Why Do We Still Pay People to Drive to Work?

Photo: VCU CNS/Flickr
Photo: VCU CNS/Flickr

Whenever city rankings of traffic congestion come out, there’s always a round of coverage about curing gridlock with wider roads — a strategy that never solves the problem. Instead we should be focusing our attention on eliminating all the incentives that favor driving.

Among the more galling subsidies, writes Susan Balding at Greater Greater Washington, are commuter parking benefits. Many employers provide free parking as a perk, and the federal tax code allows car commuters to write off up to $255 a month in parking expenses.

Thanks to a change in the law in 2015, transit riders can write off the same amount, but the impact is overwhelmed by the traffic-inducing effect of the parking benefit. Baldwin says if we’re going to make a dent in congestion in major cities, parking subsidies have got to go:

DC, San Francisco, and New York City have all passed laws requiring employers of a certain size to let employees spend their own money tax-free to buy transit fares. According to DDOT, 78% of employers in DC started offering pre-tax transit benefits because of the law.

Nonetheless, employers who offer to pay for part or all of their workers’ parking can be a lot more attractive than those who just allow employees to buy pre-tax transit fares. In DC, 34 percent of employers offer free parking, and an additional 18 percent offer an employer-paid parking subsidy.

If you work somewhere where parking is free and abundant, a parking benefit doesn’t really affect you. But if you’re commuting in a place where parking costs money — for example, downtown DC — this benefit is very real, as it makes driving cheaper, but transit still costs the same.

Parking benefits, you likely won’t be surprised to hear, also drive up congestion. And beyond that, they leave governments with even less money to repair roads and keep up public transit systems: As of 2014, the parking benefit translated into about $7 billion a year in lost tax revenue (because the money used toward the benefit is not taxed). To put that in perspective, the Federal Transit Administration’s total appropriations in 2016 came to just over $11 billion.

More recommended reading today: Capital Metroblog reports that Austin is planning to move forward with a bus system redesign much like Houston’s. And Green Caltrain considers whether the Trump administration’s interference with Caltrain electrification signals hostility to transit projects in the rest of the nation too.

  • Kevin Love

    Meanwhile, in the rest of the world…

    I am aware of zero other places anywhere else in the world that allow people to “write off” car parking expenses.

    Many other places (for example, Canada) treat free employer-provided car parking as a fully-taxable employment benefit. This results in many people officially declaring to their employer that they do not drive a car to work, so that they do not get hit with that tax.

    I would be willing to wager that if the US income tax treated the value of employer provided car parking as a fully taxable employment benefit, there would be a drop in car driving in the USA.

  • Asher Of LA

    45% of new cars in Europe are company cars, which are subsidized by favorable tax treatment. This probably has much more impact than a parking benefit that’s worth on average ~$100 a month.

    Calling the US uniquely bad may feel good, but it’s not accurate.

    http://www.oecd.org/env/tools-evaluation/company-car-taxes.htm

  • vnm

    And think of all the places that offer their employees “free” parking in garages connected their work buildings, but make their employees pay out of pocket if they still want to take the train or bus. I’m thinking of Stamford, Connecticut, but probably a lot of edge cities do this. It should be the other way around!

  • Asher Of LA

    Those places probably have high parking requirements. Once excessive parking is built, it’s not considered worth charging for it.

  • Asher Of LA

    Even if this law wasn’t in place, would employers really have to charge for parking in places with high parking requirements? If there’s already excessive parking, charging may not be practical. So the problem in most places is the parking requirements.

    As for the parking benefit, if eliminating it wholesale isn’t practically possible, it might be better to just have one uniform rule: people can deduct up to $100-120 a month total across all transit modes (cycling, transit, parking and maybe even shoe repairs 🙂 ).
    The bike commuter benefit is puny at $20 a month and nigh unusable. The commuter benefits in general are only accessible if your employer has set them up, I believe.

  • reasonableexplanation

    Yeah, it’s way more common to have a company car over there, something that we moved away from.

  • bobfuss

    There is a tax write-off for all forms of commuting, if the employer takes advantage of that scheme. There is no reason to single out driving as one form.

  • farazs

    [deleted] Never mind!

  • Dr_Ace

    For the same reason employers (originally) provided health insurance to employees. And you’ve stated it:

    because the money used toward the benefit is not taxed

    The benefit is coming from the employer, not the government, and it’s in the employers’ best interest to provide as much non-cash compensation as they can. This way they don’t have to pay payroll tax, and the employee doesn’t have to pay income tax. You’d have to change that system to discourage companies to offer free parking to employees.

  • xplosneer

    No one even sets up the commuter bike benefit to begin with. In the bay area, they offer four secondary measures: http://assets.511.org/pdf/nextgen/commuter-benefits/Employer_Guide.pdf

    Preferred Carpool parking, “secure” bike parking, carpool matchup service, and on-site “amenities”? Done. No subsidy required.

  • bobfuss

    But as I noted elsewhere, why pick only on cars? Should we reduce the much larger tax subsidies that go to transit as well? The employer commutation tax plans that I have seen cover ALL commuting methods and cost. They aren’t specific just to driving, so this entire argument is a red herring

  • bobfuss

    And it’s common here to have employer health insurance, which is an even bigger subsidy. All nations do stuff like this.

  • bobfuss

    But those driving to work still have costs. There is gas, tolls and wear and tear on the vehicle. The idea that driving is free but riding transit isn’t, is way off the mark.

    Free parking is simply a matter between the employer and the employee. If it was taken away, wages would have to rise to compensate.

  • Jason

    The way commuter benefits are administered also has to be looked at. I’m assuming they’re responding to how the federal programs are set up and that this wasn’t just their decision alone, but if I wanted to just park in my employer’s underground garage, I could just register my car and that would be it. But for transit benefits, or the small incentive they give for walking or biking, I have to log both ends of my commute every day of the month. It’s a gigantic fucking waste of time for everyone involved and, quite frankly, feels just a bit like punishment for not driving “like a normal person”.

  • Jason

    What “much larger tax subsidies that go to transit” are you talking about?

  • bobfuss

    For example, the subsidy to SF Muni transit is over 75%. And of course the buses use the roads and so enjoy that subsidy as well.

  • Jennifer Melfi

    More than the annual $50B subsidy of roads? (actually higher when you consider other funding they provide)
    https://www.cbo.gov/publication/45416

    The BART Budget is $876M (https://www.bart.gov/sites/default/files/docs/FY17%20PBM%20Final_0.pdf) and the system brings in about $500M, so I don’t know where you are getting your figures from, but they don’t look right.

  • bobfuss

    I didn’t say anything about BART, which credibly has a farebox recovery ration of over 50%

    I was talking about SF Muni, where it’s about 23%

  • Why Do We Still Pay People to Drive to Work?

    To keep the price of downtown real estate higher than it might be otherwise?

    If you don’t like those of us who must drive to and from downtown because there is no good alternatives in our neighborhoods just say so, and we will try to work from home so that we can avoid having to come downtown.

  • Eric

    Yet I have to beg for my $20 credit for biking to work 90% of the year. Oh, wait! Most of us bike commuters don’t even get that.

  • Alex

    I don’t like those of you who must drive to and from downtown

  • kevin

    I think you’re missing the point somewhat. I think what they’re getting at is why are we subsidizing people who live far outside of the cities or those who live far away from where they work. It just encourages more people to live outside of productive zones, which robs those zones of tax revenues as those commuters use city infrastructure too. And allowing companies to essentially pay (tax free) for their employees parking just encourages this behavior further.

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