Commuting, Congestion and Pollution: The Employer-Paid Parking Connection

Employer-paid parking is a form of matching grant whereby an employer offers to pay the cost of parking if employees are wiling to pay all the other costs of driving to work. In this paper we estimate how employer-paid parking increases the number of vehicle miles travelled to work, the energy consumed by commuting, and total spending on parking and automobile commuting. We then attribute the ubiquity of employer-paid parking to the anomalous federal and state income exemption of employer-paid parking subsidies, and propose a tax policy that will encourage employers to offer their employees the option to choose a cash travel allowance in lieu of a parking subsidy. Finally, we estimate the benefits of cashing out parking subsides, and argue that cashing out parking subsidies is a fair, efficient, and simple first step to improve transportation pricing. One way to illustrate how parking subsidies strongly influence commuters' travel costs is to compare the average employer-paid parking subsidy to a hypothetical congestion toll. For commuters who receive employer-paid parking in downtown Los Angeles,, the average employer-paid parking subsidy is equivalent to 11 cents per mile travelled to and from work. Thus, imposing a congestion toll of 11 cents per vehicle mile travelled would raise the cost of driving to the Los Angeles CBD by only as much as employer-paid parking already lowers it.