Fringe

You may have heard that the economy is in a bit of a funk, and that it's needs some shakin' up and fixin'. You may have also heard that back in September, Treasury Secretary Paulson proposed a $700 Billion bailout plan that was stunningly defeated by the House. This caused great dismay and much hand-wringing and so

by the end of the week, the House reversed course, prompted by fears of a global economic meltdown and by old-fashioned political inducements added by the Senate: a portfolio of $150 billion in popular tax provisions, including credits for the production of solar, wind and other renewable energy, and an adjustment to spare middle-class families from paying the alternative minimum tax.

They needed to convince 12 legislators to change their votes. One of the inducements added was the Bike Commuter Act possibly because Earl Blumenauer, the legislation's sponsor voted no on the Emergency Economic Stabilization Act of 2008.

In the end, 33 Democrats and 24 Republicans who had voted no switched sides to support the plan. President Bush quickly signed the bill, called the Emergency Economic Stabilization Act, on Oct. 3.

Earl's Long Fight

Earl Blumenauer has been working on this bill for seven years. In 2006 it was called the Bicycle Commuters Benefit Act. That was the third time it'd been introduced. It proposed a $40-$100 per month, non taxable benefit. In 2007 the Democrats retook control of the House and James Oberstar, Blumenauer's Bicycle teammate, became the House's Transportation Committee Chairman and he expressed an interest in passing the law in the 110th Congress.

By July, things seemed hopeful. The law was added to the Renewable Energy and Energy Conservation Act of 2007 - with a reduced benefit of $20. The law made it out of committee and seemed to have a good chance of passage. Republicans Patrick McHenry and Doc Hastings ridiculed it.

Nonetheless in December it seemed that the law would pass, until it didn't.

The Senate passed an energy bill with overwhelming bipartisan support last night but only after a Republican filibuster threat forced Democratic leaders to ditch the bill's tax package, which would have extended tax breaks for wind and solar projects while reducing breaks for the biggest oil and gas companies.

The Bicycle Commuter Act was part of that Tax Package.

Which brings us back to the reintroduced Emergency Economic Stabilization Act.

Ironically, Earl Blumenauer voted against it. [And I thought he was pro-bike. Sheesh].

After seven years of toil, Blumenauer’s Bike Commuter Act is finally going to become part of the U.S. tax code, and because of the way Washington politics works, he was forced (by his conscience) to vote against it.

This is not exactly how anyone wanted it to go down.

“He was looking at the big picture, the state of the economy,” said Lucia Graves, a spokeswoman for the congressman. “If anything it was a diversion,” she said of the cycling tax credit. “It’s great that it was on there, but it was not the point.”

Fallout

Since it was jammed into an unrelated bill, it makes the BCA look like pork.

many are decrying the act because it is part of an assortment of pork added to the bailout that some find frivolous

Or like a economic policy statement

American oil, clean coal, natural gas and nukes are the solutions to our economic malaise, not bicycles and windmills.

Actually none of those things are solutions to our economic malaise, they're energy independence initiatives.

[Aside: The author of the above letter also wrote:

Am I missing something or if this were to succeed, wouldn't New York City look like Beijing did 20 years ago?

NYC Planning Commissioner Amanda Burden might respond yes, that's the point.

It will really transform the culture of the city from a car-oriented city to a bike-oriented city]

The BCA obviously isn't about Economic Stabilization. Nor is it pork. Pork generally "refers to spending that is intended to benefit constituents of a politician in return for their political support, either in the form of campaign contributions or votes." And while some people in Portland will benefit, this law isn't local in nature. Nor do I see anyone getting much in the way of campaign contributions from this.

It isn't even really an energy initiative. Sure, it has energy benefits. But it could have as easily been placed in environmental, health, transportation or urban development legislation. What it's really about, is equality.

What is a Fringe Benefit, and why is it being extended?

The IRS says

A fringe benefit is a form of pay for the performance of services. For example, you provide an employee with a fringe benefit when you allow the employee to use a business vehicle to commute to and from work.

Any fringe benefit you provide is taxable and must be included in the recipient's pay unless the law specifically excludes it.

Commuting benefits are not tax deductible - except for all the exclusions. Originally parking was the only exclusion. Even if your employer gave you free parking, this benefit was not taxed. Some companies wanted to be able to offer people the choice of a parking space or a cash payout. The Taxpayer Relief Act of 1997 allowed employers to do this, but if you took the cash, you still had to pay a tax on it.

Then people started asking "Why are we subsidizing driving on one hand (by not taxing this benefit) and promoting not driving on the other?" They could have fixed this in two ways:

1. Allow employers to give those who don't use parking a tax free payout equivalent to the benefit of parking. [Actually, if you wanted to make it fair, this would have to mandatory, not voluntary]

2. Remove the tax-free exemption for parking and tax it like most other benefits.

But those solutions would have made too much sense. So, in 1998 the Transportation Equity Act for the 21st Century extended the fringe benefit to those who used transit or vanpools. Now you're employer could offer you free parking tax-free; give you a payout AND allow you to pay for your transit tax-free; or give you a partial payout (including none), but let you use some of your pay to pay for transit with untaxed dollars.

But if you walked or biked, you still had to pay taxes on the cash payout from not parking. And you still only got the fringe benefit if your employer bothered to set it up.

The BCA seeks to allow employees who bike, to capture some of this fringe benefit exemption.

Of course, people who walk, roller blade, segway etc.. are still left out. As are those, like me, whose employer doesn't offer it.

The whole thing reminds me of a Monty Python sketch where they put an actor in platform shoes so that he looks taller. Then he's too tall so they dig a hole for him to stand in. But then he's too short, so they put the actress in a hole...and on and on it goes until they're both standing in deep holes on top of giant stilts (or something).

In addition to being slapdash; the breakdown is neither fair, nor in line with our national environmental, energy or urban development goals.

Parking: $220 a month

Transit: $115 a month

Biking: $20 a month

So you can see that if anyone really thinks that this $1 million a year for biking is too much, there is plenty of money to be saved in reducing the parking benefit down to the transit level.

It's odd that McHenry and Hastings are against this legislation. It is after all a tax cut. McHenry is a Hero to taxpayers, and Hastings says:

We need to keep tax rates low and allow Americans to keep more of their own money to save, spend or invest.

OK, so why are you against this tax cut?

How the Program Works

It goes into effect January 1st, 2008.

Bikeleague writes

The original intent was that an employer could now provide up to $20 a month in incentives related to an employee's bike commuting, to include, but not limited to, bike parking facilities, shower facilities, and maintenance then deduct that amount from their taxable income.

But your employer has to set it up (it's voluntary) so you need to talk to them about it. It works the same as the transit benefit. They can give you some or all of the benefit, tax free, in addition to your pay, or they can let you set aside some of your own pretax dollars to pay for whatever they don't give you.

Locally

In the Washington area

WABA plans to promote the new tax break by working with the Metropolitan Washington Council of Governments. The council already has a program in place, Commuter Connections, to inform employees about methods of transit. It also plans to work with the D.C. Council, particularly with Councilman Tommy Wells.

“We need to get employers and people eligible to know about it so that they can then take advantage of it. For folks who have thought about riding a bike but haven’t made the switch, this could be a great incentive to spark this change,” said Charles Allen, Councilman Wells’ chief of staff.

The city of Alexandria hired Urban Trans Consultants to lead its Local Motion program

Urban Trans works with firms to help them understand transportation options for their worksite. Any businesses based in Alexandria can discuss transportation strategies and options with the firm at no charge.

BCA will surely become another transportation benefit they'll discuss.

Alex Block [a planner with Urban Trans] said a recent trend is for businesses to promote the health benefits of certain kinds of transportation. A business might want to provide bike racks and showers at their workplace, for example, so that employees can bike to work.

Celebrate?

It's nice that something has happened on this. I doubt many people will get anything out of it. And those that do will get little. I doubt the law will change any behavior. But perhaps its the camel's nose under the tent.

“It’s a totally weird, ironic political situation,” Mr. [Jonathon] Maus said. “It’s a pretty small victory. But this gives a lot of people around the country the ability to walk into their human resources office or their manager’s office and ask for the credit. It helps move the conversation forward.”

Andy Clarke, president of the League of American Bicyclists, [who bought a (small and cheap) bottle of champagne to crack open] said

"It's definitely a day to celebrate just this one little thing that has been achieved after seven years," Clarke said. "It may not be a total game changer—it's still a relatively small break—but it gets us closer to the kind of treatment that cyclists in the U.K. and other parts of the world have had for years."

Comments

[AJ]

Wow! That was a lot to read! Nice work and well said. Thank you!

[freewheel]

This is the most comprehensive analysis I've seen anywhere on the new benefit. Thanks.