The guzzler gratuity

April 06, 2007

With gasoline prices back near the $3 mark, and the threat of air pollution, including excess carbon dioxide, more dire than ever, one would like to think the federal government would be steering commuters toward public transportation. But there is a long-standing quirk in the federal tax code that does exactly the opposite - that gives preference to people who drive over those who ride energy-efficient, lower-polluting buses or trains.

Here's how it works: Employers can offer parking as a tax-free benefit of up to $215 per month per worker. Even companies that charge their employees can take advantage - parking charges can be deducted on a pre-tax basis. At first glance, that seems reasonable; it's particularly helpful to urban employers and their workers for whom parking may be a significant cost.

Since the mid-1980s, the federal government has also provided a tax credit for transit. If that same employer is willing to buy a transit pass, either the company or, if the cost is passed along as the parking benefit can be, the employee can deduct up to $110 of that expense per month. That, too, seems fair since the average bus or subway monthly pass is in that range.

But both subsidies have their failings. As daily commutes have lengthened in recent years, so has their expense. It's not uncommon for commuter rail passes to cost $200 or more per month. The top fare on Maryland's MARC line is $350. Virginia's top VRE pass is nearly $300.

As a result, federal tax policy gives a greater reward to the SUV driver who slogs it out alone through Interstate 95 traffic from Perryville to Washington each day than it does to the federal employee who travels the same route by MARC train. That's simply idiotic in a world struggling with high energy costs and global warming.

Meanwhile, giving employers a tax credit for parking can lock them into a kind of car-dependency. If, for instance, a business has used the credit to help finance a parking garage, it's now in the perverse position of needing its employees to keep using the garage to balance its books.

Several bills to bring parity to the tax credits have been introduced in Congress, but Washington needs to go a step further. It's time the federal government gave preference to transit over less efficient and more polluting forms of transportation whenever possible. The tax code is simply a good place to start.

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