Transit Benefit Reappears on the Congressional Agenda

The tax benefit for transit riders has zigzagged dizzily from parity with the car parking subsidy to second-class status. Currently, while drivers can pay for up to $250 in parking costs per month with pretax income, transit riders can't claim more than $130. Could it zigzag back up?

Sen. Ron Wyden (D-OR), who took over the gavel of the Finance Committee when Max Baucus left to become ambassador to China, just introduced a package of tax extenders, which the committee will consider in a hearing Thursday. The $50 billion package, which re-instates tax benefits that have expired or are expiring, includes a provision bringing the maximum transit benefit up to $250, equal with the driving benefit, for the next two years. That would be a welcome respite from the zigzagging.

The bill has a long way to go before passage, however. It has no “pay-for,” meaning it adds $50 billion to the deficit -- a tough sell in an election year. However, some of the benefits included in the package [PDF] -- help with mortgages, education deductions, and assistance to members of the military, for example -- may be popular enough to warrant it.

Over in the House, Ways and Means Chair Dave Camp has announced he plans to go through the extenders package policy by policy, so lawmakers can decide whether to make them permanent or kill them off. “I think we can all agree that a short extension of tax policies is no way to legislate and is even worse for the families and businesses who utilize those tax benefits,” he said in a letter to Ways and Means Committee members last week. “Moreover, it further confuses the debate as to what the real revenue baseline is. It is time for clarity in both policy and baseline.”

Camp’s plan to hold hearing after hearing on individual measures will take a long time. Wyden wants to act more quickly than that. But Camp is angling toward comprehensive tax reform, especially now that he’s announced that he’s retiring after this term. Although even his fellow Republicans have deemed his reform proposal -- which pays for transportation with revenues from a changed corporate tax code -- dead on arrival, Camp would clearly like to leave a legacy of some permanent reform.

Wyden’s proposal would make the $250 rate for transit benefits retroactive. The last time parity was restored, in 2013, it was made retroactive, but the paperwork proved too high a barrier and hardly any employers actually re-issued W2’s.

“In theory it’s retroactive, but in practice it’s not,” said Jason Pavluchuk of the Association for Commuter Transportation. “And where it is practiced, it’s scorned.”

Pavluchuk expects that the drama around the extenders bill will mean it’s left until the lame duck session after the election. While a new transportation bill is due before then, he says lawmakers have been reluctant to separate the transit benefit from the entire package of expiring tax provisions to consider it in a transportation reauthorization. It will likely have to wait its turn with all the other extenders.