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From
Crains:
Tucked into the massive federal spending and tax-cut agreement reached by congressional leaders this week is a measure that will save New York mass-transit commuters hundreds of dollars apiece each year. Employers will save as well.
The provision nearly doubles the maximum amount of pre-tax income they can use to pay transit fares. Currently $130 a month, the limit will be raised to match the amount that people who drive to work can spend in untaxed earnings on parking fees—$255 per month in 2016.
Moreover, just like the parking benefit, the transit break will be permanent and will rise annually with the cost of living if Congress passes the mammoth bill as expected.
The biggest beneficiaries will be high earners who regularly take the Long Island Rail Road or Metro-North and spend at least $255 a month on fares. By participating in a commuter-benefit program such as TransitChek offered by their employers, they will be able to spend $3,060 annually in untaxed income on fares, up from $1,560—yielding a tax savings of about $1,200 instead of $625 for someone in the highest income-tax bracket.
The reduction in taxable income lessens employers’ payroll taxes, such as Social Security and Medicare. It adds up to 7.65% of what their workers spend in pre-tax money. It is nearly always greater than the $5 to $7.50 per employee per month that businesses pay a third party, such as WageWorks, to administer the program. But businesses with low participation rates among employees could end up paying more than they save.
From
Crains:
The New York City Council passed a bill Tuesday afternoon to require businesses with 20 or more full-time employees to provide access to a transit tax benefit. The heretofore optional program enables employees to pay for monthly train and bus fares with pretax earnings, potentially saving them hundreds of dollars on annual payroll and income taxes.
Companies, which can also save on payroll taxes but must bear the cost of administering the program, will face fines starting in 2016 unless they can prove hardship.
The transit benefits, typically provided via TransitChek in New York City, are currently used by roughly 1 million New Yorkers. According to its proponents, the new legislation, which now awaits Mayor Bill de Blasio's signature, will provide 450,000 more New Yorkers with access, saving them an average of $443 a year and injecting $50 million into the city economy.
While the savings on pretax income are real for employees, the argument that small businesses will save money as well is less certain. A report by transportation group Riders Alliance estimated that the legislation would save businesses $103 a year in taxes for every employee at the median wage level. But that doesn't take into account that administration of the program must be provided by the businesses, many of which may have to outsource the work.
The legislation creates additional costs in the form of fines for those that fail to abide by the bill. The legislation does allow the city's Department of Consumer Affairs to exempt businesses that demonstrate that compliance will be a financial hardship.
For critics of the bill, the idea of fining companies for failure to provide a costly program that was created by Congress as an option for businesses is yet another example of de Blasio-era legislation that burdens businesses.
