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.

“A monthly MetroCard now costs $112—that’s $1,344 a year,” said Councilman Dan Gardonick, the bill’s author, at a midday rally preceding the council vote. “For many New Yorkers, that is an unavoidable cost.”

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.

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Jeffrey R. Ungvary President

Jeffrey R. Ungvary