips are used or not!

    Why? Because some people will get unlimiteds who otherwise might not have bothered.

  • Wilfried84

    This could be seen as a way to encourage transit use, except they also offer a tax break for car parking, but for almost twice the amount, $250 per month. They at one point raised the pretax limit for transit to match that for parking, but then cut it again.

    Encouraging transit is all good, but then subsidizing drivers even more makes no sense, so I can’t figure out what exactly the point of this tax break for commuting is supposed to be.

    To top it all off, I found this:
    http://www.forbes.com/sites/ashleaebeling/2015/01/08/irs-guidance-on-retroactive-2014-commuter-tax-break/

    They retroactively raised the 2014 limit to $250/month, but how your average taxpayer is supposed to know about this, or figure out how to manage it on their tax return, is beyond me.

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