Skip to content

Posts from the "Tax Policy" Category

38 Comments

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.”

Read more…

No Comments

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.

Read more…

No Comments

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.

Read more…

8 Comments

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.

25 Comments

If You Pay Sales Tax at Amazon.com, Your Transit System Could Improve

A bill moving through Congress could help struggling transit systems around the country.

A bill to allow sales taxes to be charged on internet sales could mean more funding for transit in Seattle -- and lots of other places. Photo: Seattle Transit Blog

The Senate approved the Marketplace Fairness Act on Monday, a bill that would impose sales taxes on most items sold online to residents of the 45 states (and the District of Columbia) where stores charge sales tax.

PubliCola at SeattleMet highlighted the benefit to public transportation: “Local transit agencies rely heavily on sales taxes — in King County, for example, sales taxes contribute 54 percent of Metro funding — so a larger sales tax base translates into more funding for transit infrastructure.”

In fact, it could mean an additional $45.4 million each for Seattle’s metro and Sound Transit between 2014 and 2017. “For cash-strapped systems like Metro, that windfall could mean the difference between systemwide cuts and the first new service in years,” according to the SeattleMet article.

Seattle’s not the only city that stands to see a windfall for transit. More than a dozen other cities fund their public transportation systems using sales taxes, including Boston, Dallas, and San Francisco [PDF].

The Senate’s filibuster-proof 69-27 majority vote was a good sign, but the House is more divided on the bill. It’s not clear when the House will bring the measure up for a vote.

No Comments

A Golden Opportunity for Congress to Avoid the Transportation “Fiscal Cliff”

The Highway Trust Fund is expected to slip into negative territory in 2015. Estimates are based on CBO's February 2013 baseline projections. Image: CBO

MAP-21 expires in a year and five months. When it does, if lawmakers haven’t already found a solution to the “transportation fiscal cliff,” they’ll have to do one of three things, according to a report issued last week by the Congressional Budget Office [PDF]:

  • Transfer $14 billion more in general funds
  • Raise the gas tax by 10 cents a gallon
  • Cut the authority to obligate funds in 2015 from about $51 billion projected under current law to about $4 billion

“If lawmakers chose to wait until fiscal year 2015,” wrote CBO analyst Sarah Puro, “at the expiration of MAP-21, to reduce spending, those cuts in 2015 would need to total about 92 percent for the highway account and 100 percent for the transit account.”

It couldn’t be clearer. Congress has to stop dithering and start working on a revenue solution, stat. Oh, and the president and his new secretary of transportation have to get behind it, guns blazing.

Congress has three potential vehicles for a revenue solution: 1) a “grand bargain” on the deficit, the sequester and the fiscal cliff, 2) tax reform, and 3) the next surface transportation bill.

And what will that “revenue solution” be? The simplest, most easily implemented fix is a gas tax hike, but over the long term, taxing fossil fuels as a way to pay for transportation infrastructure just won’t cut it.

Read more…

21 Comments

$450 Billion in Federal Subsidies Tilt U.S. Real Estate Market Toward Sprawl

Real estate in the United States, it turns out, isn’t really guided by “the invisible hand” of the free market.

Federal housing subsidies flow disproportionately to single family homes over multi-family -- distorting the housing market. Image: Smart Growth America

In truth, federal policy puts a finger on the scale in a major way. Even apart from the quasi-governmental Freddie Mac and Fanny Mae, the federal government is the single largest investor in the American real estate market. And according to a new report from Smart Growth America, each year an assortment of subsidies, tax credits, and deductions exerts $450 billion worth of influence on the location and character of American residences and commercial spaces.

That massive influence can distort the market in significant, and insidious, ways.

“Viewed as whole, federal funds are not targeted to those most in need, are not targeted to strengthen existing communities and are not targeted to places where people have economic opportunities,” says Smart Growth America’s research team.

For starters, according to SGA, not a single federal program is primarily focused on support for existing neighborhoods. Government priorities are often contradictory on this front, with subsidies operating at cross-purposes. One program may subsidize new housing in undeveloped locations, for instance, while another attempts to shore up the city neighborhoods left behind. These programs also fail to factor in what it costs to support real estate development: There is no preference for projects with lower long-term infrastructure costs, leading to higher spending on things like roads and sewers at the local and state levels.

Overall, the report suggests, federal real estate interventions undermine market trends toward the development of more walkable places. About 85 percent of federal housing subsidies flow to single-family housing over multi-family, although only 65 percent of American households are homeowners and the majority of renters live in multi-family buildings. This has hampered the market for rental housing even as demand for multi-family rental housing has soared following the housing bust.

“Federal real estate spending is stuck in the past,” said smart growth-focused real estate developer Chris Leinberger in an SGA-sponsored call with reporters yesterday. “It’s not what the market wants today, it’s what the market wanted in the ’70s and ’80s and into the ’90s.”

Leinberger added that while consumers are demanding walkable urbanism, federal policy stands in the way of that kind of development — to the detriment of the economy.

Read more…

4 Comments

UPDATE: Boehner’s Cryptic Message on Taxes

UPDATE 1:47 p.m.: Speaker Boehner just sent out an email to reporters, highlighting media reports of his comments that assert that he doesn’t intend to raise tax rates. It clarifies his position that the election doesn’t equal a “mandate for raising tax rates” on the American people. 

In a move likely calculated to distract attention away from the post-election chatter about the Republican party’s state of crisis, Majority Leader John Boehner made a surprise announcement yesterday. “Because the American people expect us to find common ground,” he said, “we are willing to accept some additional revenues, via tax reform.” The reform would be part of a deal to avoid the impending “fiscal cliff.”

Is John Boehner talking sense on taxes, or is he just talking? Photo: Twitter/SpeakerJohnBoehner

The fiscal cliff is a murky cocktail made up of the expirations of tax cuts and unemployment benefits, combined with the “sequestration” cuts that are harmful enough that the mere thought of them was supposed to be incentive enough for Congress to find some other way to tame the deficit last August. Unfortunately, Congress being Congress, they didn’t, and the sequestered cuts could kick in at the end of the year if nothing is done.

What this means for surface transportation isn’t completely clear. The aviation sector faces the loss of 2,200 air traffic controllers and support staff and the Coast Guard — still reeling from some heroic missions after Hurricane Sandy — could get a $439 million chunk taken out of its hide. But surface transportation is somewhat sheltered from these cuts because of its dedicated funding source, the Highway Trust Fund.

However, given that nearly $14 billion of the current bill’s $105 billion outlay comes from sources other than the Highway Trust Fund, experts speculate that even standard transportation expenditures could fall victim to the cuts — not to mention non-trust-fund programs like Amtrak, New Starts and TIGER.

So it’s refreshing to hear the leader of the House Republicans say they’re willing to back off their hard-line Grover Norquist kow-towing on taxes and explore all the options on the table. That could reduce the severity of the cuts required and, who knows, if we’re opening up a conversation about some targeted tax hikes, maybe someone will notice that there’s a gas tax that’s been begging for some adjustment for almost 20 years now.

But what did Boehner really say?

Read more…

1 Comment

UPDATE: Where Did the Senate Get the Extra Money to Pay For Its Bill?

UPDATE: The final bill contained a $2.4 billion transfer from Leaking Underground Storage Tank Trust Fund to the Highway Trust Fund in June 2012 and three transfers from the General Fund to the Highway Trust Fund, totaling $18.8 billion. They were: $6.2 billion to the Highway Account of HTF in October 2012; $10.4 billion transfer to Highway Account of HTF in October 2013; and $2.2 billion transfer to Mass Transit Account of HTF in October 2013. They dropped the car tariffs change and the gas guzzler transfer. They replaced those smaller transfers and offsets with the pension provisions and a tiny bit from the roll-your-own-cigarettes change.

Congressional leaders announced opaquely last week that they’d “moved forward” on a deal on the highway section of the transportation bill. That means transit, rail, and safety programs are still being negotiated. And it means the financing of the bill hasn’t yet gotten the seal of approval from the House.

What do roll-your-own cigarette machines have to do with surface transportation? Photo: News Herald

Still, both houses of Congress have agreed to spend more on the transportation bill than the Highway Trust Fund itself can bear. (The House gave its green light a couple weeks ago when it nixed the Broun motion to keep transportation spending to HTF receipt levels.) To overspend the HTF but still plausibly deny that they’re deficit-spending, the Senate Finance Committee has done some pretty fancy footwork to offset the expenditures with other savings.

Chair Max Baucus (D-MT) squeezed blood from the stone of the U.S. budget, and many of his colleagues have lauded him as a miracle worker. But Taxpayers for Common Sense – and lots of other people with common sense – say the numbers don’t really add up. The information below comes from TCS’s report, released last week, on the Senate pay-fors.

Stick with me here – this is all a little convoluted, but understanding the funding is a key part of the process. While the Senate transportation bill may be a good stop-gap compared to the option of even shorter extensions, a look at the funding shows why it provides no long-term answers to the question of how to pay for transportation.

The sources of new Highway Trust Fund revenue Baucus et al came up with are:

A transfer from the general fund: $4.97 billion. This is the most obvious example of deficit spending – just taking money from the Treasury to pay for transportation. That’s on top of $34.5 billion the Treasury has already coughed up in the last four years to bail out the Highway Trust Fund – something no one wanted to repeat.

Dedication of imported car tariffs to the Highway Trust Fund: $4.52 billion. This revenue would no longer go to the general fund.

Read more…

3 Comments

Commuter Transit Tax Break Could Reclaim Parity With Parking in 2012

As Congress prepares to reconvene and take up the payroll tax cut extension yet again, a movement is forming to restore the transit commuter tax benefit to 2011 levels.

Commuters in New York's Hudson Valley could lose out on $1400 in annual pre-tax benefits if the transit tax break stays at its current level. Photo: railpictures.net

Transit advocates across America were disheartened when Congress failed to maintain parity between the transit and parking pre-tax commuting benefits last month. On New Year’s Day, the maximum monthly pretax benefit fell from $230 to $125 for transit commuters, while motorists actually saw a slight increase in their parking benefits, from $230 to $240. (As The Sierra Club pointed out today, things used to be even more lopsided.) But members of the House and Senate have now indicated that a restoration is more than just possible, it could even be probable.

Rep. Richard Neal told Politico on Tuesday that a retroactive extension of 2011 tax policies is “likely,” and a staffer said today that “Nearly as often as extenders have been taken up in a calendar year, they have also been taken up retroactively.”

They won’t have to wait long for their first opportunity to prove it. In 54 days, the payroll tax cut extension expires, and Senator Charles Schumer and others intend to reinsert the commuter tax break at its 2011 level once it is reopened for debate. Speaking today in Staten Island, Sen. Schumer said he hoped to make the tax break permanent, and defended its inclusion in a tax cut extender bill, saying “it fits in the theme of a middle-class tax break.”

Schumer also said he hoped to make the tax break retroactive to January 1, but that could be difficult. It is true that precedents exist for retroactive tax cuts — there were plenty of retroactive cuts passed in 2010, including extensions of the Bush cuts to biofuel, payroll, and estate taxes – but it’s hard to un-buy a transit pass you’ve already purchased for January and started using.

“You can’t make it retroactive, but you can make it proactive,” explains Cathy Connor, Manager of Government Relations at Parsons Brinckerhoff. “January’s gone, and unless Congress passes the extender the day they come back, they can’t do February either. But it could still be good for March through December,” if not longer.

As for the benefit’s odds of being pro-rated for 2012 at all, Connor told Streetsblog, that depends on whether or not it becomes a “victim of the vehicle,” as it was in December. “There seems to be a lot of support in congress for it. If they decide to do a tax extender bill with just the payroll tax and unemployment, then that’s that. But if they open it up and start making it a more robust bill, this is a very meritorious provision that there’s a lot of support for.”