Subsidizing Public Transportation

Why We Should Subsidize Public Transportation

Well to start, we already do. Sort of. The federal government has a small piece of the tax code that is known as the "Qualified Transportation Fringe" benefit. The purpose of this benefit is to create a deduction to reduce the tax burden of commuting. This benefit ranges from $20 per month for biking to $245 per month for parking. The problem with this current system is that it must be set up through employers, and many employers simply do not have the time to file this paperwork. The end result is that few people have any idea of what the Qualified Transportation Fringe benefit even is.

Rather than continue down this relatively confusing path, the federal government could switch to a system that would directly subsidize transit. Rather than filling out complicated tax paperwork to get a transit rebate, a direct subsidy would enable transit agencies to simply reduce the prices of fares. 

Why is this Better?

First and foremost, directly subsidized transit fares would apply to everyone, not only those who work for companies that are willing to take the time to file the paperwork. This would make the entire system more efficient and allow everyone access to the subsidy. Fortunately, this would save time for employees and employers.

Decreasing the price of transit would increase ridership. According to basic economic principles, as prices drop, people are willing to consume more. Lower public transportation prices may encourage more people to leave their cars at home. This would reduce road congestion and pollution. 

Because the government would pay the gap between the charged prices and the original prices, transit companies would benefit from increased ridership. If public transportation operators receive greater revenues, they may be able to actually expand service to communities that need it. The budget and service cuts of recent years could be reduced or eliminated. 

Lastly, this is more fair. Right now the benefit applies to different people in different magnitudes. Because it is a deduction, it's value depends on income level. Because people at lower incomes are taxes at lower rates, they actually receive less of a benefit than do wealthy people. A direct subsidy would ensure that all people could take advantage of the best deal.