A new report from two pro-transit groups, the Frontier Group and the Transit Center, argues that allowing employers to deduct parking costs from their income when calculating their profits (and, thereby, their taxes) represents a $7 billion subsidy to driving. This subsidy, the report claims, adds significantly to highway congestion.
Baloney. First of all, just like providing office space to office workers and factory space to factory workers, providing parking is a cost of doing business. No one would argue that employers should charge their employees rent for the office or factory space they use. Why should employers charge for parking space?
Second, even if this were a subsidy, it has nothing to do with traffic congestion. The report claims that ending the tax break would reduce auto commuting by 2 percent. That’s probably high: just ending the tax break wouldn’t necessarily cause all employers to begin to charge for parking. But even if the number is accurate, the authors clearly don’t understand how congestion works.
The Texas Transportation Institute’s most recent urban mobility report estimates that the time the average commuter wastes in congestion has more than doubled, from 15 hours to 38 hours, since 1982. Yet census data reveal that the average amount of time auto commuters spend getting to and from work has remained almost unchanged at around 25 to 26 minutes each way. These two facts aren’t contradictory; instead, people adjust their lives to deal with increased traffic, such as by moving their homes closer to their work or by picking jobs in less congested areas.
This means that, if ending the parking tax deduction eliminated 2 percent of cars from the road, everyone else would simply adjust their home or work locations to compensate and we would have just as much apparent congestion. This is a version of the so-called induced-demand story, and while I disagree with many of the implications behind this claim (such as that there is something wrong with letting more people go where they want to go), the hidden truth behind it undermines the claim that free parking increases congestion.
(Curiously, in a recent blog post the Frontier Group agrees with the Antiplanner that induced demand is “a good thing” because it means people are making the best use of infrastructure. However, the post goes on to say that induced demand is still bad when applied to highways but not when applied to transit because “the marginal cost of serving an additional transit rider is near-zero” while the costs of adding an additional car to a highway “are significant.” However, when dealing with transit policy we aren’t talking about adding a single transit rider but spending billions of dollars on new transit infrastructure that won’t reduce congestion or particularly help transit riders.)
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In any case, what is really going on with this free-parking report is sour grapes on the part of pro-transit groups. A couple of decades ago, these transit groups claimed that the reason so many Americans drove to work instead of taking transit is that it was unfair that employers could deduct the cost of parking but not the cost of giving transit passes to their employees. Congress fixed that in 1998, so that today, if anything, the tax breaks are biased in favor of transit today. Neither employers nor employees can deduct the costs of commuting by car, but now employers can give their employees free transit passes and deduct those costs from their taxable incomes.
We can see this bias right in the anti-free-parking report. Page 15 estimates that the parking tax break represents a $7.3 billion subsidy per year, while the transit pass tax break represents a $1.3 billion subsidy per year. Since auto commuters outnumber transit commuters by more than 17 times, the tax subsidy per transit commuter, as calculated by the report, is more than three times as much as the parking subsidy per auto commuter.
Yet nationally, this hasn’t led to a significant increase in transit’s share of commuting. Transit’s share grew from 5.12 percent in 1990, before the transit tax break, to just 5.17 percent in 2013. (The Census Bureau collected journey-to-work data in 1990, 2000, and every year since 2005, but not in 1998.)
Since giving tax breaks for transit passes didn’t significantly reduce driving, anti-auto groups are now going after the so-called free-parking subsidy. If parking really were an unfair subsidy, I wouldn’t have any problem with that. But they aren’t arguing that it is unfair, they are falsely claiming that it adds to congestion.
There is a proven economic value to expanding people’s job opportunities and the pool of workers available to employers. Automobiles are roughly twice as fast as transit and so at least quadruple the economic opportunities available to people. Increasing commute costs and times with the hope that it will force more people to switch to transit reduces those opportunities and thereby reduces economic productivity.
If the authors of this report genuinely cared about congestion, they would focus on the one thing we know that can fix congestion: variable-priced tolls. But I suspect they don’t really want to relieve congestion; they just want to get people to drive less.
Why do any of these benefits exist? Get rid of these tax subsidies. Bike, transit, parking. Whatever. Get rid of them all.
This again? Really?
It’s an old canard and sounds very similar to the ‘oil subsidies’ meme. Here’s the thing, if you dislike the notion that companies are able to deduct business expenses for tax purposes, that’s one thing. I might even be willing to listen to that argument.
But there is no logical reason to pick on one particular expense and suggest that it ought to be treated differently because…..well, because we think most people are choosing the ‘wrong’ mode of travel. As Randal mentions, Congress has already bent over backward to try to level the playing field (well, at least as well as Congress could be expected to). But that is not what Frontier Group or the Transit Center want. It’s just special pleading. Junk science to rationalize differential treatment. Don’t fall for it.
AP if an employer gave me a car to get to work, would I have to pay taxes on it? How is that different from giving me free parking in a downtown area where there’s an established market for parking?
MJ most drivers don’t benefit from this tax expenditure. Mostly just upper middle class downtown office workers. If you work in a mall that offers free parking you don’t benefit. Because you are receiving something with no market value. You know all those special interest benefits in the tax code the republicans always rail about replacing with a simple rate? This is one of them.
These groups better watch their back. Parking is the most vicious and contentious issue in all of city planning. Mess with peoples parking and expect the wrath of torches and pitchforks.
I’m in agreement with Mr. O’Toole. Why should parking treated differently than other business expenses? Silly.
However, the post goes on to say that induced demand is still bad when applied to highways but not when applied to transit because “the marginal cost of serving an additional transit rider is near-zero” while the costs of adding an additional car to a highway “are significant.”
I don’t buy this argument.
In the case of transit, it is only true in the case of infra-marginal increases in demand. And while transit systems do operate with a significant amount of excess capacity, most of this excess capacity is available during off-peak periods, when roads are seldom congested. The goal is presumably to induce significant increases in transit ridership (assuming for the moment that this is possible), otherwise why bother with such a campaign. But since transit fares are well below even short-run marginal costs, doing so would cause deficits to increase dramatically, since it would require the provision of costly additional peak-period capacity.
In the case of highways, it is not a priori true that the cost of adding more cars to a highway are significant. If the highway is not congested, the cost may well be close to zero, as with their argument regarding marginal costs of transit provision. Even if the highway is congested, the long-run marginal cost may be well be lower if additional capacity is added. But it seems the entire premise of the argument is that capacity fixed. In that (special) case, as Randal points out, the correct response would be to price access to reflect the congestion externality, not to further distort behavior by more greatly mispricing a second mode.
ahwr asks: “AP if an employer gave me a car to get to work, would I have to pay taxes on it?”
I’m pretty sure company cars are a write offs for employers. I think equity is important here. If you’re saying that no business expense should be written off, okay. But to single out one over another doesn’t make sense to me. Also, a mall that offers free parking to employees doesn’t mean that that parking hasn’t been paid for. Nothing is free.
I’m not sure I agree with the elimination of write offs. As a private sector worker I understand the value. Taking these subsidies (if that’s what we want to call them) away would dramatically increase the cost of doing business.
MJ most drivers don’t benefit from this tax expenditure. Mostly just upper middle class downtown office workers. If you work in a mall that offers free parking you don’t benefit. Because you are receiving something with no market value. You know all those special interest benefits in the tax code the republicans always rail about replacing with a simple rate? This is one of them.
The argument is that employers are the ones who benefit. The full incidence of that benefit regarding workers is unclear, but to the extent that parking is costly to provide (as in the case of downtown office workers), the workers will see their wages reduced by approximately the cost of the parking. Complicating matters, in downtown areas where land is more expensive, it is less common for employers to directly provide parking. Often there is third party, public or private, who supplies parking via structured or underground garages. This breaks the link between employer and employee.
Moreover, it is unclear that if this tax arrangement were ended that employers would start charging for parking. I doubt it. As you mention, outside of these situations (downtown employment centers) the cost of providing parking is very modest, so it is not clear that workers benefit much, if at all. Certainly not enough to alter their regular choice of commute mode.
I don’t really understand why this issue gains as much attention as it does. I suppose it is symbolic for planners, environmentalists and other advocates of less car use. They seem to like to talk about it in abstract terms and make it part of an agenda, even if the practical implications are nil or close to it.
You know all those special interest benefits in the tax code the republicans always rail about replacing with a simple rate? This is one of them.
Sure, but to what end? The budgetary implications are too small to matter much (not that I think the promoters care about that anyway) and the behavioral impacts, which I’m fairly sure they overstate, are likewise not large enough to notice. This leaves me at my previous explanation, that the issue is just symbolic and that this campaign is merely an example of “policy theater” designed to do little more than draw attention to their cause (and perhaps secure some concentrated benefits for their constituency in the process).
To be sure, I’m not convinced that Republicans are that concerned about fiscal matters and a balanced budget. To the extent that they are, the methods by which they get there will probably be more ham-fisted. But I also think that is beside the point and bears little relation to what these groups are proposing.
Y’all are missing the root cause of the problem: taxation. Eliminate that, and problem solved! No write-offs. No redistribution. People pay directly for the goods and services they use. Private charity based on voluntary transactions supplant government forced “charity”. Not a utopia by any stretch of the imagination. Just a society based on voluntary association.
If I’m given a company car unless I need to use that vehicle for work – say I’m a plumber and it has all the tools – I have to pay taxes on the fair market value of the car used for personal use. Commuting to an office downtown? That’s personal use, not business.
With parking, an exception is made it’s a nontaxable benefit up to fair market value of 250 a month.
The reason I mentioned the suburban mall is that it doesn’t matter how much it costs to provide parking. What matters is if there is a market for it. So downtown businesses get to rent parking spots for 250 a month and provide it to employees. If an exception wasn’t made declaring parking a non taxable fringe benefit then the business would have to pay their employees 350 a month extra so they could pay for the same parking using after tax dollars. At a suburban mall with free parking? The market value of a parking spit provided to an employee is zer, they don’t benefit from this. The point isn’t to make businesses charge for parking where parking is free.
This isn’t about business taxes. It’s about individuals paying taxes on fringe benefits.
“This isn’t about business taxes. It’s about individuals paying taxes on fringe benefits.”
Restated: This isn’t about…taxes. It’s about…taxes…”
+100 Frank. The state and its supporting cast of statists delight in torturing language to cloak the government’s predatory designs on our assets.
Providing free parking to employees is not a cost of doing business in the same sense as providing office space or factory space; the enterprise could fulfill its goals without parking spaces, but not without office or factory space where the actual work is accomplished. We can see this is the case because in many CBDs, where the cost of giving employees free parking would be significant, employers don’t do it. I work in downtown LA and I don’t get free parking, because the office lease doesn’t come bundled with parking. At our office in Orange County, parking comes with the office lease, and employees get to park for free. If parking was not included, the firm could choose to not provide it, & employees would have to pay for parking at a private lot (probably something nominal like a few dollars a day, but still).
“The state and its supporting cast of statists delight in torturing language to cloak the government’s predatory designs on our assets.”
Amen.
Why should it matter if it’s bundled with the office lease? If the office lease was bundled with a dozen apartments should a business get to give them to emoyees for free? If there’s an established market value for the benefit provided why should it be exempt? If it’s a suburban office park where parking is free everywhere it makes sense to let employees park free. But why subsidize parking in downtown areas where you have an established market and so quantifying the benefit provided is easy?
My biggest confusion here is why do all the normally anti city posters support this benefit for city center jobs?
I have an idea, it might be revolutionary, but how about we let property owners decide whether or not to charge for their parking structures? I know, the collective gasps of horror are still echoing.
But seriously, that is a cost to the business for attracting its customers. When Jiffy lube gives me a limited time discount on an oil change, we don’t say that the other customers who paid full price are subsidizing me.
Using language like this is a duplicitous attempt to translate ordinary private party transactions and concerns into the business of the state, with its grasping claws ready to tax, regulate, and fine yet another previously innocuous occurrence.
When you start to hear words like “unfair advantage”, “subsidy”, and so on and so forth, my advice is to tighten the grip on your wallet, because someone is busily trying to justify mugging you for a government transaction fee.
Come on, metrosucks. Get real. Don’t you know that you don’t own anything, not even yourself? You and everything else was created and is owned by the god known as the state. Commenters like ahwr won’t explicitly acknowledge that, but that’s the implication.
Metrosucks the general rule is that if a busiess gives something to employees with a market value then that has to be treated as income and taxed as such. In an area where parking is free, employer provided parking is unaffected by this, the market value is negligible. According to the APs links ~67% of employer provided parking is in this category, and will remain free to employees after the proposed change. In downtown areas where parking has a market value then allowing it to be paid for with pre tax dollars is the exception to the rule. A simpler tax system should get rid of little exemptions like this.
This has absolutely nothing to do with parking provided to retail customers. In areas where parking is always free? It would remain free. I realize that some proponents of this change also push other parking reforms, but ignore that for a moment and try to focus on the substance of this issue.
Sorry, 63% of parking has no value according to Frontier and so is unaffected by the benefit. Only substantial benefit is to those working downtown.
Is it me or is ahwr either: 1. Suffering from reading comprehension issues; or 2. Willfully ignoring the central premise (that the state does not have a moral claim to an individuals income, and eliminating the income tax would solve any subsidy issue)?
Pledge of Allegiance chanted by government planners in bureaucracies around the country:
“Everything in the state, nothing outside the state, nothing against the state.”
When a statist belches out the magical weasel word “fairness”, hold on to your wallet, again. Fairness as a concept is illegitimate. Things are either right or wrong. “Fairness” doesn’t enter into the equation, except as a highly pliable argument meant to be shaped into whatever corrupt policy decision currently being promoted. This does not change based on what 51% of the voters were fooled into approving, or what a government committee decides. Murder while wearing a badge is still murder. Theft under color of law is still theft. Just because the government gave itself a pass, doesn’t change the morality of the situation.
When statists wax poetic with love for the state and try to paint it as a benevolent overseer and protector, they forget the first concepts taught in basic sociology…government is mainly characterized by having a “monopoly” on violence in its territory.
Okay Frank, why does the state have a greater moral claim to the earnings of those working in the suburbs than of those working in city centers?
Okay Frank, why does the state have a greater moral claim to the earnings of those working in the suburbs than of those working in city centers?
When a statist is on the defensive, always expect the entirely typical appeal to envy.
Yep. And that’s a highwayman evasive response if I ever read one.
If a company wants to provide a place for employees to park on their own property, why is that anybody’s business other than the company’s?
@Not Sure
If there’s a market value for something provided to employees, it’s treated as taxable income generally. Except for health insurance. Or parking. Most people who drive to work don’t receive parking with a market value, because parking is free there for everyone. But those who drive to some downtowns do. Why is that tax exempt? If the employer wanted to provide housing it wouldn’t be tax exempt. And if the value of the parking is too high, only the first $250/month is tax exempt.
The cap should be lifted, right Frank? And businesses should be able to provide tax free housing too, right? And bike share memberships. And cars. And clothing. Right? Why is parking special?
“The cap should be lifted, right Frank?”
No. The income tax—at all levels—should be abolished.
How do you plan to pay for local roads, education etc… Frank? The masses tend to get violent if they don’t get their food stamps.
“How do you plan”
I’m not a planner.
“to pay for”
Directly.
How did this country survive most of its history without a federal income tax?
How do Washington, Florida, South Dakota, Wyoming, New Hampshire, Tennessee, Texas, Nevada, and Alaska survive without an income tax on wages?
And my local roads aren’t paid for with income tax.
Come on.
You. Can. Do. Better.
Or maybe you can’t.
Perhaps you should do some research on Google instead of trolling a libertarian blog and asking libertarians to educate you. Stop being so helpless.
So no government provisions for the common good are appropriate, everything should be paid for ‘directly’ with user fees?
By the way, why did you derail a question of a tax benefit that exists within the current income tax system by saying the whole system should go? Why can’t you stay focused on this point first?
Use Google. Find answers to your questions there.
I stand by my original statement on this thread: “Y’all are missing the root cause of the problem: taxation. Eliminate that, and problem solved!”
Not your job to educate anyone, just use google eh? You sound like a tumblr liberal.
And you sound like a troll.
Gas taxes pay for roads and property taxes pay for schools. If you’re concerned about derailing a discussion of income taxes, why did you bring them up?
Ahwr (by the way, that is a nuclear technology acronym for Advanced Heavy Water Reactor), just wants to find one tiny crack in Frank’s reasoning that he can crash his “government uber alles” armored vehicle through. Frank is absolutely right. Abolition of the income tax would create an immediate boon to the economy and a wondrous increase in freedom with Washington’s profligacy limited to only what they can print.
Free parking or not for customers or employees should be left up to the company or landlord to decide if it is go for their business or not.
“If there’s a market value for something provided to employees, it’s treated as taxable income generally. Except for health insurance. Or parking.”
Or training, Or plane tickets. Or food. Or drink. Or hotel rooms. Or rental cars…………………..
Also, you seem to be focusing on what kind of taxes the employEES are paying. The argument is about what an employER can write off. I’ve never owned a company car. My assumption is that the employer can write it off as a business expense.
Bennett why are you talking about business write offs? The frontier group report isn’t about what employers can write off. It’s about what they are allowed to give to their employees as a tax free form of compensation. Plane tickets, food, drink, hotel rooms, rental cars? You can’t send your employees on a tax free vacation. You can send them on vacation, but whatever the fair market value of the vacation is would be treated as taxable income. You can have them travel for work tax free with certain limitations. But commuting to work isn’t considered a business expense. That’s why employers aren’t allowed to give employees tax free payments to cover the cost of their commutes. They can give them money to cover the cost of their commutes, but it’s treated as taxable income. Except if they park downtown, then employers can offer 250 a month tax free to cover the costs of parking. Liberals complained about this, so congress added transit and bike benefits too.
If the frontier group’s recommendations were enacted, then the suburban mall that lets employees and shopper park free? No change for the business or the employees. No change for the shoppers, parking is still free for everyone, whatever the business spends to build and maintain the parking facilities is still a busiess expense deducted from taxable income. No change for the majority of people who drive to work or their employers.
What would change is that the downtown office that rents ten spots from a nearby garage for 250 a month would not be allowed to have employees pay for this parking with pre tax income. If they want to provide those parking spots to their employees, it would count as taxable income, the total cost would be the same as if the employees aquired the parking themselves. As for the business, whatever compensation they give to their employees, whether in the form of cash or parking or other benefits, is a business expense, and would remain so. Whatever they spend providing parking would be deducted from their taxable income, just as today no change there.
An exception would be made for those who are required to come to work in a vehicle. Say they have a trade and all their tools are inside the vehicle, or they are required to have a vehicle to travel. An analogue in the existing tax code would be if a hospital requires someone to live onsite, the housing could be provided tax free. If the employee has the option of aquiring their own housing offsite then that onsite housing could still be offered, but it could not be provided tax free. Likewise if it makes no difference to the employer whether an employee comes by private car, taxi, transit, bike or walking, then paying the costs of transportation is compensation, and should be taxed as such.
All I see in ahwr’s comments is numerous, desperate appeals to envy. Fairness? What’s that; are we back in grade school again to be excoriated on that vague concept? Am I made worse off because some group got a tax deduction? No! I could argue that I, and society, is better off, since that is less revenue that the government can use to press its jackboots harder on our neck with. I, am normal people, don’t care that there is a nominal deduction for parking costs. Get over it. Find something more substantive to whip people up with. This is really bottom of the barrel dredging here.
Why is the ability to keep as much of what you earn as you can a problem? I must be missing something.
Well, according to statists, the government’s “claim” (sic) on “your” money is sovereign and first in line. All other needs, including feeding your family, are second.
Once again I repeat the philosophy of the statist:
“Everything in the state, nothing outside the state, nothing against the state.”
It would appear so. With asset forfeiture laws in place, just about everything else you “own” can be taken away on a whim. Why not your income, too?
The Mussolini quote really hits home. Fascism, the economy of which blends the state and the corporate until the lines are indistinguishable, is totalitarian. Our government now claims total control over the individual, whether it’s how much of one’s income one is “allowed” to keep or whether or not an individual may put this or that substance into one’s body. The state illegally spies on its “citizens” in the name of security.
EVERY aspect of our lives is OWNED by the state. Heil government!
Shhhhh Frank, you’re not supposed to make references to Nazis or fascists or communists when referring to our glorious government. You see, those tyrants were unelected and unnaccountable. Oh darn, Hitler was elected. So was Mussolini. OK, but still, our government doesn’t herd people into the streets and gun them down. Oh wait, how many SWAT raids a day where homegrown jackbooted thugs are actually less accountable then their uniformed murderer counterparts in Iraq?
Darn, our government doesn’t look so good all of a sudden. Can’t wait for the Great Default!
What is funny is that eliminating free employee parking will just move more businesses out of the central city and into the suburbs, which is the opposite of what the planners want.
It has absolutely no effect on free parking sandy teal. If it’s free, there’s nothing to tax. It only affects parking that isn’t free.
And if it supports the anti planners who want jobs out of the city centers and in the suburbs why are so many here complaining about it?
I’d think anti planners would want jobs to be where employers choose to provide them (city centers or suburbs, doesn’t matter) without the artificial prodding of planners using the power of government to allow them to enforce their social engineering experiments.
But then, that’s just me.
Then why does the AP and the posters here seem to find the proposal to eliminate artificial prodding in the form of commuter subsidies (parking, transit, bike) that flow mostly to city center jobs so objectionable?
The people who advocate for transit and bike subsidies tend not to include parking in the mix, from what I can see. YMMV of course.
I’m not talking about increasing transit and bike subsidies. I’m talking about getting rid of all commuter subsidies. It’s compensation. As long as there is an income tax it should apply to commuter payments as well.