A proposal involving federal tax write-offs for public transportation commuters would benefit employers, employees and the city
Earlier this month, I took part in the Columbus Transportation Innovation Challenge, a weekend-long “hackathon” focused on tomorrow's transportation hurdles in Central Ohio.
The challenge unearthed an exciting new proposal. The weekend's winning team proposed that Columbus replicate Seattle's Commuter Benefits Ordinance, set to take effect January 2020.
Seattle's ordinance requires employers to allow their employees to write off the taxes for all qualified transportation expenses besides parking. The goal of Seattle's ordinance is to provide a benefit for lower-income workers and to encourage the use of public transportation.
According to Seattle's ordinance, a middle-income worker using public transportation would save over $350 a year in federal taxes due to the benefit. A minimum wage earner would save over $230. This alleviates financial strain for lower- and middle-class workers using alternative transportation, but it also gets more cars off the streets, alleviating congestion and reducing commute times for those who do drive.
I'll admit: I was skeptical at first. Our country's experience with employer-provided health care makes me wary of trying to solve problems of equity through the medium of the corporation. That being said, commuter benefits work a bit differently than health care.
Commuter benefits allow employees to elect to use pre-tax income to pay for alternative commuting expenses. This is actually enabled by federal tax code, which allows employers to provide these benefits to their employees.
Because commuter benefits are a federal tax expenditure, the cost of the benefit is directly borne by the federal government, not by local government or the businesses themselves. Because of this, business groups have actually supported these requirements in other cities, with the Berkeley, California, Chamber of Commerce calling its local ordinance “a rare opportunity to reduce taxes for both businesses and employees.”
In this way, a commuter benefits ordinance is an economic development tool for the city, lowering the cost of commuting and reducing frictions within the local labor market that keep employees from getting to places of employment. In a tight labor market, employers should be excited about this opportunity.
So if commuter benefits are so great for employers, the natural question is this: Why do we need to compel businesses to provide them in the first place?
In Seattle, a 2016 survey of businesses found that the major barrier to providing the benefit was an administrative burden. While that burden should not be written off right away, the additional income generated by the tax write-off should make up for the burden if there is a minimum utilization of the benefit.
Seattle also included $200,000 in its 2018 budget for education and outreach to businesses around commuter benefits and exempted very small businesses from the mandate.
Mandated commuter benefits are one tool the city has to reduce inequality, grow the economy and build a more sustainable local transportation system. While there will be some kinks to work out, the city should certainly take this proposal seriously.