Mass Transit:

Effects of Tax Changes on Commuter Behavior

RCED-92-243: Published: Sep 8, 1992. Publicly Released: Oct 14, 1992.

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Pursuant to a congressional request, GAO reviewed the role that tax policy plays in workers' commuting decisions, focusing on: (1) the contrast between tax treatment of mass transit and parking benefits; (2) how the current tax treatment influences commuter behavior; (3) whether proposed tax law modifications would encourage mass transit use; and (4) alternative efforts to discourage drive-alone commuting and encourage mass transit use.

GAO found that: (1) federal tax law favors employer-provided parking over employer-provided transit benefits, which encourages driving rather than mass transit use; (2) parking benefits are tax-exempt for employees, but transit benefits are taxable income; (3) proposed legislation before Congress would increase the allowable amount of tax-exempt transit benefits and begin taxing employer-provided parking; (4) employers consider cost, preference of employees, and the effects on productivity in deciding which transportation benefits to offer their employees; (5) employees consider the convenience, reliability, security, and comfort of transportation alternatives when deciding how to commute to work; (6) some proposed tax law changes would treat the value of employer-provided parking exceeding $145 or $160 per month as a taxable fringe benefit, but in some cities parking benefits are worth less than $145 per month and would discourage relatively few drivers from driving alone; (7) other general means that discourage driving include congestion pricing and gasoline taxes.

Matter for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: Legislation passed around the time the report was issued did not call for monitoring. Because further legislation is not expected in the near future, the recommendation is being closed.

    Matter: It is unclear how effective legislative changes in the tax treatment of transportation benefits, such as those currently proposed, would be in discouraging drive-alone commuting and encourage greater reliance on mass transit. Therefore, Congress may wish to consider including language in such legislation to direct the Secretary of Transportation to monitor the effects of increasing the tax-free limit on transit benefits and taxing parking. Congress may wish to use this information to determine if additional legislative changes are desirable.


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