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.

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

  1. 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?

  2. 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.

  3. 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.

  4. 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.

  5. 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.

  6. 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?

  7. 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.

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

  9. 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.

  10. 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.

  11. 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.

  12. 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.

  13. Not taking AS MUCH money from people is NOT the same as “paying people”
    Burglar: “Hey, I took your TV, but not your laptop. That’s is a GIFT from Me to You!”
    Don’t know where everyone is from, but here in NYC the transit system is already overcrowded, and at or in some cases above capacity. If only a fraction of the millions of people who currently use their cars would suddenly try to switch to mass transit, the MTA would clog up like a cheap sink

  14. While I agree with your underlying point, it’s still the case that this is a standard example of how the government uses carrots-and-sticks to get people to engage in desired behaviors.

  15. For people who really and truly think this sort of thing is necessary, then I’d bounce back that it would probably make more sense to just lower people’s taxes by $250 a month than to force people into this convoluted “claim your benefit” method.

  16. Correct. $250 a month which could be spent any way you wish would probably have more economic stimulus than a $250 transit or parking benefit.

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