Our legislation expands transit tax benefits

Proposal would save commuters money at little cost to state

IN EXPLORING legislation to expand commuter transit benefits, we sought to save Massachusetts residents money and improve our environment. Then a global pandemic changed the entire transportation landscape.

Presently, use of MBTA services and regional transit authorities across the state are still just a fraction of what they had been prior to COVID. Commuter rail and subway ridership is only 40 percent of pre-pandemic levels, while bus service is about 60 percent.  By comparison, highway traffic has rebounded much faster and could surpass previous highwater marks.

Reducing transit costs and helping the environment still needs to be a priority, but so does addressing aftereffects of the pandemic.

Legislation expanding access to commuter transit benefits offered by employers would require Massachusetts employers with 50 or more employees to offer an optional commuter transit benefit program through which employees could use pre-tax salary dollars to cover eligible commuter costs, including transit passes, commuter highway vehicles, and bicycles. Once implemented, employees would no longer have to pay taxes on public transit expenses associated with commuting, up to the allowable federal amount.

Thanks to states that have already implemented similar programs, we have a good idea of how much money this will save Massachusetts residents. After a similar law was passed in New Jersey in 2019, commuters who made $45,000 annually and took advantage of the pre-tax benefit for monthly transit passes were projected to save $456 in income tax payments.

If this legislation succeeds in incentivizing public transit, it could also have a significant impact in terms of improving the commutes of those who continue to drive themselves to work.

According to a 2021 Texas A&M study, Boston-area commuters wasted more hours in traffic than their counterparts in all but one other city; and Massachusetts drivers burned through roughly 50 million gallons of fuel while stuck in traffic in 2020. Getting more people on buses and trains means fewer cars on the road, less reliance on polluting fuels, and shorter commute times for many. Outside Greater Boston, commuter tax benefits also could help bring new riders into the networks of regional transit authorities, many of which have struggled for years with low ridership and diminishing fare revenue.

This legislation also will benefit employers financially. The implementation of this benefit program can be done in-house or outsourced to third-party servicers. These servicers typically charge a 4 percent administrative fee, which falls far below the 7.6 percent FICA tax that employers would not have to pay on the withheld wages. Pre-tax commuter transit benefits also can reduce the need for employers to provide parking spaces and can help employers recruit and retain employees.

Better still, these commuter transit benefits would save Massachusetts residents and employers money at a relatively small cost to the Commonwealth. The Department of Revenue estimated that implementing S.1218/H.2036 would cause an annual loss of $20 million in tax revenues if employers with 20 or more employees were required to offer the benefit. Since then, the Joint Committee on Labor and Workforce Development has revised the legislation to require businesses with 50 or more employees to participate, meaning the estimated tax revenue loss will be even smaller than the initial Department of Revenue estimates. Any losses the Commonwealth does incur would be more than offset by the projected $3.1 billion increase in tax revenue that the Commonwealth would collect this year, and by the long-term savings associated with better air quality.

Meet the Author
Meet the Author

Steven Owens

State representative, Watertown
Passing this legislation is more important now than ever. Not only will doing so help the Commonwealth and its residents in the long-term but it would also quicken our post-pandemic recovery. We can make transportation cheaper, easier, and less harmful to the environment. In other words, we can make transportation better, and this legislation would be a big part of making that possible.

John Keenan is a state senator from Quincy and Steven Owens is a state representative from Watertown.