Telecommuting tax credit misses mark

Creates illusion of action while accomplishing little

THE MARK OF GOOD PUBLIC POLICY, often honored in the breach, is to identify the most direct means to address a particular problem. In the case of the state’s massive and ever worsening congestion on our roadways, Gov. Charlie Baker’s proposed solution of creating an employer tax credit to encourage telecommuting seriously misses the mark.

Baker’s plan to give employers a $2,000 tax credit for each employee who begins working from home after January 1, 2020, has a superficial appeal. But on closer examination it creates the illusion of action while delaying any serious efforts to provide even a modicum of relief to beleaguered motorists across the Commonwealth.
The tax credit idea is flawed in several ways. First, there is no connection between which employees would begin to work from home and whether ceasing their particular commutes would do anything to relieve congestion. Many employees who might qualify for the credit contribute nothing to congestion, either because they drive on non-congested roads or they travel at times when congestion is not a problem. There is no analysis demonstrating that employees who might qualify for the credit drive in sufficient numbers on particular roads and at particular times to make even a dent in the state’s congestion problem, the worst in the nation.

To put this into perspective, the governor proposes a cap of $50 million annually which equates to a maximum of 25,000 drivers in a Massachusetts workforce of almost 4 million. And, of course, the vast majority of our residents work in jobs or sectors such as hospitals or restaurants where there is no option to telecommute.

A second major flaw is the administrative complexity involved in developing and implementing such a program. Many employees already work from home but only new telecommuters would qualify for the credit. What about employees who currently work from home for two days — would they qualify if they jumped to five days? What about employees who must come into the office a day a week but otherwise work from home? The permutations are endless. Unless the state simply accepts the employer’s word, which means there would be no oversight, a large bureaucracy and complex regulations would be required to administer the program. The more targeted the state makes the program, the more complex the resulting rules and bureaucracy.

Beyond the added costs of administration, will employers be open to dealing with the regulatory requirements? And is a $2,000 credit sufficient to motivate them in any case? The employer response is likely to be disappointing.

Should the program prove popular, it will not be cheap. In fact, under the governor’s proposal, the state subsidy of $3.80 per trip for the tax credit (assuming 25,000 participating employees avoiding two trips a day 261 days a year) would be greater than the current subsidy per trip ($3.20) for the MBTA, a costly irony. As the program grows in popularity, the cost to taxpayers grows commensurately. Compare that to the MBTA, where the more commuters it takes off our congested roads the less the state subsidizes each trip.

Finally, there is the matter of timing. Even if the transportation bond bill that includes the tax credit were to be approved by the Legislature this fall, it would take many months to develop the regulations and many more months for employers to work with their employees to implement a telecommuting program. Realistically, the absolute earliest the credit would have any impact on congestion, if it had any at all, would be calendar 2021, an unacceptable delay given the intensity of the existing problem.

Baker has stubbornly resisted more direct and proven ways of addressing the congestion problem through roadway pricing. Many countries, states, and cities across the world have successfully deployed variable tolling to dramatically improve the flow of traffic on congested roads. (See my earlier CommonWealth piece on this subject) Why not undertake a modest pilot program on the Tobin Bridge or the Mass Turnpike to reduce tolls during off-peak hours and charge slightly higher tolls during the prime commuting hours?  A pilot program could be designed so drivers would still pay the same in total, but the tolls would be adjusted for low-peak and high-peak hours. Pricing governs consumer behavior in virtually every area, so why exempt roads?

Meet the Author
Why does the governor ignore this direct approach, instead offering an unwieldy, bureaucratic ,and ineffective tax credit that will do next to nothing to address one of the Commonwealth’s most serious problems?

Michael Widmer is a long-time analyst of Massachusetts state government who lives in Belmont.