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Permalink Reply by heather s on December 24, 2008 at 5:40am

It's actually $20 a month, not per year. The original proposal was $80 per month, but that was changed in the final wording of the bill.

M.A.R.K. said:

My pessimism on what, getting a tax break of 20 dollars a year...

When I'm feeling pessimistic about this, it seems hardly worth the effort of trying to get this benefit--I already have more bikes than I need, I don't spend a lot on repairs, I already have space to park my bike... I'm not sure how much this will end up benefiting ME. But when I brought it up with my employer (an environmental organization!), they've really been dragging their feet: 'we don't know how to implement it, we're not sure how many people ride their bikes consistently, we already do the transit benefit,' etc. This makes me feel like the symbolic win is in gaining visibility for cyclists and the needs of people who commute by bike. I want to push for it for the benefit of the cycling community, even though the personal gains will probably be negligible.

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Permalink Reply by J on December 24, 2008 at 12:53pm

M.A.R.K. said:

I know its 20 a month, so 240 a year. Tax on 240 a year is roughly 20-40 dollars. 80 a month would have been much better, or the option up to 80 a month..

Depending on your tax bracket, the benefit could be twice that. I agree with those who see this as an exciting first step. Obviously very few companies will implement the plan -- it's a tiny benefit that will be very expensive to administer. I imagine that the early adopters will be medium and large progressive corporations with big HR organizations -- it would hopefully be easy enough to track this using existing benefits accounting software.

I got an email from a friend who works at Microsoft the other day. He figured he'd net about $70 per year and was discussing with his friends over lunch what that could buy.

There are plenty of interesting economic incentives to get folks on bikes -- those in the trenches know that the real work is all on the infrastructure side: safer roads, safer parking, higher density, education, better multimodal implementation, etc. But this sort of superficial benefit is interesting because it gets people talking. Denmark had for some years a rebate for cargo bikes. Ontario, Canada refunded the VAT on bikes up to $1,000. That's the sort of stuff that gets into the mainstream consciousness and is sexy. But I wouldn't trade it for better city planning.

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Permalink Reply by payton on December 24, 2008 at 8:54pm

Just to make sure people know, this is how it works. Let's say that you make $52K a year (the Chicago area median income for a single-person household), which puts you in the 25% tax bracket. Under this program, it looks like your employer can pay you, as long as you commute by bike every month, $20 a month as a tax free "fringe benefit" -- whereas before, you received that $20 as taxable ordinary income. That will save you $60 a year in federal income taxes, and it saves your employer $18 a year in payroll taxes. Not a huge deal, but it's something. I haven't heard anything about an employer keeping the money for bike parking, although that's currently kind of how the car parking benefit works. And as Ethan points out, almost any payroll processing company (ADP, Paychex, whatever) can easily figure it all out.

How did it end up in the bank bailout bill? This legislation has been proposed as a standalone bill over the past several years by Rep. Earl Blumenauer, a Democrat from Portland, Ore. and founder of the Congressional Bike Caucus, but it failed to pass over the years. He voted no on the original bank-bailout bill, so the House leaders sought to woo his vote by including several legislative sweeteners -- including this particular legislation. It didn't work (Blumenauer voted no the second time around, too), but whatever, we got something good out of it anyhow. (The [de]merits of the bailout bill are quite complex and well outside the scope of this reply, so I'll leave that aside, but suffice to say that we live in challenging times indeed.)

Another bit of good Blumenauer legislation that got dropped in was an internal review of the federal tax code to identify ways in which it impacts the nation's carbon dioxide emissions. For instance, people who drive to work can get up to $220 in parking costs a month paid as a "fringe benefit," which is obviously a lot more than $20 a month. That, in some way, encourages people to drive to work.

Here's a chart that, in pretty plain English, sums up how the existing "transportation fringe benefit" programs work:
http://www.nctr.usf.edu/clearinghouse/commutebenefits.htm

One reservation I have in general about tax deductions is that they benefit upper-income people more: someone earning $8/hour (in the 10% tax bracket) gets a mere $24 a year out of it ($240 x 10%), while someone pulling down 400Gs gets $84 a year ($240 x 35%). A sales-tax rebate, like what JT described (and that's evidently how Canada gives its transit benefit, by rebating sales tax [i.e., GST] on transit passes), would be more fair since it would be the same percentage across all income brackets.

However, I actually don't wish to be pessimistic about this. It's a good start, it fits into the existing framework of how things get done, and it can only supplement our efforts to do better city planning. Indeed, if it's true that cyclists will get cold, hard cash from the deal, it's the first federal implementation of a concept called "parking cash out", which has been shown in many instances to reduce auto commuting by 25%, even in sprawly bits of California -- provided the cash incentive not to drive to work is big enough, of course (the same $200 in "free" parking that people currently get).

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