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January 04, 2013

Back on the Rails: Transit Benefits and the Fiscal Cliff

TransitThis week Congress went to the brink of the fiscal cliff before producing a last minute legislative deal, brokered by Vice President Joe Biden and Senate Minority Leader Mitch McConnell (R-KY).  While the centerpiece of the bill included extending tax breaks for most Americans and delaying broad spending cuts, there were many other tax provisions included in the final package. On the night of the vote, Sierra Club applauded the extension of two tax credits that will spur growth in wind energy.

Unknown to many, the bill also included an extension of a transit tax benefit that will level the playing field for commuters that take transit to work and those that drive. Through 2013, employers will be able to offer their employees pretax deductions of up to $240 per month for riding transit.

For years commuters have received bigger tax breaks for driving to work instead of taking public transit. In 2012, drivers could deduct up to $240 a month before taxes for parking expenses, while transit commuters could only deduct $125. The difference is substantial.

According to Forbes, a commuter that deducts the full $240 per month will save more than $550 over the course of a year, compared to a commuter that deducts $125 per month. Nationwide, more than 2.7 million Americans use the transit benefit, and, thanks to the extension, transit commuters could save $190 million in 2013, according to the congressional Joint Committee on Taxation.

As we try to reduce our dependence on oil, relieve congestion, and improve our air quality, it is absolutely critical that commuters have convenient and affordable access to public transit. Today, passenger cars and trucks account for nearly half of our oil consumption and are leading sources of smog-forming pollution, which threatens public health. Increased transit ridership can relieve congestion and reduce toxic pollution by taking cars off the road. By leveling the playing field between driving and transit tax benefits, more commuters may choose to take transit when they have the option.

Although Congress may have been going off the rails as time expired, the final deal will put more commuters back on the rails throughout 2013. Now it is incumbent upon the new Congress to ensure that transit commuter benefits don't lapse again at the end of this year.

-- Jesse Prentice-Dunn, Sierra Club Green Transportation Campaign

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