Bigger tax break for motorists than transit riders

For the past two years, the federal tax code has provided just as big a tax benefit for people who drive their cars to work as for those who take mass transit. That seems nonsensical, since riding transit is better for the environment, energy conservation, and the well-being of cities.

But on January 1, the situation is likely to become still more illogical. Unless Congress quickly approves a patch to what's called a "pre-tax commuter benefit," the solo driver of a Lexus will get bigger tax break in 2012 than the person who rides a bus or a commuter train.

The situation is explained by Ron Lieber in his "Your Money" column in The New York Times. 

Lieber looks at how a tax break that was meant to encourage use of public transportation has evolved over the years. At one point, the government allowed employers to subsidize up to $60 a month of an employee's public transportation costs without any of the subsidy being subject to taxation.

Over the years, Congress has frequently tinkered with the commuter benefit. Currently "about three million people are enrolled in pretax commuting plans of some sort," Lieber reports. But as of Jan. 1, the current maximum benefit allowed—$230 a month for transit riders or for the parking expenses of those who drive to work—will be reconfigured. The benefit for parking would rise slightly, to $240 a month. The benefit for transit riders would drop, to $125 a month.

Lieber thinks favoring motorists over transit riders is wrong. He analyzes how the situation might yet be resolved, if Congress is willing to act quickly.