University of California Transportation Center

Employer-paid parking is an invitation to drive to work alone. Thus, it increases traffic congestion, air pollution, and energy consumption. To deal with problems created by employer-paid parking, I propose a minor technical change in the Internal Revenue Code. The proposal is that employers who subsidize employee parking should be required to offer employees the option to take a taxable cash travel allowance equal to the fair market value of the parking subsidy. Case studies and a statistical model suggest that offering employees the option to cash out their parking subsidies could reduce solo driving to work 20 percent, reduce automobile travel to work by 76 billion miles per year, saving 4.5 billion gallons of gasoline per year, eliminate 40 million metric tons of CO₂ emissions per year, and increase tax revenues by $1.2 billion per year. These objectives would be accomplished by offering commuters the option to take taxable cash in lieu of a free parking space.