Home

From the department of stupid subsidies

December 10, 2011

Once upon a time, employers could pay for employee parking without it being treated as taxable income — no limit. Someone noticed that it was unfair not to also subsidize mass transit use in a similar way, and for a while both could be subsidized, with a limit this year of $230/month. The article below notes the equal subsidies could expire at the end of 2011, with 2012 limits of $240/month for parking and $125/month for mass transit.

http://www.nytimes.com/2011/12/10/your-money/why-drivers-get-more-commuter-tax-benefits-than-bus-riders.html

Of course, the bicycle subsidy is all of $20/month, only eligible if the bike is used for a “substantial portion” (majority?) of your commute, and cannot be combined with any other commuting subsidy.

$230/month is $2760 per year. At a 25% marginal tax rate, that’s $690 a year in federal subsidy (taxes not levied) on driving. For comparison, per-mile, for the average US driver (13476 miles per year), that is over a $.05 / mile federal tax subsidy (it’s not entirely fair to call this a per-mile subsidy, since it is for parking, not travel, but it gives a sense of the magnitude — working only from direct costs, some people like to claim that the government subsidy for “driving”, meaning roads, is only about a penny per mile.)

At this point, I think I’d be happiest if all these subsidies were just dialed down to zero. If parking’s expensive, let it be expensive. If people don’t like that, there are other choices. Why not let the invisible hand do its work?

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: