Report: Letting Transit Tax Benefit Expire Will Throw Riders From the Train

In his recent re-election campaign, Chuck Schumer ran ads touting his support of transit tax benefits. Those benefits are now expiring, however.
In his recent re-election campaign, Chuck Schumer ## ads## touted his support of transit tax benefits##. Those benefits are about to expire, however.

For many transit riders, there’s another fare hike coming down the track, one that many may not even be aware of.

A provision of the stimulus bill that offered a larger tax break for some transit riders is set to expire at the end of the year. A new report by TransitCenter [PDF], a non-profit that works to provide tax-free transit benefits, outlines just how many riders will be affected by the end of those benefits, and how hard it will hit ridership numbers. By letting the transit benefit revert back to its pre-stimulus levels, Congress would push Americans away from riding transit and pinch the pocketbooks of those who keep riding.

The tax break was slipped into the stimulus bill by New York Senator Chuck Schumer in early 2009. Previously, riders could buy up to $120 in transit fares per month without paying taxes on that income, while those driving to work could deduct up to $230 in parking costs (one example of how the incentive to drive is embedded in the tax code). Schumer’s proviso equalized the caps, but only temporarily. It expires at the end of this year.

TransitCenter found that the higher transit benefit helped increase the number of people who took advantage of it. In 2010, 17 percent more firms offered the pre-tax transit benefit than in 2009, and 29 percent of employers reported higher enrollment in commuter benefits programs while the higher cap was in effect.

Without the higher cap, transit riders paying the national average tax rate of 31.6 percent could see their commuting costs rise up to 18 percent higher. For riders facing such a large effective fare hike, the train won’t look so appealing anymore. The report looked at studies of previous fare hikes and found that an 18 percent increase in price will translate into a five to nine percent drop in ridership among that group.

The cap reduction won’t affect every transit rider. On the nation’s largest urban transit systems, like New York City Transit or L.A. Metro, the cost of a monthly pass is below $120. However, TransitCenter found that of all Americans taking advantage of the commuter tax benefit, around 30 percent spend more than $120. Many of those are commuter rail riders; more than 200,000 people take advantage of the increased tax benefit on New York City’s three commuter rail lines alone, according to TransitCenter.

Schumer has a bill in the Senate, S. 322, that would make the increased transit benefit permanent, but it only has 14 co-sponsors, none of whom are Republicans. The House version of the bill, sponsored by Massachusetts rep Jim McGovern, has 47 co-sponsors, including two Republicans.

  • Josef

    Here’s the need for framing in this discussion. Republicans who hate cities may say we need to cut out “benefits” and “subsidies.” Democrats need to respond forcefully saying “any Republicans voting against Schumer’s proposal are responsible for increasing taxes.

  • It sucks for New Yorkers who take both the railroad and subway to work, for sure. Also for New Jerseyans who take PATH or rail to the city, then subway. Another reason to start biking to work.

  • J

    Josef is right on. This is a tax increase, that mainly hits the poor and middle class. This should be fought as such, The republicans have got every single politician in the country terrified of raising taxes. Let’s use that fear against them.

  • @J – if you really want to sell this to the Republicans, tell them this is a tax increase that mainly hits the upper class 😉

    Tax deductions come off the top, so there is more $ saved per dollar in deduction by those in the higher tax brackets. But that’s not the real rub.

    Most local bus passes are under the old $120 cap. The most likely person to need more is commuting on Commuter Rail, and commuting long distances. This is more likely to be someone in higher income stratas – for example people who take Caltrain from Palo Alto to San Francisco or vice-versa.

  • Tell Congress to leave your transit benefits alone. Sign Commuter Nations petition to support leaving the transit benefit cap at $230.00

  • notamused

    What’s more annoying about this isn’t that they are reducing the cap for transit from $230 to $120, but that they are leaving the parking cap at $230, which effectively means they’d rather people drive cars than take mass transit.

  • Michael Smith

    You can call it a “tax increase” in order to try to keep the benefit. But it is really just a SUBSIDY for the middle class, and especially the upper middle class, who benefit more from tax free benefits and are able to buy big houses way in the boonies since their transportation costs are subsidized. If you want to help transit then the money should be spent directly on transit. That way all users benefit, not just the wealthier ones.

    And of course the parking SUBSIDY should be gotten rid of first. Why subsidize the wealthier people to park in downtown parking garages???? That certainly is not helping society.

    And by the way, I’m a huge user of the SUBSIDY. But that doesn’t make it good policy.

  • How about cutting the parking credit?

    This issue could be reframed to be equalizing the credits; that should be the proposal. Then, if Republicans vote against it, we should call on them to cut the parking credit to be at an equal level.

  • These benefits should be equalized if we are truly going to encourage public transit ridership. We can’t claim to support such ridership while still giving twice as much in tax breaks to those who commute by car. A tax increase by any other name…

    Support fair transit policy. Visit and find a TEN affiliate in your area.

  • Mr. Transit

    Keep in mind that the extra transit benefit has only been in effect for one year. A better idea with the new, deficit-focused Congress would be to lower the parking benefit to $120, same as the transit benefit, so that there would be an even playing field. This would reduce the deficit and make drive vs. ride decision more equal.


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