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National Journal Blog – Commuter Benefits: A Payroll Tax Cut Congress Can Agree On

By Admin

[As posted by Ed Wytkind on National Journal’s Transportation Experts Blog]

While Congressional Democrats and Republicans squabble over whether, and how, to cut payroll taxes for employers, they’re ironically set to cut from one popular program that’s already allowed employers to save hundreds of millions of dollars in payroll taxes while offering vital commuter benefits.

As part of the 2009 Recovery Act this benefit was expanded, permitting employers to offer their employees a $230 monthly pre-tax benefit for transit expenses. It’s win-win for employers and workers: Employees are able to save hundreds of dollars annually on transit expenses, and employers, who don’t pay payroll taxes on these pre-tax deductions, can offer a widely-used and well-liked benefit to their workers while freeing up resources for other investments.

The program is so popular that transit ridership has increased by up to 40 percent in offices that offer the benefit – providing a positive impact on road congestion and pollution, as substantial numbers of people shift to using public transit. Millions of Americans have now taken part in the program and its popularity is indisputable.

More money in everyone’s pockets, more job creation, and reduced gridlock on our highways – who could oppose a program like that? Virtually no one, as it turns out. But if Congress doesn’t act before the end of the year, the transit tax benefit will be drastically reduced, to just $125 per month – nearly a 50 percent cut that will hit the middle class directly in their wallets.

And it’s certainly the middle class who will feel the cut. The American Public Transportation Association estimates that the vast majority of people who rely on public transit make between $15,000 and $100,000 annually – pretty much the definition of middle class. For those who pinch pennies in a tight economy (let’s face it, that’s most of us), an extra $100 isn’t pocket change; it’s a vital part of the monthly budget. And for employers who use the program, reducing the monthly cap will have the same effect as an increase in payroll taxes – something Members of Congress on both sides of the aisle say they’re against.

Democrats and a few Republicans have pushed to resolve the issue before Congress leaves, to ensure that public transportation riders get the same benefits as those who get reimbursed for parking. But if this issue gets lost in the flurry of end-of-session partisan gridlock, far too many Americans will be ringing in the New Year with a drastically more expensive commute. Cash-strapped commuters – already weary from an ailing economy – shouldn’t be the latest victims of Washington gridlock.