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November 09, 2005

My Bad

Whoops: it looks like I got much of this post simply wrong. 

To recap, Brookings Institution scholar Margy Waller wrote an article in the Washington Monthly promoting car ownership for the working poor (which strikes me as reasonable, on balance), and also proposing a $100 billion annual federal tax credit to subsidize commuting costs (which stuck me as wrong-headed).

But one of the reasons I so strongly disliked Waller's commuting subsidy was that I assumed -- apparently wrongly -- that she was proposing that more expensive commutes be given bigger subsidies.  That, in my view, would create all kinds of perverse incentives, the worst of which would be to subsidize sprawl, by giving people who live in the most inaccessible locations, with the longest, highest-cost commutes, the biggest payouts.

But Ms. Waller herself now informs me that, while it wasn't spelled out in her Washington Monthly article that floated the idea, it was never her intent to link the amount of the tax credit to the cost of commuting.  Rather, people with any commuting costs would be eligible for the exact same credit.  So, if you have a choice between a cheaper commute on transit, and a more expensive one in a car, you can choose the cheap commute and pocket the rest of the tax credit as a bonus.

That seems a lot more reasonable than I first thought, as it doesn't exclusively favor longer and more expensive commutes.  So even though I'm still quite cool to the idea, I take back what I said about it being nutty.  Sorry, Margy!

There are still plenty of reasons to be skeptical about a commuting tax credit, though.

First, it clearly favors motorized vs. nonmotorized commutes -- that is, you'd have to spend money on your commute in order to qualify for the credit.  So folks who are lucky enough to be able to walk to work get nothing; folks who bus or drive get a credit.  This is essentially begging people to rack up commuting costs, even if they don't need them.  It's also asking them not to walk for transportation -- which studies now suggest is a contributing factor in the twin epidemics of obesity and physical inactivity.

Second, it still seems strange to me to focus on subsidizing commuting costs, rather than raising income generally.  That is, if I had to choose between a generalized earned income tax credit (one that helps all low-income workers, not just those with commuting costs) and a tax credit focused specificially on commuting costs, I'd prefer the former.  As to the argument that folks with young children really need a car -- well, not all low-income folks have kids.  And some of those who do might prefer to use a tax credit for child care and a short commute, or on a home near convenient transit, rather than spending (or wasting) some of the tax credit on a car.  I'd prefer to let them decide what to do with their money.

And third, this kind of proposal seems to be just the sort of thing that could get mangled in the political process.  Sure, the original proposal wouldn't favor longer commutes.  But after it gets through the rural-dominated US Senate -- not to mention the auto-industry and oil lobbies -- perhaps it would.

In the end, if I had to spend $100 billion a year on a program to lift the prospects of low- and middle-income Americans, I'm not sure that this is the way I'd do it.  But it's probably not as terrible an idea as I thought at first.

Posted by ClarkWD | Permalink

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Comments

Is this an income tax credit? Most people I've known who make little money generally avoid itemizing on their tax returns, so I'm a little unclear on how this would help.

But then I guess I should just go read the article, eh? :)

Posted by: Eric | Nov 9, 2005 8:33:45 PM

100 billion dollars is a significant chunk out of the federal budget. If I was Chair of the budget commitee in the senate and had an extra hundred billion dollars that I could allocate however I wanted, I would use the money to cut the defecit. In 2004 the US spent $321,566,323,971.29 (thats 321 billion) in intrest payments alone. If we cut the budget (which would hurt) and had a surplus, then used that surplus to pay back the debt, we would be saving tens of billions every year in intrest payments, and that money we could then redirect towards improving worker reeducation programs and small buisness grants, bolstering the middle class.
This doesn't do anything for commutes, but overtime we could use the money to lower taxes for low income familys and put more money into their pockets, so maybe they will buy that new energy efficent car instead of a used suv.
P.S. The government spent 18 billion in october paying off the defecit. Thats around 600 million a day.

Posted by: Gary Durning | Nov 10, 2005 10:42:04 AM

Eric -
To save you from reading -- it works as a tax credit, not a tax deduction. If you could prove you had commuting expenses and that your income was below a certain level, you could claim the credit. And it's refundable -- meaning that, even if you don't owe any taxes, you could get a tax refund.

It's kind of like the Earned Income Tax Credit, as I understand it.

Posted by: Clark Williams-Derry | Nov 11, 2005 5:24:55 PM

What I still don't understand, and what Waller didn't answer in her rebuttal to Earl Blumenauer's letter in the current WaMo, is why a $100B expansion of the real, proven, time-tested, works-like-a-charm EITC (nearly quadrupling its budget!) wouldn't do the trick. No, instead she lays into Blumenauer for consigning poor workers to inadequate public transit in order to make sure the wealthy are not delayed... sacrificing the working poor on the altar of a 'PC' policy agenda... holding hostage the income prospects of low-income workers and the children that [sic] depend on them until the rest of us 'understand' the need to pass enough bond debt to pay for improved transit. [verb tenses changed]

Posted by: payton chung | Jan 3, 2006 10:30:12 PM

I've gotta agree with you, Payton. Seems to me that if you're poor, there are lots of obstacles to finding a good job. An expanded EITC could help with lots of them -- without the perverse incentives that come from a subsidy that focuses only on commuting costs.

Posted by: Clark Williams-Derry | Jan 4, 2006 4:10:04 PM