America Spends $7.3 Billion a Year Paying Affluent People to Drive to Work

Photo: TransitCenter
Photo: TransitCenter

Every day, the streets of American cities are more clogged and polluted at rush hour because the federal government pays people to drive to work.

The culprit is the commuter tax benefit, a $7.3 billion annual subsidy that mainly offsets parking costs for people who drive to work. The people who benefit the most are high earners who drive into the U.S.’s biggest, most congested cities and can write off the maximum $255 per month in tax-free income.

The tax break for car commuters is not only regressive, it also generates traffic at exactly the worst time — rush hour — and in exactly the worst places — the central areas of major cities, according to a new study from TransitCenter and the Frontier Group [PDF].

Transit center graph
A model developed by Andrea Hamre at Virginia Tech shows the massive effect of commuter subsidies on mode choice in major American cities. Graphic: TransitCenter

Placing a finger on the scale of people’s commute decisions can have a profound influence on behavior. A model developed by Virginia Tech researcher Andrea Hamre estimates that in five cities — Washington, DC, Baltimore, Philadelphia, Newark, NJ, and New York City — a subsidy solely for parking at work would reduce transit’s share of the commuting pie 25 percent compared to a scenario with no commuter subsidy.

The federal government does allow transit commuters up to $255 a month in pre-tax income to offset the cost of fares. But people can claim it only if their employer offers the benefit. The parking subsidy is much more widely used — the government spends $7.3 billion a year on it, compared to $1.3 billion for transit.

Cities would be better off if both subsidies were eliminated. TransitCenter estimates that without the commuter tax benefit, 66,000 fewer people would drive to work in the 25 largest U.S. cities.

As long as the commuter benefit persists, local governments can at least help even the playing field. A number of cities, including New York, DC, and San Francisco, have ordinances requiring most employers to offer the transit benefit to their workers.

  • cjstephens

    I’m baffled that a tax benefit exists for parking private cars exists at all. If governments are going to tinker with taxes to alter behavior in this way, why are they encouraging driving private vehicles to congested central business districts? How did that even happen?

  • bikeohio

    You’re not even close to understanding the simple point I was making. So I’ll spell it out for you. The author posted a response as the moderator — “MOD” — then proceeded to deride a commenter’s post, which is clearly inappropriate. Suggesting she doesn’t like free speech, was my way of pointing this out. Full stop. End of story.

    You can cite trolls, political agendas, whatever you like. It’s all irrelevant to the point I was making.

  • Two Americas

    I get your “point.” I think it is nonsense. I think it was irrelevant to the posts you responded to.

  • Bernard Finucane

    This message was brought to you by the propaganda wing of the Republican Party. Out goal is to make sure rich people keep contributing to our propaganda efforts.

  • Bernard Finucane

    Why should anyone can about the exact time when you cease to be amazed? Do you know what “noxious” means? It seems inappropriate in this context.

    Maybe you (or “a friend”) got shut out because you don’t contribute to the conversation.

  • Guy Ross

    Hate to admit it but I’m to a point of saying ‘no transpo subsidies at all’

    – Wanna park in a city center? Pay the 20 bucks a shift rent for that real estate,
    – Travel with a metro in and out for a month? Pay the cost of $250 and not $70
    – Drive on a road? Be prepared to pay three times as much for gas.

    Let it all get sorted by the ‘free market’. This may be a case where it actually may be the best solution.

  • Guy Ross

    You speak of things as if the ‘now’ was the always and the forever. This blog is to highlight how we got ‘now’ and how to affect a future in a way which is better for the cities and areas in which we live.

    The idea of removing a subsidy rewarding those who drive is heretical to you on which practical or ideological grounds? No one is forcing you into a bus, but some think it would be fair if you paid for your parking. I don’t feel it’s divisive to discuss this in an honest way, do you?

  • Joe R.

    You may be right. Essentially, when we make travel in any form less expensive it encourages more travel. If it starts costing a lot more to commute to work each day, there will be a ground swell of support for a lot more telecommuting. Also, the economics will favor working closer to home if you can’t telecommute. Unnecessary business travel will decline dramatically. Leisure travel will decline even more. Whatever positive economic effect some of these types of travel have, they’re probably more than offset by the direct/indirect subsidies, along with the cost of the externalities. I’ve long said Americans just travel way too much. Part of the reason is subsidized travel.

  • Kevin Withers

    I voted for Bernie, speak for yourself.

  • Kevin Withers

    Fact: I’ve ‘commuted’ for 25+ years, and have received exactly $0 in tax subsidies for parking.

  • Jason

    Does your employer provide you “free” parking?

  • Jason

    Can you provide a link explaining this itemization? I thought it was just a pre-tax benefit, no deductions required.

  • Kevin Withers

    Nope

  • I also want to know how the tax deduction came about.

  • Jason

    It depends on which benefit you’re talking about, I think. There’s a pre-tax contribution that comes from your gross pay, and that’s yours to keep. But if you have a subsidy from your employer, that money goes away at the end of the month.

  • Guy Ross

    You have always stored your private car on private property which is outside a central business district? For 25 years? If true, then it’s a fact. I doubt it, however.

    The ‘fact’ is that it is impossible to own or drive a car in the U.S. without being HEAVILY subsidized – whether you take the aforementioned itemized tax credit or not.

  • Bernard Finucane

    He wasn’t on the ballot

  • Kevin Withers

    Oh but he was, in the primary.

  • Joe R.

    I found this link which suggests it’s pretax: http://www.transitchek.com/how-it-works.aspx

    However, that’s just how one company handles it. Regardless, whether it’s a pretax benefit or a deduction, those who have higher incremental tax rates benefit more from it.

  • Bernard Finucane

    The primary is not the presidential election. It’s strange how confused Americans have gotten about the fundamentals of their own political system. The primary is actually an internal party event. Thanks to the bizarre “open” primaries, lots of Republicans did vote for Bernie. Saying you voted for him in the primary proves nothing, except to show you don’t have a very good grasp of the American political system.

  • Kevin Withers

    Hogwash. You casually attempted to slander me, by commenting/referencing a “Trump voter” & Republican Party. You seem to find it easier to cope by ad-hominem attacks at those with differing opinion – which serves to polarize things, and that must feel comfortable from inside your bubble. Absolutely nothing qualified the comment to the fall ballot vs earlier primaries. In any case, you’re repeatedly wrong. Thanks for playing.

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