Greater Greater Washington

Bicycling


New commuter benefits could help bicyclists

Mayor Gray has proposed requiring large businesses to provide their employees with a commuter benefit and that benefit could include the cost of bicycling to work. While it's a good move, it doesn't cover bikesharing, and DC has yet to extend this benefit to its own employees.


Photo by James Schwartz on Flickr.

At the beginning of this month, Mayor Gray submitted a package of 11 bills as part of the Sustainable DC Act of 2013. Included in this is the Transit Benefit Establishment Act of 2013, which would require that employers with 50 or more workers provide their minimum wage-eligible staff with some form of transit benefit.

Employers will have three choices. They can give their employees pre-tax benefits, to be used however they like, that are at least as high as the maximum amount that can be deducted from the employee's gross income. They can also supply each employee a transit pass or reimburse them for vanpool cost. Finally, the employer can provide vanpool or bus transportation to work at no cost to employees.

The first option could include the bicycle commuter benefit, if the employer chooses to offer it, because the Internal Revenue Service considers it a qualified mode of transportation. The second option does not include bikesharing as a public transit system that employees can choose, but it should. And employers would likely support that, since it is surely much cheaper than any of the other options. And the third option does not relate to cyclists.

This is a good bill that could be made a little bit better if it included bikesharing as transit. (The federal government could decide to call bikesharing transit if it passed the Commuter Parity Act of 2013, but why wait?)

In addition, DC does not currently offer its employees the option to choose the bicycle commuter benefit in place of a transit benefit. Gray claims that this bill will move the District "even further along on the path to becoming an international destination for people and investment, and a model of innovative policies and practices that improve the quality of life and economic opportunity for all District residents."

Expanding the commuter benefits of DC employees to include the bicycle commuter benefit would help with that too, and at almost no cost to the District.

Crossposted from theWashCycle.

David Cranor is an operations engineer. A former Peace Corps Volunteer and former Texan (where he wrote for the Daily Texan), he's lived in the DC area since 1997. David is a cycling advocate who serves on the Bicycle Advisory Committee for DC.  

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Commuter benefits encourage sprawl because the farther away you live from the core, the greater your benefit. Absent from the discussion of transit/parking benefits are benefits for people who walk to work. By subsidizing other modes but excluding pedestrians, you discourage walking and encourage living farther than walking distance from work.

The best policy would be no parking/transit benefits for anyone and reinvesting that money to improve pedestrian infrastructure. Infrastructure improvements are particularly needed EOTR.

by Falls Church on Oct 23, 2013 2:28 pm • linkreport

An annual CABI subscription would be a great alternative to present along with any of those options but it shouldn't be the only one offered.

I'm not sure how you would subsidize a private bike only commute, perhaps they should seperately mandate bike parking in all new commercial facilities and in the long term it would be great if there was some provision for showers/lockerrooms.

by BTA on Oct 23, 2013 2:34 pm • linkreport

@Falls Church:
The best policy would be no parking/transit benefits for anyone and reinvesting that money to improve pedestrian infrastructure. Infrastructure improvements are particularly needed EOTR.
Yeah, and EOTR residents don't need transit improvements, right?

One thing that seems obscured here is that providing preferential tax treatment for certain income in this way is not costless to DC. Encouraging employers to provide pre-tax transit benefits definitely decreases income tax revenue for DC.

An alternative would be to start by ensuring that employers treat free/reduced-cost parking as a benefit at market rates. Then employees could either take that benefit or put the money toward transit/bikesharing. Or alternatively, they might take away that "free" benefit and give many employees an effective pay cut...

by Gray on Oct 23, 2013 2:36 pm • linkreport

Alternatively maybe CABI should be set up to let people pay with SmarTrip at least in terms of subscription membership if not daily/weekly rates?

by BTA on Oct 23, 2013 2:38 pm • linkreport

My work does not offer pre-tax commuter benefits to cyclists because its provider of servicers isn't set up to handle them. This law would force change if any of our staff are "mimimum wage eligible", whatever that means. So I would get a benefit by virtue of forcing our provider to set up to handle cyclist commuters, though my beenfit would be nowhere near the totally indefensible subsidy that drivers get.

by Crickey7 on Oct 23, 2013 2:41 pm • linkreport

Why not let employers give employees more money, instead of requiring the employers to give them a specific type of benefit?

That way, if the employees want to use that money and NOT commute -- for instance, by living close enough to walk, or by telecommuting -- they can! Presto, happier workers and less traffic.

by Tom Veil on Oct 23, 2013 2:53 pm • linkreport

@Gray: Yeah, and EOTR residents don't need transit improvements, right?

EOTR residents also need improved schools but the proposed policy as nothing to do with improving transit infrastructure or schools.

OTOH, following my idea of re-allocating the savings from an elimination of parking/transit subsidies, you could use some of the savings to improve both ped and transit infrastructure.

by Falls Church on Oct 23, 2013 2:59 pm • linkreport

@Tom Veil

You said it better than me.

by Falls Church on Oct 23, 2013 3:01 pm • linkreport

An additional problem with encouraging commuting cost subsidies in this way is that pre-tax benefits are far more valuable to those with higher income. Getting to take the last thousand dollars of your income pre-tax is worth a lot less to you if you make $25K than if you make $250K.

For the sake of argument, I put this into an income tax calculator. An individual with no dependents making $25K most likely faces a federal marginal tax rate of 15% and a DC marginal tax rate of 6%, for a total of 21%. So that person effectively gets $210 from the government to subsidize $1,000 in commuting costs.

An individual with no dependents making $250K, on the other hand, faces marginal rates of 33% and 8.5%. Total: 41.5%, so this person gets $415 from the government by paying that $1,000 pre-tax.

Add in that the richer person is probably spending more on eligible commuting costs in the first place, and you see that richer individuals are getting a lot more free money from the government than poor people as a result of this policy.

This is probably not the sort of differential impact that Mayor Gray wishes to have with this policy, but this is an issue with trying to obtain policy goals with tax credits.

by Gray on Oct 23, 2013 3:05 pm • linkreport

If people live close enough to walk to work, neither their place of work or home are probably unduly limited by financial considerations. The point of this endeavor is to incentivize people who are driving to take transit or ideally also be able to bike.

by BTA on Oct 23, 2013 3:05 pm • linkreport

"The best policy would be no parking/transit benefits for anyone "

that would require a change in federal tax policy, to require employers to estimate the value of free parking, and include that in taxable income.

I would not hold my breath for that to happen (maybe as part of some grand bargain tax reform)

by AWalkerInTheCity on Oct 23, 2013 3:13 pm • linkreport

and, BTW, how would you audit that? There are many places in the USA (even in major metros) were the market value of parking is negligibly different from zero. Some employer says his free parking is worth zero. Or five bucks a month, say. Does the IRS send out agents to estimate the real market value of parking in the locality? In our discussions of RPPs we have found that estimating that value is not always simple.

Sounds like a huge headache for the IRS. Not exactly "tax simplification" eh?

Providing a pre tax transit benefit and bike benefit is probably the best (though "second best") approach. Does it encourage people to take long transit rides instead of living walking distance? sure. But that social cost (and note well, some people think encouraging more TOD away from the core is a benefit of the height limit) is probably small compared to the admin cost of taxing free parking as income. Even if the latter were politically feasible. which i think its not.

by AWalkerInTheCity on Oct 23, 2013 3:19 pm • linkreport

This is aimed at minimum wage workers, right? Not your standard issue DC office wonk.

It sounds like a make-nice effort to offset the living wage disaster.

I'd rather see the minimum wage rise for all workers.

by kob on Oct 23, 2013 3:20 pm • linkreport

Is there any chance that Cabi will someday allow metro cards to be used?

by Osp on Oct 23, 2013 3:24 pm • linkreport

A mandatory parking cash out (http://www.arb.ca.gov/planning/tsaq/cashout/cashout.htm) would be better than the current transit/bike benefit coupled with tax-free parking system. I agree. But this bill is still an improvement over the status quo.

I'm not sure how you would subsidize a private bike only commute

I pay $20 pre-tax for a $20 check that I can then use at any DC bike shop that accepts them (almost all do).

perhaps they should seperately mandate bike parking in all new commercial facilities and in the long term it would be great if there was some provision for showers/lockerrooms.

That's in the proposed zoning update. Sign up to testify!

Encouraging employers to provide pre-tax transit benefits definitely decreases income tax revenue for DC.

And federal tax revenue. Which puts money in the hands of DC residents that can be captured with sales tax, etc... It might even be a wash.

So I would get a benefit by virtue of forcing our provider to set up to handle cyclist commuters

I don't think this law would force them to offer the bike commuter benefit. If they offer just the transit benefit, they're probably in compliance. But it makes it more likely.

by David C on Oct 23, 2013 3:28 pm • linkreport

kob--see my comment.

Lots of companies COULD offer this but don't, becuase some of the big vendors of this service (we use WageWorks) aren't set up for it. But if they have to do it for some, they would do it for all.

by Crickey7 on Oct 23, 2013 3:29 pm • linkreport

Should have included a link to the bill itself:

http://dcclims1.dccouncil.us/images/00001/20131007141742.pdf

This law is not for employees who get a minimum wage, it is for employees who are eligible for at least a minimum wage - which is most employees. But not babysitters, for example.

by David C on Oct 23, 2013 3:32 pm • linkreport

@ BTA:Alternatively maybe CABI should be set up to let people pay with SmarTrip at least in terms of subscription membership if not daily/weekly rates?

+1 It should not be so hard to couple CaBi to Smartrip.

by Jasper on Oct 23, 2013 3:38 pm • linkreport

How does that help? You still couldn't use pretax funds on the smartrip card without a change in the tax law.

by Jim Titus on Oct 23, 2013 8:47 pm • linkreport

@Falls Church said "Commuter benefits encourage sprawl, because the further away you live from the core, the greater the benefit."

But unless it has changed since I retired, the transit benefit for Federal employees is capped at a certain level. Federal commuters riding long-distance transit such as VRE/ MARC/ MD-DOT/ Loudoun, etc. from say, 40- 50 miles away get reimbursed only as if they lived, say, 20 miles out.

by slowlane on Oct 24, 2013 11:03 am • linkreport

The current system encourages waste. I rode the bus with a guy who bikes part way and rides the metro bus part way. He qualifies for the transit pass but can't use it all. The current balance on his pass was over $500.

by Crickey7 on Oct 24, 2013 11:15 am • linkreport

I guess we need to differentiate the benefit of using pre-tax dollars, from the transit subsidy. The transit subsidy tends to be capped, and most agencies provide $125 though they can raise it if they have the money. Hardly an inducement to move farther away, but it does shield one a bit from the market signal to move closer to work while also encouraging uburbanites to move closer to the suburban
transit station--and it certainly is a strong inducement to not drive into town.

The pre-tax benefit could be viewed as a modest inducement to live farther away, or as simply a reflection of reality. Transportation to work is a cost of being employed, so making it an above-the-line deduction simply means that one is taxed for actual income. And the home mortgage deduction provides a substantial incentive to buy a more expensive home close to town, so maybe the pre-tax transportation benfit simply offsets that a bit.

by JimT on Oct 24, 2013 11:22 am • linkreport

"Commuter benefits encourage sprawl, because the further away you live from the core, the greater the benefit."

I think this is an incredibly dubious claim. Is there any data to back it up?

by David C on Oct 24, 2013 11:25 am • linkreport

Considering the price of housing, an extra $100 dollars a month saved in taxes (which would be itself somewhat rare scenario) is unlikely to drastically change peoples choices regarding where they locate. It may encourage people to take advantage of transit at least part of the time such going to park and ride stations nearby or take the bus some days etc. The point isnt that no one should drive to work, it's incentivizing the marginal riders to switch over some of the time at least.

by BTA on Oct 24, 2013 11:34 am • linkreport

Seems like installing a TransitScreen in office lobbies would be a good employee benefit for everyone. The DC-based startup is a live, real-time dashboard of all transportation options at a specific location (including subway, bus, train, bikeshare, rideshare and carshare).

by TransitScreen? on Oct 24, 2013 11:58 am • linkreport

Good point, Tom Veil.

Just when Mayor Gray does the right thing by quashing the living wage bill, he goes and proposes this business-killing commuter benefits requirement.

And they wonder why DC can't compete with its suburbs...

by Burd on Oct 25, 2013 11:01 am • linkreport

Just when Mayor Gray does the right thing by quashing the living wage bill, he goes and proposes this business-killing commuter benefits requirement.

Actually, this bill is good for business. If businesses choose to allow their employees to pay for transit with pre-tax dollars the only expense to them is what they have to pay a benefits provider to run the program. But that will be offset by a reduction in payroll taxes that the business has to pay. It could amount to a net financial gain, while giving it's employees a benefit that makes the job more appealing.

In addition, it will transfer some money from the federal government into the hands of local taxpayers - which will put more money into the local economy (also good for business).

Finally, it should help reduce traffic congestion by moving people onto transit and bikes. And I don't think traffic congestion is good for business.

So, I can't imagine what business this will kill.

by David C on Oct 25, 2013 11:38 am • linkreport

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