On January 1, tax benefits for mass transit commuters across the nation are set to expire — and Congress’ newest budget deal does nothing about it.
In five days, Americans who commute by train or bus will no longer be able to put aside the $245 a month — before taxes — they are currently allowed in order to cover their commuting expenses. Instead, the cap will be reduced to $130 a month — only $5 above the 2012 cap.
Though the benefits have bipartisan support, because Congress is out of session until the new year and will take up the issue in the first quarter, commuters will probably not see a cap increase for months.
“Unfortunately many people will lose not only the January, February and March tax break, but probably in April, too,” Dan Neuburger — the president of commuter services at WageWorks, the largest provider of benefit plans for workers and commuters in the United States — told the Washington Post.
And because the cut is so steep, according to the Post, the new cap could result in “nearly $1,000 in higher costs next year” for “heavy users.”
Commuters, however, are not the only ones set to lose from the reduction. Employers — who must elect to participate in commuter programs so that their employees are able to reap the pre-tax benefits — are also set to lose money. When employees can no longer deduct pay before taxes to cover their commuting expenses, employers pay more in payroll taxes. Also, because drivers will see an increase in their monthly parking benefits, from $245 a month before taxes to $250, mass transit users will not just lose money, but might also be tempted to start driving, if possible.
Advocates of extending the benefits — which, despite the delay, will probably happen sometime in early 2014 — argue that the best solution is to equalize the savings given to commuters and drivers, “permanently,” as the Post notes.
Just last week, New York senator Charles Schumer (D), who estimates “some 700,000 New Yorkers” will be affected by the cap reduction, tried to get Senate approval to renew the benefits, but ultimately failed. Other lawmakers — even those in favor of extending the benefits — argue that Congress should address all the expiring tax provisions at once.
“I think it’s not unfair to do it ahead of the other tax breaks,” counters Schumer. “Because of the unique way it functions… it’s harder, although not impossible, to enact retroactively.”
Beside the tax benefits for commuters, other rejected tax provisions this December include tax credits for research and experimentation, reduced state and local sales taxes, tax breaks for the renewable energy industry, and the Emergency Unemployment Compensation (EUC) program. Because the House left for vacation in early December, the Tax Extenders Act of 2013, proposed last Thursday, could not become law. It could have been applied retroactively to the beginning of the new year, but Congress failed to do that as well.
The problem with not renewing tax benefits and credit for particular businesses and programs is that Americans lose money, and eventually the nation does, too. Not extending benefits like those offered through the EUC, which could affect millions across the nation who are unable to find work, and reducing the tax credit for research and experimentation — which hurts technological and medical advancement, especially for smaller companies just beginning their research — will only slow down the economy’s recovery process.
Photo: Psychohh via Flickr