NEW YORK--(BUSINESS WIRE)--TransitCenter, Inc., a nonprofit provider of commuter benefit programs that promotes mass transit to improve air quality, today previewed a new economic study and white paper concluding that, nationwide, mass transit -- which experienced a three percent ridership decline during the recession -- faces further ridership challenges in 2011 as a result of the expiration of an American Recovery & Reinvestment Act tax provision which helps defray the cost of getting to work.
The Federal provision, enacted in 2009 in the stimulus bill, nearly doubled the maximum pretax deduction that workers could apply toward monthly commuting costs from $120/month up to $230/month. This lowered the net cost to get to work for many employees participating in a commuter benefits program and created parity with monthly pretax deductions allowable for parking. The increase in the transit benefit cap to $230/month is set to expire at the end of 2010 and return to its previous level of $120 per month.
This imminent drop in the benefit cap will result in an increase in the cost of commuting of up to 22 percent (assuming a tax rate at the national average of 31.6 percent), according to the report, commissioned by TransitCenter and conducted by management consulting firm Bennett Midland. In turn, this will lead to an estimated five to nine percent drop in demand for public transportation among this group – a figure based on Bennett Midland’s analysis of previous studies on the impact of price on transit usage (price elasticity). These studies show that for every ten percent increase in price there is roughly a corresponding three to five percent decrease in ridership.
The report is based on data gathered from transit systems throughout the United States and a range of analyses on changes in ridership to mass transit systems and the impact that the increased transit benefit cap has had on trends related to commuting costs and economic influences on the use of transit services.
Additional key findings from the study include:
- Nationwide, daily transit ridership decreased from 2008 to 2009 on buses, commuter rail and heavy rail. Across all types, daily ridership decreased about three percent.
- When national transit ridership among transit benefit users is examined by fare level, approximately 30 percent of all users spend more than $120 per month on public transportation.
- In the New York metropolitan area, the minimum unlimited monthly pass exceeds $120 for each of the three commuter rail systems: Long Island Rail Road, Metro-North Railroad, and New Jersey Transit. It is estimated that over 200,000 commuters in the region spend more than $120 on transportation each month and are taking advantage of the increased tax benefit cap.
- On Metra, Chicago’s commuter rail, nearly 35 percent of all monthly passes purchased cost more than $120 a month.
“This commuter transit tax benefit must be preserved at its current level because it helps hard-pressed, middle-class workers stretch their paycheck,” said US Senator Charles E. Schumer. “Almost one million middle class Americans take advantage of this tax break to provide a little bit of relief to rising commuting costs. And the last thing we should do, given the economic situation, is raise costs for middle class commuters and their employers.”
“By working to maintain commuter benefits at the Congressional level, we have an opportunity to support the American public during these challenging economic times,” said Representative Jim McGovern (D-MA). “The research provided by TransitCenter proves that there are real benefits and value for commuters and their employers nationwide.”
Senator Schumer is the principal Senate sponsor of S.322 and Representative McGovern is the principal House sponsor of HR 891, matching bills which would allow the transit benefit to stay at $230/month.
“Transportation costs are one of a family’s biggest expenses,” said Representative Earl Blumenauer, (D-OR). “By making permanent the increased transit benefits that were part of the Recovery Act, we can ensure that working families can get to their job, and that we treat those who take transit the same way we treat those who drive. I am proud of the positive impact that increased transit benefits have already had on families across the country, and will continue fighting to make them permanent.”
Separately, TransitCenter shared a preview of findings from an upcoming employer and employee study that examines the impact of the increased transit cap amount to $230/month. The report indicates that enrollment by employers in commuter benefits programs increased considerably after the monthly cap was raised, especially at medium and large companies:
- 60 percent of employers with offices in multiple cities reported that employees increased their pre-tax deduction.
- 29 percent of employers saw higher enrollment in commuter benefits programs.
“It is clear through this research that the Federal increase to the transit benefit’s monthly cap has had a widespread positive impact on the economy,” said Daniel M. Neuburger, President and CEO of TransitCenter. “American families save on their commuting costs and find protection from rising transit fares occurring nationwide; transit agencies who are facing their own financial challenges are also benefiting in the number of commuters encouraged by the higher benefit cap to choose mass transit over driving and, businesses have found increased savings as a result of reduced payroll taxes that pre-tax programs like commuter benefits provide. All of these positive effects will suddenly go into reverse if the cap returns to the $120 level at the end of the year.”
Mr. Neuburger added, “An expiration of the cap equates to a tax increase on the middle class, the largest group that takes advantage of the benefit, as well as on all businesses, including small businesses that will see an increase in payroll taxes.”
For a copy of TransitCenter’s white paper regarding the impact of the $230 cap, please email email@example.com.
TransitCenter (www.transitcenter.com) is a nonprofit organization whose mission is to advocate for greater use of mass transit in order to reduce traffic congestion and improve air quality. TransitCenter engages in a wide variety of activities in support of transit. We are a pioneer and a leading national provider of tax-free commuter benefits through our TransitChek® programs. Through education and awareness activities, we also promote the essential benefits of transit, foremost among them making communities better places – and more sustainable places – to work and live.
About Bennett Midland
Bennett Midland LLC (www.bennettmidland.com) is a management consulting firm. They work in the civic sector, with public agencies, not-for-profits, and foundations to solve operational problems, conduct original research, and assist with the development and implementation of new programs.