Tax break sends mixed message to motorists

It’s around 6 a.m. on the East Coast. That means some folks are topping off their travel coffee mugs in preparation for their early-morning commute to the office. Later today, they’ll close down their cubicles and head out on the return trip home.

And around 400,000 of those employees, most of whom work in cities, get a tax break to help cover commuting costs, while at the same time, the federal government is handing out millions of dollars to help discourage urban driving.

A story in today’s New York Times examines the federal schizophrenia when it comes to commuting. According to the article, drivers in the Big Apple and its immediate environs account for about 200,000 of the country’s commuters who take advantage of a federal tax break that gives them up to $215 a month in pre-tax wages to pay for their parking at work.

No wonder most of the city’s drivers aren’t too keen on Mayor Bloomberg’s effort to charge congestion zone fees on Manhattan motorists. That program didn’t make it through the state legislature a couple of weeks ago, but it’s not yet dead. The Times reports that the Federal Transportation Department has pledged $354 million, primarily to expand bus and ferry service in support of the congestion pricing plan.

Parking perk more profitable: While some drivers use the employer-offered tax benefit to pay for parking at commuter rail stations or bus
stops, most apply it to garage or lot charges near their city offices.

One thing Americans don’t need is a tax incentive to drive. I used to be one of those folks who paid for parking when I drove from the Maryland suburbs to work in downtown D.C. Or rather, my employer paid for the monthly parking permit at the garage across the street.

But even if I had to pay for the parking myself, I probably would still have driven to work. Back then, the Metro train didn’t make it out to our suburb and the bus routes out our way were few and required a longer time commitment than driving. So convenience — and extra sleep time — won out.

The feds also offer a tax break to employees who buy commuter rail passes. That benefit, reports the Times, is used by more than two million people nationally. But its tax-preferenced amount is capped at $110 a month, meaning patrons of public transit get less tax savings.

Despite the disparity in the benefit programs and the contradictions when it comes to other federal transportation initiatives, experts say don’t expect Congress to end the parking benefit, which has been around in some form for more than 20 years.

It’s a miracle that Uncle Sam hasn’t seriously injured himself from
trying to go opposite directions simultaneously. Well, now that I think
about it, maybe he has, at least fiscally.

Rough legal road for Virginia traffic taxes: Meanwhile, about 200 miles down I-95 in Virginia, motorists are finding some courtroom success in their battles against that state’s costly
new traffic violation surcharges, blogged about here and here.

Joseph Henchman at the Tax Foundation’s Tax Policy Blog reports that two state trial judges have held the new charges unconstitutional for violating the federal and state Equal Protection
Clauses. The legal inequity? Out-of-state drivers are exempt from the law that took effect on July 1.

The lawsuits aren’t ending there, though.

Now, says Henchman, a pregnant woman going 57 mph in a 35 mph zone en route to the hospital plans to appeal her $100 traffic fine, plus the $1,050 civil assessment fee she received. Since her labor pains were false that day (her baby girl arrived two weeks later), she wasn’t admitted to the hospital. Because of that, a judge left the charges in place, setting the stage for the new mom’s appeal.

And in a Richmond courtroom, lawyers will eventually argue whether
the law appropriately delegated assessment powers to local transportation authorities.