Bike Commuter Subsidy

[dbb]

Last week I spoke with Representative Moran’s staff about some changes that I feel are necessary with the bicycle commuter subsidy.

At the core, we need to do more to encourage all cycle commuting, full time and part time.

As you know, employers are authorized (but not required) to provide a tax-free commuter subsidy to cyclists. At present, the subsidy is capped at $20 per month and recipients are prohibited from receiving both the traditional transit subsidy and the bike commuter benefit.

Representative Mike Grimm (from New York) has introduced HR 2288, the Commuter Parity Act of 2013 that sets the maximum parking and transit subsidies at the same level. The act also raises the bicycle commuter subsidy to $35/month. Unfortunately, the act still leaves the language in the IRS code that keeps the either/or nature of the benefits.

This bill has been cosponsored by 40 members of Congress including:

Rep Connolly, Gerald E. [VA-11] – 6/11/2013
Rep Moran, James P. [VA-8] – 6/14/2013
Rep Wittman, Robert J. [VA-1] – 7/31/2013

Rep Norton, Eleanor Holmes [DC] – 6/14/2013

Here is my ask.

With a minor change to the bill, we can change the authorization to allow bike commuters to be eligible for both the transit and bicycle subsidy, an approach that would encourage part time bike commuting and multi-modal commuting. I propose to change the (A) and ( in para (f)(2)(A) below (deleting the text in red and adding the underlined text).

Please write your representative and ask them support the bill and offer the change as a friendly amendment. Note that I couldn’t find anybody from Maryland that is cosponsoring the bill.

The link to the bill in Thomas is: http://thomas.loc.gov/cgi-bin/bdquery/D?d113:1:./temp/~bdeRZC:/home/LegislativeData.php|

Please not that I am sharing what I sent my elected rep for your information and that I am doing this as a private citizen. I ain’t lobbying.

Bicycle Commuter Subsidies

The current authorization for a Bicycle Commuter Subsidy requires an either/or decision by the commuter. Either they take the bicycle commuter benefit or the mass transit subsidy. For all but a few, selecting a single commuting mode is simply not an option, particularly bicycle commuters.

House Resolution 2288, the Commuter Parity Act of 2013 that makes changes to the Bicycle Commuter Subsidy. Because of the wording of the bill, it continues the limits on the promotion of multimodal commuting as is the case for so many bicycle commuters. H.R 2288 does not specifically establish the simultaneous eligibility for both the mass transit subsidy and bicycle commuting reimbursement. Eligibility for multiple forms of transit subsidies (with a common cap on the aggregate benefit) would encourage greater use of non-automobile forms of commuting.

The currently authorized Bicycle Commuter Subsidy is capped at $20 per month but it denies eligibility for other commuter mass transit benefits during that month. In the Washington, DC area, a typical commuter eligible for $150 transit benefit for the metro would be denied any of that in exchange for the current $20 bicycle benefit. Allowing eligibility for both forms of subsidies (subject to individual and aggregate limits) would encourage commuters to become bicycle commuters.

Because the Bicycle Commuter Subsidy would come out of the total eligibility for the transit subsidy, this change would be cost neutral for the employer. Because federal agencies typically take unused transit subsidies back at the end of each month, regular bicycle commuting would actually reduce an agency’s costs because the subsidy is much lower.

Changes to H.R 2288 are modest, and are shown below

SEC. 2. QUALIFIED TRANSPORTATION FRINGE.
(a) In General- Subsection (f) of section 132 of the Internal Revenue Code of 1986 is amended to read as follows:
`(f) Qualified Transportation Fringe-
`(1) IN GENERAL- For purposes of this section, the term `qualified transportation fringe’ means any of the following provided by an employer to an employee:
`(A) Transportation in a commuter highway vehicle if such transportation is in connection with travel between the employee’s residence and place of employment.
`( Any transit pass.
`(C) Qualified parking.
`(D) Any qualified bicycle commuting reimbursement.
`(2) LIMITATION ON EXCLUSION- The amount of the fringe benefits which are provided by an employer to any employee and which may be excluded from gross income under subsection (a)(5) shall not exceed–
`(A) $220 per month in the case of the aggregate of the benefits described in subparagraphs (A) and ( (A), ( and (D) of paragraph (1),
`( $220 per month in the case of qualified parking, and
`(C) $35 per month for qualified bicycle commuting reimbursement.
`(3) NO CONSTRUCTIVE RECEIPT- No amount shall be included in the gross income of an employee solely because the employee may choose between any qualified transportation fringe and compensation which would otherwise be includible in gross income of such employee.
`(4) DEFINITIONS- For purposes of this subsection—

…

`(F) QUALIFIED BICYCLE COMMUTING REIMBURSEMENT- For the purposes of this subsection, the term `qualified bicycle commuting reimbursement’ means any employer reimbursement for reasonable expenses incurred by the employee for the purchase of a bicycle and bicycle improvements, repair, and storage, or bikesharing program, if such bicycle is regularly used for travel between the employee’s residence and place of employment.

Topic

[dasgeh]

@mstone 65763 wrote:

And if you drove, you’d buy a monthly parking pass and the subsidy would cover it outright (which is the most common option, and the reason this is basically a giveaway with overhead). Adding transit and cycling is a fig leaf to cover the fact that they’re giving away free money to SOVs. Since employers decide what to implement, it’s relatively common to find them only providing parking benefits and not transit or cycling. (I’ve never worked anywhere that didn’t provide some sort of parking subsidy, or that did provide transit & biking subsidies. Part of the reason for this is exactly because of the overhead of managing such programs.) So you can tinker with the margins, and it’s certainly better to screw cyclists less in this deal, but it’s fundamentally bad policy.

I agree with you on the substance, but I don’t want the perfect to be the enemy of the good. Some Members of Congress are willing to do X. It would be better if they did X’ and best if they did Y. They’re not willing to do Y. They might consider X’. Why not ask them to do X’? If you want, you can make your argument about Y in the letter advocating for X’. But note we may end up with just X, or worse yet, status quo.

[lordofthemark]

@mstone 65760 wrote:

You misunderstand, this isn’t about non-car commuters: the same subsidy applies to parking. That’s why I suggested simply raising the standard deduction–the only people who can’t claim anything are those who don’t work or who walk to work. It’s just a giveaway, not a way to incentivize certain behavior (except that cycling or walking, and especially telework, are disincentivized). So, make it a general “getting to work” subsidy (which will still disproportionately benefit SOVs,) or give everybody free money without making them find some way to justify it as related to getting to work, or just scrap the idea because it’s just a stupid regressive giveaway with a lot of overhead (a tax benefit is most useful to those in the upper income brackets).

In addition to teleworkers and walkers there is another effectively unsubsidized group – those who drive to work in places where the market clearing price for a spot is zero, or trivially different from zero. The complete exclusion of free parking from taxable benefits is a way to avoid placing the burden on individuals, firms, and/or the IRS of evaluating the actual value the free parking spot. It also makes it easier for firms in places where charging for a garage spot would add administrative costs out of proportion to the value of the spot. But that ended up being effectively a subsidy to driving/parking in those locations where the value of the parking spot is particularly high. The transit subsidy was added, IIUC, to balance that. And yes, the bike subsidy goes further for balance.

Eliminating the exclusion of the parking benefit (and transit benefits) from taxable income, while increasing the standard deduction by roughly the same amount as the value of parking in places like downtown DC or Chicago (please lets not even think about Manhattan) would be a net loss of tax revenue to the govt, and a windfall to the folks who drive to work in places from small towns in North Dakota, to exurbs of major metros. The advantage of that would be that it would simplify some things (though it would mean folks who drive and park for free in places where parking has value would now have to estimate that value, or their employers would have to, and IRS would need some way to verify/audit that) but the revenue would have to be made up. If you set the increase in the std deduction at something lower than the price of parking in downtown DC – say at the price of parking in downtown Omaha, or in Tysons Corner – you would lose less revenue, but you’d also piss off the folks who do park for free in places like downtown DC, because they would be net losers.

In short, MStone’s analysis is well reasoned, insightful, and completely correct – EXCEPT that it implicitly assumes the value of a parking space is the same in all locations. When you relax that assumption, things get rather more complicated.

[Mikey]

I like the idea, and have to admit I shifted to my current multi-modal commute becuase it allowed me to cover nearly all of my upfront commuting costs with the transportation subsidy. I would applaud using my benefit for bike-commuting related purchases as well, if only my LBS took SMARTRIP benfits as a form of currency.

[mstone]

@lordofthemark 65776 wrote:

In short, MStone’s analysis is well reasoned, insightful, and completely correct – EXCEPT that it implicitly assumes the value of a parking space is the same in all locations. When you relax that assumption, things get rather more complicated.

Don’t get me wrong: I think the idea of a standard deduction is just as stupid as the current system, it just has the benefit of requiring people to jump through fewer hoops, and spreads the free money around to more people and is more honest about what’s going on (vote buying). I’d much rather see no direct subsidies at all. If we like transit & biking, the government should just pay directly for some infrastructure rather than all this farce for (as much as!) [tax rate]*$30/month for bicycling and a much more significant tax break for upper income folks who drive.

[DismalScientist]

You are always going to have these issues when you tax income. If income is taxed and benefits are not, there will always be the incentive to have employers pay benefits in lieu of cash income. Because of this, the government will need to regulate what are legitimate employer provided benefits. Is free parking too much? How about a large office? An attractive assistant? Why should the employer pay for heat in the office? All this leads to government micromanagement of employment relations.

Non-taxable health care benefits and the government regulation thereof is the principle source of the distortions we see in the health care industry. Is it any wonder that it can screw up other sectors of the economy?

[Author]

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