U.S. Senator Charles E. Schumer announced today that he was able to include a retroactive extension of the mass transit commuter tax benefit in the Finance Committee's mark-up of the Highway Investment, Job Creation, and Economic Growth Act of 2012, that will allow riders of mass transit to use up to $240 a month, tax free, to pay for their commutes. The benefit, which expired at the end of 2011, brings to parity the commuter benefit currently in place for those who drive their cars to work.
"We plan to use every tool available to us to see this benefit reinstated and made retroactive back to January," said Schumer. "It makes absolutely no sense to incentivize driving to work and not incentivize the use of mass transit."
Last year, employees whose monthly mass transit fees were less than $230 were able to deduct the full amount of their commuting costs from their paychecks, tax free, through an employer benefit program. The cost is pegged to the IRS tax benefit that covers parking for drivers and would be increased to $240 with the extension offered by Schumer. Until 2009, commuters who drove to work received a greater tax break than those who took mass transit. In 2009 the mass transit benefit was almost doubled from $120 per month to $230 per month, creating a savings of over $1,000 per year for commuters. Currently, 500,000 commuters in the Greater New York Metropolitan Area, and 2.7 million commuters nationwide take advantage of the benefit. Schumer was able to have the benefit extended in 2011, but in year-end negotiations, Congressional Republicans failed to include tax extenders in a year-end payroll tax cut deal.
Schumer also noted that he intends to offer the extension as part of any final deal for a year-long extension of the payroll tax cut in order to ensure the benefit is attached to as many legislative vehicles as possible.
Schumer authored the original legislation that passed as part of the economic stimulus package in 2009, that allowed employers to offer their employees up to $230 per month in transit benefits tax free, equal to what they were offering tax-free for parking costs. The transit benefit reduces a commuter's transportation costs by a third or more. With the benefits expiration there is now a greater incentive for people to drive to work rather than take mass transit. If renewed, a $240 per month mass transit benefit will fully cover the monthly cost of riding all major mass transit systems in New York City, including subway, bus, and express bus, and will cover most of Metro North and Long Island Railroad commuting costs.
According to TransitCenter, in the New York metro area, commuters saved over $200 million in 2010 because of the transit benefit and employers have saved over $45 million since the benefit went into effect in the New York area. Approximately 15,000 companies in New York offer the transit benefit covering more than a half a million employees. And in 2010, employers nationwide saved about $300 million in payroll taxes, money that can be reinvested to create jobs.