Commuter benefit could be tied to payroll package

Commuters wait at a New York City subway platform. (AP Photo/Mark Lennihan) Commuters wait at a New York City subway platform. (AP Photo/Mark Lennihan)

Pressure is mounting for Congress to reverse cuts to commuter benefits as part of a major tax package this year.

Public agencies, businesses and lawmakers are hoping a provision that allows public transit riders to put away more pre-tax money for commuting costs will be attached to legislation on the payroll tax cut, which is set to expire on Feb. 29.

Without a fix to the law, it’s projected many workers will face up to $550 in increased commuting expenses this year.

At a Senate Finance Committee hearing on Tuesday, Sens. Charles Schumer, D-N.Y., and Ben Cardin, D-Md., made the case for bringing back the tax credit for commuters using mass transit, according to The Hill. “This is the one that’s hardest to go back and do retroactively,” Schumer said.

The Senate Finance Committee will discuss H.R.  3630: The Temporary Payroll Tax Cut Continuation Act of 2011 on Wednesday.

In 2009, Congress amended the pre-tax savings allowance for transit expenses to $230 per month. The increase brought transit benefits up to the same amount that could be set aside for parking costs. The adjustment meant workers were able to set aside $230 for parking, and $230 for transit fares or vanpool expenses.

After Jan. 1, the amendment expired, and the transit portion was reduced to $125, while the parking amount increased to $240 due to a cost of living adjustment. 

As Congress gets set to debate an extension on the payroll tax cut, members of the CommuterBenefitsWorkForUs.com coalition are hoping to squeeze the commuter benefits expansion into the drafted bill, along with a permanent rule to make the monthly amount that can be set aside tax-free for parking and transit costs equal.

Last July, Sen. Charles Schumer and Rep. James McGovern introduced the Commuter Benefits Equity Act of 2011 (S. 1034 and HR 2412), that would permanently restore parity between the transit and parking parts of the commuter benefit.

But, as Dan Corbett, Vice President, Transportation Development at WageWorks, explains, an inclusion in any upcoming legislation (though the provision faces no opposition) is easier said than done. Even harder is pushing for permanent parity.

“Tax provisions don’t usually expire every year but this is a quirk of the budget and the congressional fights that have been going on, so it’s turned into a one-year fight every year,” Corbett said. “This isn’t routine order where we’ll pass the bill and everyone’s working together. It’s very contentious. While we have no real opposition to [the commuter benefits] provision, trying to get attention for it is the problem right now."

From a policy perspective, no one in Congress is going to refute the environmental and economic benefits of using public transportation or carpooling. In 2009, congestion cost Americans about 3.9 billion gallons of fuel, 4.8 billion hours stuck in traffic, and $115 billion in lost income, according to “Commuter Benefits Work For Us,” a white paper published by the coalition.

Employers benefit from the transit tax break because they don't pay payroll taxes on pre-tax deductions made by employees. “Beyond the personal savings realized with transit benefits, the accounts saved employers more than $300 million in payroll taxes in 2010,” wrote WageWorks CEO Joe Jackson in a late 2011 blog for The Hill.

When offered commuter benefits, according to commuterbenefitsworkforus.com, nearly one in five people shift from single occupancy vehicles to public transportation.

Unlike other job-related expenses, workers are unable to claim transit costs to and from work on their own tax return, Corbett says. “The IRS likes to have a third party involved, because someone else is verifying  that an expense actually occurred.”

Corbett, who is a former staff member for the United States Senate Committee on Environment and Public Works, hopes that if the provision isn’t included in the payroll tax package, a highway trust fund bill will be the next big opportunity.

“Nothing is easy right now. We’re trying to get more co-sponsors to [the commuter benefits bill], and we’re trying to get people to send more letters to Congress to tell them that they’re frustrated that this has happened. The middle-class tax increase that people were so determined to avoid has already happened to transit riders.”  

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