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Posts from the "Tax Policy" Category

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The Parking Tax Benefit: A $7.3 Billion Subsidy for Traffic Congestion

Graph: TransitCenter/Frontier Group

Not only does the parking tax benefit pay people to drive during the most congested times of day, the whole system of commuter benefits functions as a gigantic transfer from poor workers to affluent workers, who have greater access to subsidized travel to work. Graph: TransitCenter/Frontier Group

The federal government spends billions of dollars a year on tax subsidies that make traffic congestion worse, according to a first-of-its-kind analysis by TransitCenter and the Frontier Group. The culprit is the parking commuter tax benefit, which costs taxpayers $7.3 billion in foregone revenue each year, all while adding more than 800,000 cars to rush-hour traffic on the nation’s roads each workday, the authors estimate.

The parking tax benefit allows people to claim up to $250 in parking expenses as tax-free income per month. It originated in the late 1970s, when, in the name of fairness, Congress prevented the IRS from taxing the free parking perks that employers gave their workers, without any thought to the effect on transportation. The new report shows that not only does the parking tax benefit have a disastrous effect on traffic, it’s not even fair to car commuters — amounting to a gigantic transfer to the most affluent drivers.

Most advocacy efforts centered on commuter tax subsidies attempt to raise the transit benefit — currently capped at $130 per month. Last week, for instance, two members of Congress pledged to fight for an equal commuter benefit for transit and parking. TransitCenter and the Frontier Group argue that this is the bare minimum to strive for. The real impact lies in simply getting rid of the parking benefit.

The transit benefit, they write, is a “relatively inefficient tool for motivating changes in transportation behavior” and “only weakly counteracts the negative impact of the parking tax benefit” — and should be thrown out, as it were, with the bathwater. If commuter benefits are retained, however, they recommend some key reforms: equalizing the transit benefit, and mandating that employers who offer parking benefits also provide the option of receiving a cash equivalent instead.

TransitCenter and Frontier Group estimate that while most people don’t change their commuting behavior based on the incentives created by these tax benefits, about 2 percent do — and that 2 percent drives 4.6 billion additional miles per year.

To make matters worse, they do that extra driving at peak hours, in crowded downtown areas, worsening congestion that the country’s transportation policy is supposedly oriented toward fixing.

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Lawmakers Could Finally Equalize Benefits for Transit and Parking This Year

It’s time to rev up the annual fight over parity between federal transit and parking benefits for commuters. Members of Congress hope this might finally be the year to get it done.

This could be the year to equalize benefits for transit riders and make it permanent. Photo: ##http://en.wikipedia.org/wiki/RTD_Bus_%26_Light_Rail#mediaviewer/File:Denver_light_rail_train_at_16th-California_station.jpg##Wikipedia##

This could be the year to equalize benefits for transit riders and make it permanent. Photo: Wikipedia

This morning, Reps. Earl Blumenauer (D-OR) and Jim McGovern (D-MA) announced that they will, again, push to equalize the tax benefits available to transit commuters and car commuters.

Right now, people who drive to work can get up to $250 a month in tax-free earnings to pay for parking. The monthly tax-free income available to the 3 million Americans who use the transit benefit, meanwhile, is capped at $130.

With the passage of the 2009 stimulus law, parity was implemented between the parking benefit and transit benefit for a brief while. After extending the higher transit benefit a few times, however, in recent years Congress has failed to take the necessary action to do so.

At today’s press conference, Washington Metro Board Chair Tom Downs noted that Metro ridership had stagnated since transit benefits dropped. “If you’re providing a $1,500-a-year incentive to drive your car over taking transit, you’re probably going to have an impact on mode choice,” Downs said.

Increasing the transit benefit makes the law more fair, but it probably won’t make a big impact on how people get to work. Studies show that providing parking benefits always increases solo driving rates, whether or not the workplace also offers transit perks. Better to do away with all commuter benefits than to provide both [PDF]. Besides, most transit commutes cost far less than $235 a month. A monthly New York subway pass costs $112. In DC, you’d have to travel from one end of the system to the other every day during peak hours to make use of the full $235 transit benefit Blumenauer proposes.

Though Blumenauer’s plan only cuts the parking benefit by $15, it’s deficit neutral (at worst), since so many more people drive than use transit.

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Missouri Says No to Amendment 7′s Monster Tax Hike for Roads

Amendment 7 would have helped pay for road expansions like this diverging diamond on Stadium Boulevard. Image: ##http://www.modot.org/central/major_projects/Boone740_PublicHearingMay2011.htm##MoDOT##

Amendment 7 would have helped pay for road expansions like this diverging diamond on Stadium Boulevard. Image: MoDOT

Last night, Missourians decided overwhelmingly to reject a ballot initiative that would have raised the sales tax by three-quarters of a cent to pay, almost exclusively, for roads. It would have been the largest tax increase in the state’s history.

Voters voted 59 percent to 41 percent to reject the tax.

“It’s difficult to pass a tax increase in Missouri,” said Terry Ganey, spokesman for the opposition group Missourians for Better Transportation Solutions. “It’s impossible to pass an unfair tax increase in Missouri.”

Missourians for Better Transportation Solutions opposed the tax, saying 85 percent of the $5.4 billion it would have raised over 10 years would have gone toward roads, with just 7 percent for transit and a small fraction for local governments. The measure would have made nearly every purchase more expensive for everyone, whether they drive or not, while freezing gas taxes and prohibiting new tolls. That’s essentially a free pass for drivers while the state forces the general population to foot the bill for new roadway capacity the state doesn’t need. Missouri’s cities already have more highway capacity than most, and the state’s population is barely growing.

While the construction industry tried to sell the initiative as a cure for deteriorating infrastructure, a big chunk of the revenues would have gone to interchange enhancements and road extensions.

Though a tax increase this big would have been a tough sell under any circumstances, voters clearly considered this one to be a particularly bad investment.

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What’s the Best Way to Tax Parking?

Taxing parking, the way Pittsburgh does, can make downtowns livelier and encourage a healthier mix of transportation options.

A visual inventory of parking in downtown Providence. Image: Greater City Providence

An inventory of parking in downtown Providence. Image: Greater City Providence

Of course, implementing these policies can get tricky. A recent report from the Victoria Transport Policy Institute [PDF] delves into the issue and sorts out the best way to go about it.

At his blog, Transport Providence, James Kennedy considers what the conclusions mean for his city:

The long and short of it is that it’s politically easiest to tax parking on dedicated lots, rather than to do a “per space” tax on all parking, but this way of taxing parking has problems. We might be tempted, for instance, to tax the lots in downtown Providence but not tax the lot attached to, say, the Whole Foods, because our instinctive thought would be that though we don’t like a surface lot next to a grocery store, it’s much better than a bare lot serving nothing but parking alone.

The problem comes with the fact that the lot parking attached to businesses is free to customers and employees. Of course, it’s not actually free. It costs money which is passed into lost wages or higher prices. But to the worker or consumer, it appears free. When the price of commercial parking, i.e., the lots downtown that charge per hour, becomes more expensive without putting an equal burden on these other parking lots, it gives a stronger incentive for businesses to include free parking into their design as a benefit to customers or workers. This is not what we want.

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Talking Headways Podcast: Rondo Revisited

Finally, there is a light rail line connecting the Twin Cities. The Green Line, running 11 miles from Union Depot in downtown St. Paul to Target Field in downtown Minneapolis, cost $957 million and took decades to build. The process of choosing stations was contentious but eventually incorporated the proposals of low-income communities that wanted them, and the line is already being held up as a model. It’s not the fastest way between the two downtowns, but it might be the best way. Jeff and I discuss.

Then we sink our teeth into the Sightline Institute’s proposal to change the property tax structure in order to incentivize better uses of downtown space. That might help some cities with their parking crater problem.

Finally, we rejoice at Calgary’s decision to tear down a whole mess of parking outside one of its light rail stations, and we discuss the balancing act between preserving broad access to transit and creating walkable, compact communities where they belong: near transit.

We can’t wait to read your thoughts in the comments.

P.S.: Get us on iTunesStitcher or the RSS feed.

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Talking Headways Podcast: California Über Alles

Welcome to our all-California, all-the-time episode of the Talking Headways podcast.

We start with a statewide debate over whether $60,000+ Teslas should qualify for tax breaks — or whether any electric vehicles should get tax breaks. Then on to the conversation about how California’s cap-and-trade dollars should be spent. One proposal, from the State Senate leader, would spend it on affordable housing, sustainable communities, transit, and high-speed rail. And then we zoom in on Fresno, where one blogger wonders why the political threat to BRT didn’t get as much attention as it did in Nashville.

We missed the podcast after a long-ish break and are glad to be back! We hope you filled the gaping hole in your life by listening to back episodes of Talking Headways goodness and subscribing to us on iTunes or Stitcher or signing up for the RSS feed.

And, side note: The giveaway for our spring pledge drive has changed since we recorded this podcast. Now, you’ll be entered into a drawing to win a package of zines and books by feminist bike activist and writer Elly Blue. Thanks for your donation!

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Uncle Sam Wants You to Drive: 5 Tax Breaks for Cars in the U.S. Tax Code

It’s April 15. If you bought an electric car in 2013, you can claim a tax break today. If you bought a plug-in hybrid, you can get a tax break today. But if you don’t own a car and walk to work instead? Sorry, Charlie.

Drive too much? Congratulations, you get a tax break. Photo: ##https://www.flickr.com/photos/86530412@N02/8264919801/##Chris Potter/flickr##

Bought a shiny new electric car? Congratulations, you get a huge tax break. Photo: Chris Potter/Flickr

There’s a whole array of goodies in the U.S. tax code for drivers, the automobile industry, and oil companies. Here are the ABC’s (and the DE’s) of these tax-day gifts that help clog our streets with cars.

Alternative vehicle logistics. President Obama wants to extend the tax break for people who invest in properties involved in the production of advanced vehicles or the fuels they use. The Treasury Department argues that the $2.3 billion allocated for this incentive under the 2009 stimulus wasn’t enough, and that it didn’t reach more than two-thirds of eligible applicants.

Biofuels. You can get a dollar from Uncle Sam for every gallon of biodiesel you produce, though this is the last year for that one.

Car commuting and driving for work. The granddaddy of all tax incentives for driving is the $250 per month that car commuters can claim in tax-free income to cover parking expenses. Once you’re on the clock, your driving expenses are also eligible for a tax deduction. The IRS lets you write off 56.5 cents for every mile you drive for your job. As Turbo Tax’s fact sheet says plainly: “More miles, more money.” You can even write off trips to search for a job, see a rental property you own, or do volunteer work (though that one gets a lower rate). In some cases, you can even claim deductions for car washing and polishing.

Drilling. Oil companies can write off costs associated with drilling and for the amount of oil taken out of (“depleted” from) their wells. They also get a big thank-you from Uncle Sam for not exporting jobs to China. According to The Atlantic, those three tax expenditures alone will cost taxpayers $37 billion over the next decade. Despite repeated efforts to repeal these subsidies, including for deficit-reduction purposes, they live on.

EVs. The Obama administration announced last month that the tax incentives for alternative fuel vehicles aren’t big enough yet. The White House wants to increase the maximum tax credit for purchasing electric vehicles from $7,500 to $10,000 and broaden it to include a wider range of “advanced technology vehicles.” The reason? President Obama thinks putting a million of these cars on the road by 2015 would “reduce dependence on foreign oil and lead to a reduction in oil consumption of about 750 million barrels through 2030.”

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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) included tax parity for transit riders in his extenders package. Photo: ##http://www.wyden.senate.gov/meet-ron/biography##Office of Sen. Ron Wyden##

Sen. Ron Wyden (D-OR) included tax parity for transit riders in his extenders package. Photo: Office of Sen. Ron Wyden

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.

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Might Atlanta Tax Parking to Fund Transit?

Last summer, voters from a 10-county region in and around Atlanta shot down a large package of transportation projects, including some major urban transit projects.

Could Atlanta exploit a resource it has plenty of -- parking -- to improve transit and sidewalks? Image: Creative Loafing

But almost immediately after, plucky Atlanta leaders were searching for other ways to move the work forward. The city of Atlanta hasn’t set aside ambitions for things like the Beltline, an innovative circle of trails and transit that would ring the city.

Among the proposals being floated as a source of new revenue is an inventive solution that would go a long way toward realigning incentives in the notoriously car-centric city: taxing parking to pay for transit and streetscape improvements.

The plan could generate as much as $75 million each year, says Thomas Wheatley, a reporter at local alt-weekly Creative Loafing – “enough to put a sizable dent in Atlanta’s more than $150 million sidewalk repair backlog.” To stretch those dollars further, the money could be used as a local match to attract transportation funding from the federal government.

Atlanta City Councilman Aaron Watson has been studying the proposal, which emerged from a graduate student’s research paper, but he still needs to get the rest of the council on board. And even if the council approves it, the city might need state approval for the new tax. Since the state of Georgia is pretty much openly hostile to transit in Atlanta, that could sink the whole deal.

Sidewalks are in a terrible state of repair in the city. The woefully under-funded transit system, MARTA, actually bucked national trends and saw ridership dip last year. The city is also considering going to voters to approve a $200 million bond package to pay for transportation improvements.

Wheatley says the parking tax makes sense on many levels.

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Bi-Partisan Lawmakers Push Permanent Tax Equality for Transit Commuters

Right now, transit riders get the same commuter tax benefits as drivers: $245 a month in pre-tax income to spend to get to work. But next year, straphangers might go back to second-class status, getting just $125 for their ride.

A new bill would save transit riders as much as drivers on their commute. Photo: WJLA

Four members of Congress, two Democrats and two Republicans, have stepped up to make sure that doesn’t happen — next year or ever. Yesterday, Reps. Earl Blumenauer (D-OR), Michael Grimm (R-NY), James McGovern (D-MA), and Peter King (R-NY) introduced the Transit Parity Act, which would make tax credit parity permanent for drivers and public transportation commuters.

Rather than have to fight it out every year, transit riders and advocates for sustainable transportation would know that our equality is enshrined in law.

The “Transit Parity Act” caps both the transit and parking benefits at $220, making the change deficit-neutral. 

“With rising gas prices and highly congested streets, we should be encouraging New Yorkers to use more public transportation, not push them back into their cars,” said Rep. Grimm in a statement.

“By helping protect commuters’ choices, and preserving equity between those who drive and those who take transit or vanpool,” said Rep. Blumenauer, “we can avoid a tax increase on millions of families, and continue to give workers the option to use a transportation mode that increases economic productivity, reduces congestion, and is friendlier to the environment.”

Parity between the tax benefit enjoyed by drivers and transit riders first became law when the American Recovery and Reinvestment Act passed in 2009. Parity continued through 2010 and 2011, but Congress let it expire for all of 2012. The fiscal cliff deal early this year saw a return to parity – retroactively, even, if you can figure it out. If the Transit Parity Act passes, we can stop fighting this battle every year.