You may have to dig a little deeper into your wallet for your commute to work.
The commuter tax benefit, the tax break provision in the stimulus bill in 2009 by Senator Chuck Schumer (D-NY), is set to end at the end of this year.
The tax-free benefit is voluntarily offered by companies and was designed to make mass transit more appealing, help reduce congestion and prevent pollution.
The Schumer tax made both the mass transit and auto tax deductions equal. However, if the tax is not extended, those who take mass transit will get less of a deduction because the tax goes back to pre-stimulus levels.
I asked Dan Neuburger, CEO of TransitCenter if this provision was let to expire what kind of ripple effect this would have on families and the economy.
LL: If this benefit is taken away this could create a significant burden on families. What kind of further impact will this have on consumer spending that is already hurt?
DN: With transportation costs being the 2nd largest household expense, many Americans rely on this benefit to reduce their daily travel costs. The reduction of the benefit equates to a tax increase at a time when many can least afford it.
The transit commuter benefit puts hard earned dollars back into the pockets of commuters who use it. Commuting costs are increasing everywhere, from the cost of gas to higher tolls to increased transit fares. And these costs are putting a dent in whatever savings families can hope to achieve in the current economy. The commuter transit benefit can save a family up to $1,150 per year. Any reduction in the benefit amount will mean that many of those working families will have less disposable income to spend on consumer goods, as the cost of their commute will rise.
LL: This benefit is actually two-fold for the employees as well as employers, please explain.
DN: The benefit reduces gross taxable income for employees. The employee saves on the lower amount of taxes they pay on their income and employers save on payroll taxes. Employers saved hundreds of millions of dollars in taxes last year because of the benefit. An extension or an effort to make the $230 transit benefit cap permanent means that these tax savings can be reinvested in the business and create new jobs.
Commuter benefits have joined health, retirement and disability as one of the core four benefits offered by employers. And while many benefit offerings have been cut to reduce budgets, commuter benefits have seen an increase in adoption over the past two years. Employers find it helps to retain employees and attract new talent because it addresses commuting cost issues that force workers to consider jobs closer to home. Few employee benefit programs can accomplish this while saving money for employers and employees alike.
LL: What kind of future impact will this have on the environment?
DN: The impact can be significant. Studies that we have conducted have shown that one in five commuters switched from driving to taking public transit when their companies decide to offer commuter benefits. When the monthly benefit cap increased from $120 to $230 in 2009 as part of the American Recovery Act, more companies began offering the program and more employees switched from driving to taking public transit as a result.
In 2010, transit benefit users helped reduce carbon emissions among commuters by nearly 2 billion tons by choosing mass transit. This is the equivalent to the carbon emissions from the electricity used in over 110,000 homes for one year. Without the benefit, fewer commuters would be making this switch and, in fact, those who did might consider going back to driving.
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A Senior Talent Producer at CNBC, and author of "Thriving in the New Economy:Lessons from Today's Top Business Minds."