Even our daily sojourns to the office are affected by the twists and turns in the U.S. tax code. If you drive to work, your employer can cover up to $230 per month in parking costs tax-free. And in recent years, if you take mass transit, your employer has also been able to reimburse you, tax-free, for up to $230. This latter program was part of the 2009 stimulus bill, and one Businessweek survey found that, when companies do offer it, many workers really do shift to public transportation.
It’s clear why the parking subsidy is popular — transportation is already the second-largest household expense and the vast majority of American workers drive alone to work. But, as UCLA’s Donald Shoup has detailed at great length , there are real costs to offering “free” parking. It’s a market distortion that leads to more driving than would otherwise be the case. Until recently, workers who drove got a bigger benefit than those who rode the bus. People who bike to work get an even smaller subsidy.
An alternative approach, introduced as a bill earlier this year by Rep. Earl Blumenauer (D-Ore.), would try to smooth out some of these distortions. His bill would cap the benefit for parking and transit at $200 per month. It would increase the benefit for biking (to $40 per month) and “van-pooling.” But here’s the big innovation: Blumenauer’s bill would require any employer that offers the parking benefit to allow workers to take cash instead.
This is an idea long touted by Shoup, who has argued that it doesn’t make much sense for non-drivers to subsidize drivers. Don’t want the parking benefit? Fine, you can just take cash instead. States like California have tried this, and, as it turns out, the program really does lead to fewer people driving work. As Shoup discovered, a “parking cash out” program motivates more workers to carpool, take public transit, bike, or walk. Ultimately, that means less oil use and less pollution. And it does this without penalizing workers who really do need to drive:
Blumenauer’s bill might prove too big an overhaul to get done this year. (Plus, many Republicans seem to have an aversion to anything that would promote walking or biking — witness the uproar over a small pot of pedestrian funding in the transportation bill.) Practically speaking, the real debate will likely be about whether Schumer’s tax benefit gets renewed. Still, there’s no reason Congress can’t think bigger.