Commuters are about to get screwed on a major payroll tax break at the end of the year—unless Congress, currently paralyzed by the government shutdown and the threat of a debt default, steps in.
Through the current pre-tax benefit, commuters can shield up to $245 of their earnings from taxes to pay for fares—a major savings boon for LIRR and Metro North riders, as well as express bus riders in New York City.
But starting January 1, it is scheduled to slide to only $125 per month—almost cutting the benefit in half.
“It’s a big savings for a lot of people,” said William Henderson, executive director of the Permanent Citizens Advisory Committee to the MTA. “Nothing seems to be moving. All attention is being directed to the debt limit and to putting some kind of plan to fund the government in place. This isn’t getting a lot of attention.”
A rider who commutes from White Plains to New York City and has a 30% tax rate would pay only about $175.50 for a monthly ticket—a major decrease from the $249 price tag.
Next year, they would see their monthly cost jump to $211.50—an increase of more than 20 percent.
“Commuters from the suburbs will likely see the biggest impact from the benefit cap shrinking to $125 a per month,” said Dan Neuburger, president of Wage Works Commuter Services, which provides pre-tax benefit options to workers and employers. “That’s a raw deal for commuters who will be left out in the cold this winter if Congress doesn’t address this before the year’s end.”
Senator Charles Schumer introduced a bill in the Senate to prevent this plunge in June, and there is similar legislation in the House—but all attention right now is focused on the government shutdown and debt crisis, not commuters.
Rebecca Gonzalez, a 28-year-old healthcare worker from White Plains, said the cut in the benefit would be horrible. “[I’ll continue] to come into the city,” she said. “But if it gets worse, [I] will contemplating changing jobs.”
Tom, a 24-year-old French horn musician, told the Post it would be a strain on his wallet. “I will have to take up a few more gigs,” he said. “Probably an extra gig or two. Be smarter with money, watch it more carefully.”
In 2009, commuter tax benefits were initially raised so that they would match the amount set for pre-tax parking benefits—but this expired in 2011.
Under a fiscal cliff deal early this year, the commuter benefits were restored to the level of parking benefits, as well as retroactively for 2012—but are set to expire at the end of the year.
Even if the full commute tax benefits are saved on December 31, a last-minute decision would challenge human resource departments.
“Time really is running out,” said Henderson. “Employers are going to need some lead time to put the benefit level where it needs to be. You can’t pass it at the eleventh hour. It’s just not realistic.”
Schumer said that although the deadline is coming quickly, he will pull out all the stops in November or December when the Senate discusses tax changes.
“We can’t throw commuters in the metropolitan area under the bus, and allow this critical tax break to expire,” he said.