While Congressional Democrats and Republicans squabble over whether, and how, to cut payroll taxes for employers, they’re ironically set to cut from one popular program that’s already allowed employers to save hundreds of millions of dollars in payroll taxes while offering vital commuter benefits.

As part of the 2009 Recovery Act this benefit was expanded, permitting employers to offer their employees a $230 monthly pre-tax benefit for transit expenses. It’s win-win for employers and workers: Employees are able to save hundreds of dollars annually on transit expenses, and employers, who don’t pay payroll taxes on these pre-tax deductions, can offer a widely-used and well-liked benefit to their workers while freeing up resources for other investments.

The program is so popular that transit ridership has increased by up to 40 percent in offices that offer the benefit – providing a positive impact on road congestion and pollution, as substantial numbers of people shift to using public transit. Millions of Americans have now taken part in the program and its popularity is indisputable.

More money in everyone’s pockets, more job creation, and reduced gridlock on our highways – who could oppose a program like that? Virtually no one, as it turns out. But if Congress doesn’t act before the end of the year, the transit tax benefit will be drastically reduced, to just $125 per month – nearly a 50 percent cut that will hit the middle class directly in their wallets.

And it’s certainly the middle class who will feel the cut. The American Public Transportation Association estimates that the vast majority of people who rely on public transit make between $15,000 and $100,000 annually – pretty much the definition of middle class. For those who pinch pennies in a tight economy (let’s face it, that’s most of us), an extra $100 isn’t pocket change; it’s a vital part of the monthly budget. And for employers who use the program, reducing the monthly cap will have the same effect as an increase in payroll taxes – something Members of Congress on both sides of the aisle say they’re against.

Democrats and a few Republicans have pushed to resolve the issue before Congress leaves, to ensure that public transportation riders get the same benefits as those who get reimbursed for parking. But if this issue gets lost in the flurry of end-of-session partisan gridlock, far too many Americans will be ringing in the New Year with a drastically more expensive commute. Cash-strapped commuters – already weary from an ailing economy – shouldn’t be the latest victims of Washington gridlock.

Many people look at the latest threat to the mass transit tax benefit as an attack on transit. At the Transportation Equity Network, we look at it as an attack on the poor. Who takes buses, not as a choice, but as their only option? Low income people, people with disabilities, teenagers, students and seniors. It's also an attack on middle class folks who takes transit. As the International President of ATU, Larry Hanley, said in this space "Americans spend more on transportation than health care, education and food. It is the second largest household expense for many families. The transit commuter tax benefit means they have one less expense to worry about, and in today’s economy, every dollar saved counts." When we talk about reducing the transit benefit and not reducing the parking tax benefit - it's a reverse Robin Hood situation. Somehow, the cries of the Occupy movement - we are the 99% - are not reaching politicians' ears - they still want to take from the poor and give to the rich. We hope that President Obama and Congress will wake up soon and start to support and defend programs that benefit the poor. The Low Income Home Energy Assistance (LIHEAP) and the Mass Transit Tax Benefit are both excellent programs that benefit the poor and working class. Proposals by Congress and the Administration to slash LIHEAP and the current inaction on the Mass Transit Benefit are both alarming. Let's avoid being Grinches and give low income folks who have suffered so much in the recent economic downturn a holiday gift they can appreciate - support for using mass transit.

If Congress doesn’t’ move very quickly, approximately 270,000 public and private sector employees who use Washington Metro are about to get an unwelcome increase to their commuting costs. The legislation that would extend the current transit/vanpool commuter tax benefit at $230/month is set to expire on December 31, 2011. Failure to extend the transit/vanpool benefit will cause it to revert back to $120/month ($125 after an inflation adjustment).

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 extended the $230 benefit level through January 1, 2012. The legislation marked a milestone for transit riders who finally received parity with those who drive and receive a parking benefit of $230/month. Ironically that benefit will be raised to $240 per month beginning in 2012.

Without the added transit benefit, commuters may turn to their own vehicles or take fewer transit trips. As a result, we estimate that the reduction of transit benefits back to $120/month could translate into a loss of 2.8% of Metrorail ridership per year. In addition to the added congestion and detrimental environmental impacts, such a ridership decrease would result in a $16 million passenger revenue loss on WMATA’s already strained operating budget.

In these challenging economic times, it is important to note that both employers and employees benefit from the pre-tax or subsidized commuter benefits provision. Employers benefit from reduced payroll taxes, and from the valuable employee recruitment and retention tool that this benefit provides. Employees benefit from reduced commuting costs at a time of financial uncertainty.

There appears to be bi-partisan support in both the House and Senate to extend the benefit. As Congress moves to end the first session of the 112th let’s hope this important benefit for transit riders is once again renewed.

The transit commuter tax benefit provides much needed financial assistance to many families across the nation. If Congress lets it expire in January commuters will have to dig deeper into their pockets to make up for their government’s inaction, just to get to work.

Households and businesses alike are struggling to make ends meet these days. Americans spend more on transportation than health care, education and food. It is the second largest household expense for many families. The transit commuter tax benefit means they have one less expense to worry about, and in today’s economy, every dollar saved counts.

This tax benefit encourages more people to get to and from work each day on public transportation, which has many environmental, social and economic benefits. When people take public transit, there are fewer cars stuck in traffic and more room on the road, including for emergency vehicles. One full 40-foot bus takes 58 cars off the road. This also means less pollution. Per year, public transportation saves more than 885 million gallons of gasoline, which meansthat the community is healthier, with fewer medical problems caused by air and water pollution. Public transit is good for our economy. People can get to work or look for a job when commuting is affordable and convenient.

Every day we hear Republicans in Congress lashing out against new taxes. If the transit commuter benefit is allowed to expire, it’s nothing more than imposing a tax increase on transit riders and their employers. It will amount to allowing payroll taxes to increase on both employees and the employers who offer the benefits. Removing this benefit is essentially a fare raise – how is this not a tax on working people?

By letting this transit commuter benefit expire Congress is encouraging people to drive to work alone because the monthly cap on parking benefits ($240) will be significantly higher than the transit cap ($125). This makes no sense in today’s world where people are desperate to beat the high price at the pump by taking public transit. Bus, heavy rail, and commuter rail riders should be rewarded – not penalized – under the tax code for choosing to ride transit rather than driving to work.

Unfortunately, this is the second year the transit commuter benefit has been in jeopardy. Because this benefit is largely unknown, it gets lost in the shuffle in Congress. Many commuters who qualify don’t even know that they are entitled to this, which reduces the ability to advocate for the benefit.

We have launched a campaign to fight to save this critical benefit. We have collected more than 11,000 postcards signed by riders who use the transit commuter tax benefit, and are educating those who could be seriously impacted by the expiration of this benefit.

Congress needs to be reminded that the transit benefit is good for the community, our economy, and our environment. With fares for buses, subways and other forms of public transit continuing to increase, it doesn’t make sense to take away public transportation tax breaks for commuters who depend upon mass transit every day.

If Congress fails to act, there will be a financial bias in the federal tax code against public transit use. We are seeking to maintain parity with the parking benefit to ensure that there isn’t a disincentive to take public transportation. Inaction by Congress will result in the parking benefit ($240 per month) increasing to almost twice the public transit benefit ($125 per month).

In fact, a 2005 Transit Cooperative Research Program (TCRP) study found transit ridership increases between 10 percent to more than 40 percent at participating worksites.

Another important point is that people who have the longest commutes will be the most adversely affected. This benefit helps keep those who would otherwise drive long distances off the road. Not only does the benefit improve the quality of life for these working citizens, but by encouraging greater use of public transportation and other shared commuter services, it supports important congestion reduction strategies.

Access to quality public transportation, vanpool and commuter services also keeps people employed. Many middle class workers, who may travel long distances to work, also find themselves at their financial limits. The transit commuter benefit helps keep transportation affordable and allows working people self-sufficiency through access to jobs.

Furthermore, if this benefit level were to expire, not only will employees see their payroll tax liability increase, but their employers will as well. Employees in the 28% tax bracket could see a tax increase of more than $500 annually, and an employer with 100 employees utilizing the benefit will see their total tax liability rise by more than $10,000.

The transit commuter benefit should be maintained at a level of parity with the parking benefit just as we should be encouraging public transit ridership for the environmental, energy, economic and quality of life benefits it provides. The American Public Transportation Association supports permanent parity for transit commuter benefits at the level of parking benefits.

In contrast to the many stories that have been published recently about the use of the transit benefit in urban areas, all of which are a crucial part of the transit benefit discussion, I’d like to focus on the use of the benefit in rural areas. The transit benefit is a pre-tax benefit that is an option for all employers across the country, not just those in urban areas. This becomes especially important in rural areas when looking at how people are connecting to employment opportunities from where they live, allowing people to maintain themselves in their communities with a quality of life that they’ve come to expect. Vanpooling is the rural transit option that makes sense for these individuals and one that is eligible for the transit benefit.

Many people who vanpool in rural areas are living in their desired community and commuting to a location that is, by design, inconvenient or otherwise difficult to access. These could be nuclear power plants, meat processing facilities, hydroelectric or wind power facilities, oil fields, natural gas fields, grain distribution centers, chemical processing plants, or other types of manufacturing facilities that don’t make for pleasant neighbors. Frequently, employees of these facilities are traveling 50, 75, sometimes even 100 miles one-way in order to reach their place of employment. To do so in a vanpool significantly reduces their commuting costs, increases the ability of the group to be on time for work, and increases safety by allowing for shared driving responsibilities. The transit benefit allows for their employers to offer an option that works for the employees in terms of costs and safety, while also working for the employer in terms of reliability and longevity.

There are examples of these rural successes all over the country:

• Pueblo, Colorado started a program in 2008 that has grown to 45 vanpools serving southern Colorado. Many of these vehicles are assisting the County in the recruitment and retention of employees, as many of these groups are travelling over 100 miles per day.
• Ben Franklin Transit, located in Richland, Washington, has a fleet of ~280 vehicles serving central Washington. These vehicles help meet the commuting needs of employees to the Hanford Nuclear Reservation, the Bonneville Power Authority, and other rural manufacturing and recreational locations from Walla Walla to Yakima.
• White Sands Missile Base in New Mexico has taken advantage of the transit benefit to help manage its base commuting issues, especially related to parking facilities, and now has over 70 vanpool groups travelling to the facility daily.
• Rural central Florida through Florida DOT started a new program that allows employment access from economically distressed counties to coastal resort facilities that are in need of many types of service employees. These employees take advantage of the benefit to pay for their portion of the costs of the service.

These are just four of many examples of rural programs that are taking advantage of the transit benefit that would be harmed with a reduction in the benefit.

Let’s be clear, there are many tax provisions that have an indirect effect on employment and jobs. The transit benefit is a provision that gives people in many locations an ability to travel to a job that they would otherwise be unable to afford to get to. This is especially true in rural areas, where the cost of commuting is a choice between travel as an individual in a vehicle and travelling in a vanpool. At a time when people need access to employment, now is not the time to reduce the value of the benefit and remove that access to employment.

I’ll try to answer Fawn’s five questions:

“How important is this transit benefit?” Shielding $2,760 a year from taxed income can be worth some $300 to $1,000 a year to those who pay income tax.

“Would it do any harm to extend it?” Yes, Gerard Bridi surely knows that the savings to the few receiving these transport subsidies are at the expense of the many who do not.

“Why has it gotten lost in the congressional shuffle?” Possibly because the federal congress, which has trouble managing its workloads, now tries to focus on national issues, rather than on local ones.

“Is mass transit really at a disadvantage with respect to cars and automobiles?” It can be at a disadvantage in offering slower and less convenient services. It is at an advantage in getting some 20% of federal surface transport subsidies while providing less than 2% of traveler miles.

“Are there other ways to encourage mass-transit commuting?” Public transport can be encouraged by allowing groups of taxis and minibuses to provide high-frequency, seated, scheduled, services. These work successfully, without subsidy, in Atlantic City (legally), and in New York City (illegally.

We have a response from Gerard Bridi, CEO of Edenred North America:

Edenred, one of the nation’s premier providers of transportation fringe benefits, is working with a coalition of other transit benefit providers, transit agencies, national associations, and other stakeholders under the banner commuterbenefitsworkforus.com (www.commuterbenefitsworkforus.com). Through this effort, more than 40,000 letters have been sent to Congress urging action to maintain parity between the parking and transit portions of the commuter benefit.

The transit benefit helps reduce the cost of commuting for an estimated 2.7 million Americans. While it is generally thought of as a tool used to promote transit, conserve energy, improve the environment, and ease congestion, the primary benefit for individuals who take transit or a vanpool is financial. The tax savings enjoyed by these individuals is returned into the economy. Employees who take advantage of the transit benefit save up to $1,000 in Federal taxes paid, in addition to saving on state and local taxes. The transit benefit has the ability to directly reduce a working American’s commuting cost by up to 40%.

If the transit benefit were to be eliminated or the cap reduced to $125/month, the subsequent increase in commuting costs would be equivalent of transit tax of nearly $500 and would cut the effectiveness that a payroll tax holiday would have on those commuters who utilize transit or vanpools by 25%.

It should also be noted that the transit benefit makes sense for businesses of all shapes and sizes. The provision is a pre-tax benefit, not only for employees, but also for the employers who offer it. Thus, employers do not pay payroll taxes on the benefit, providing a sound fiscal savings, and offering many employers additional resources to expand and create new jobs. Last year, it is estimated that the employers who provided the benefit saved a collective $300 million in taxes, enough to hire over 6,000 new workers.

The transit benefit is not just for big cities. Hundreds of thousands of people in rural and ex-urban America commute by vanpool every day. Vanpooling is the most cost-effective mode of public transportation. It is often utilized by Federal, State and local governments as a way to provide transportation options to workers when there is not enough density or demand for traditional transit services. When gas prices doubled in the spring of 2008, transit ridership across the nation increased by 4-5%, however, vanpooling increased by nearly 40%. The transit benefit provided relief for those workers hit the hardest by the sharp increase in gas prices without need for additional Federal funding to support capital expansion of a rural transit system.

With much to be decided over the coming days, I am optimistic that Congress will recognize the harm they will do to American workers by failing to extend this provision into law. The cost of a one-year extension would only be $136 million. However, parity with parking can also be retained in a revenue neutral manner by setting the monthly caps for both parking and transit at $200/month.

Last week, Senator Menendez (D-NJ) organized a letter to support the long-standing efforts of Senator Schumer (D-NY). A bi-partisan group of 22 Senators signed on to the letter urging the Senate to complete the necessary task of extending parity. Similarly in the House, a letter is being crafted by long-time champion Congressman Jim McGovern (D-MA) as well as Congressman Blumenauer (D-OR) and Congressman Grimm (R-NY).