Saturday, December 10, 2011

Commuter Subsidies and Tax Expenditures

Ron Lieber writes about the commuter tax expenditures in today's NY Times. He calls them benefits and tax breaks, but they are accurately called tax expenditures, or government spending through the tax code. Lieber rightly points out that the current expenditures favor drivers and that the potential transit expenditures are set to get cut by about half starting next year. Here is a previous post of mine about this.
 What I learned from the story is a bit of history of the program.  Senator Daniel Patrick Moyninhan lead the Senate in demanding the high parking tax expenditures:
Daniel Patrick Moynihan, the late New York senator, led the charge on the changes. The senator’s concern, according to Mr. Filler, was that eliminating the parking tax break might cause some workers to find jobs closer to their suburban homes, thus putting city employers in his and his Capitol Hill colleagues’ states or districts at a disadvantage.
Lieber continues:
At an economic moment like the one we’re in today, the idea that people would switch jobs because of the loss of a parking garage tax subsidy seems rather quaint. But whatever the soundness of the logic, rules at the time required legislators and policy makers to pay for all new tax breaks in full. So in an effort to appease subsidy-happy drivers, lawmakers figured out what the average monthly parking rates were and tested the resulting $155 figure. What they found was that capping the monthly benefit at that level would bring in enough new taxes from the formerly untaxed parking subsidy to pay for a $60 public transportation benefit.
I'm not sure what is quaint about the idea that parking affects people's location decisions. These folks could get subsidized to the tune of a couple of hundred dollars a month! That's a lot of wool, as the kids said in the days when Moyninhan was a kid saying colloquial things.

The troubling issue is Moyninhan's fear that people might work closer to home if they didn't get subsidized parking.  Not only have jobs and households continued to suburbanize, having people work near home should be encouraged. These expenditures are also tilted toward the wealthy, so we can't really argue that they are equity enhancing. It does seem that if the government is going to spend so much on transit investment it should at least have consistent complementary policies to encourage transit usage.

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