Bicycle Commuter tax break becomes law

A long sought tax break for bicycle commuters was signed into law as a tiny part of the gargantuan, $700B Financial Bailout package.

The Coalition of Arizona Bicyclists own Radar Matt was quoted in Bicyclists will benefit from $700 billion bailout (The Arizona Republic Oct 10, 2008).

Upon reading the comments, a couple of things become evident. First, that the general public has a bad reaction because of anger about the financial bailout, and specifically to this provision because it has nothing do with the financial bailout. I cannot defend the sausage factory that is the legislative process of our government , it is what it is. Secondly, there is the general feeling that the government should not be paying for this sort of thing.

This is based on the mis-perception that the money is paid by the government to the commuter. This is not at all how these expenses are paid (technically, these are known as IRC Section 132(f) “commutation expenses” , after the part of the Internal Revenue Service code).

The money is not paid by the government, it is either paid by the employer directly, or withheld from the employee’s pay.

The only cost to the government is that of foregone income taxes.

Arguably, it would be better, more “economically efficient”, to have car-commuters pay their costs directly. The cost of “free” parking are huge (see Donald Shoup’s book “the High Cost of Free Parking” referenced here) and generally not reflected anywhere.


References & More Details:The actual language can be found in Section 211 of the “Emergency Economic Stabilization Act of 2008”  see e.g. pdf of the senate version. The new provision takes effect Dec 31, 2008.The allowable deduction of $20 per month pales in comparison to the existing car-parking or transit deductions of $220 and $115. The amounts are indexed for inflation.More info about how existing parking and transit Section 132(f) fringe benefits can be be found at any of the many benefits administration companies.

Bicyclists will benefit from $700 billion bailout The Arizona Republic Oct 10, 2008.

Bicycle Commuter Tax Break Is a Bittersweet Victory for Measure’s Sponsor New York Times Oct 10, 2008

bailout bill includes bike commuting-benefit Streetsblog, retreived Oct 12, 2008 has good commentary. And the Knowledgeproblem blog. The latter includes a link to .pdf of the senate version.