Employees and employers could save money through pre-tax commuter benefits.
For many Seattle families, public transit costs are a major household expense. National data shows that transportation costs are the second highest household cost after housing, affecting cost-burdened households in Seattle. But few people know they can set aside money for transit expenses through a pre-tax payroll deduction. That money can be used to commute via bus, rail, ferry, or water taxi.
Pre-tax commuter benefits save employees and employers money in the long run by allowing workers to allocate up to $255 for transit costs before taxes are applied. For a Seattle worker making between $38,700 to $82,500 per year and deducting $100 per month in pre-tax commuter benefits, that Seattle worker would save $356 a year in taxes.
Commuter benefits also save businesses money. By offering the pre-tax benefit, businesses save about 8% on payroll taxes because the commuter benefits are allocated before taxes are applied. In the example above, the business would save $92 per year for that one employee.
This is a rare opportunity to reduce taxes for both employees and employers, and the tax discount is significant enough that more people may be encouraged to take public transit, which in turn reduces our impact on the environment. The City of Seattle would be following other cities, including San Francisco, Berkeley, Washington D.C., Oakland and New York City.
So why do so few people take advantage of pre-tax commuter benefits, which are available for everyone in the country? Often, it’s because employers and employees don’t know it’s available.
Since September of 2017, I’ve been working on a mechanism to require businesses to offer commuter benefits to their employees. The first step in my work was to allocate funding in the 2018 City Budget for the non-profit Commute Seattle to conduct outreach to Seattle businesses and educate them on pre-tax commuter benefits. Commute Seattle is an organization available to all businesses to provide outreach, education and technical assistance on many transit issues including pre-tax commuter benefits. My office has also conducted extensive business outreach throughout the summer, including working with leaders from Mayor Durkan’s Small Business Advisory Council.
Through my Sustainability and Transportation Committee, I introduced a Commuter Benefit Ordinance (Council Bill 119329), which would require Seattle businesses with 20 or more employees to offer an option to use this pre-tax commuter benefit.
Businesses won’t go it alone, of course. They will receive advice and assistance from Commute Seattle. Based on feedback from members of the Small Business Advisory Council, I have decided to move the implementation date from July 2019 to January 2020 and the enforcement date from July 2020 to January 2021 to ensure businesses have ample time to successfully implement this ordinance.
The proposed Commuter Benefit Ordinance passed my committee on Sept. 18, 2018, and will be considered by the full City Council on Monday, October 1.
By allowing employees to reduce their commuting costs and lowering businesses tax liability, the Commuter Benefit Ordinance will save money and can help reduce congestion and carbon emissions.