Saturday, December 18, 2010

Who gets paid to drive to work?

State legislators: I do! I do!

Let me give you a CPA’s perspective on the periodic controversy of travel payments received by state legislators for driving to the State House.

Most taxpayers are aware that commuting expenses are not deductible on their federal income tax returns. In Massachusetts, on a side note, there is a small deduction available for people who ride the “T” or buy an “E-Z Pass,” but this pales in comparison to the benefit enjoyed by state legislators.

The definition of “commuting” comes from the Internal Revenue Code (IRC) concept of “tax home.” Simply put, traveling to your tax home is called commuting and is not deductible. For most of us, our tax home is where we work and earn our pay; not where we live. If you live in Barnstable and work in Boston, you are traveling to your tax home (Boston). No deduction is allowed for that travel.

State legislators (in all states, by the way, not just in Massachusetts) are subject to IRC Section 162(h), which allows state legislators who live more than 50 miles from the capitol to declare their residence in the legislative district to be their tax home.

This flips the situation from “commuting to work” to “traveling away from home.” Travel away from home is tax deductible and essentially eliminates federal income tax on the per diem travel payments received by legislators.

At least one newly elected state representative announced that he will not take the travel stipend. That is an option, but there’s a better one.

During a debate that was videotaped by Cape Cod Community Media Center, Matt Pitta, WXTK news director, asked Lance Lambros and me if we would be willing to donate the travel stipend to charity. We both agreed.

The idea of refusing the travel payments, thereby leaving that money in the coffers of the state under the spending direction of the state legislature and administration, leaves me a bit cold. My confidence that this money will be wisely spent is low.

Matt’s idea of donating the money to charities of our choice is a terrific alternative. I will meet with Matt over the next couple of weeks and choose one charity for each month. My only stipulation will be that the organization either reside in the 5th Barnstable District or serve people in the district.

If all of our Cape Cod legislators joined in this effort, the combined contributions to our charitable organizations would amount to about $60,000 to $75,000 over the coming year.

What do you say, Cape Cod legislators?

18 comments:

  1. Cutting a commuting allowance for the legislators is a great idea. But will the vote come to support that? I doubt it. Using the allowance as a charitable donation, while nice, does not give the taxpayer relief for overly inflated bennes because it does not remove the expense from taxpayers side of things. I get the gesture, but frankly I would love to see the energy go completely to reform. I was amazed at the notion that giving legislators raises to charity rather than not take them was suppose to make tax payers feel better. Good explanation Randy. Thanks.

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  2. Linell, I agree that eliminating the travel stipend would be a good start. I don't recall ever watching the state legislature voting to take things away from themselves (which you acknowledge). A citizens petition could do that, but this is not a big enough issue by itself to generate such an effort, in my opinion.

    I suppose the debate might move into who can be a legislator. If there's no pay and no benefits, like we've gone to in Sandwich for our selectmen, then only people of means would run for the job. That argument is waged regarding the travel stipend as well, with one legislator saying that he wouldn't be able to afford to drive back and forth to Boston from Western Mass without it.

    On the other hand, you don't see state legislators in New Hampshire fighting for their jobs when they get in trouble. Because nothing (or little) is at stake financially, they just quit.

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  3. Carl Johansen Stated

    Good morning Mr. Hunt
    I like your approach to the travel
    voucher.

    Now if Lance jumps on the same train, it will provide a boost to what ever charity you decide to give too.

    I would suggest that both agree to give to the same charity each month as this would provide a better flow of money to whatever charity you decide.

    Since we are talking about charities It may be nice to put together a list of all the more needy ones within your district,

    My suggestion would be to start with those that are in need and are in shelters, especially during the cold months of the year.
    I am sure that we have even local folks here in Sandwich that might be in need during these hard winter months.

    Once you detrermine the actual donations per month possible, You may even find other ways to put this money to use for those more unfortuned among us.

    Carl Johansen
    A concerned Citizen of Sandwich

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  4. Carl, to be clear, Lance Lambros, in his new role as Cape & Islands Coordinator for Congressman Keating would not be subject to IRC 162(h). That only applies to state legislators.

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  5. Carl,

    As usual, you make a statement about something like 152(H), and, of course, it is wrong. Randy did clear that up for which I am pleased.

    You state that a list ought to be made. Again, who makes the list and how do they know all the charities out there. There are many that I believe you do not know about. You also seem to put your priority of the "unfortuned" (not a word) and I would put mine as the helpless, innocent unborn.

    I would also suggest that if Randy is going to do this, that he goes to the Cape Cod "Democrat" Times, and the Enterprise newspapers to ask charities to make their case. There should also be a committee of citizens made up of people from all walks of life.

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  6. I am amused quite frankly with Randy's subject "Who gets paid to drive to work". Well, I know a few right here in Sandwich, and, yes, you, the public pay for the commute. Take the police; nice new 4WD vehicles. They go home so that the cop and commute to the police station in an emergency, I guess. How many town cars go home at night. We know that the police and fire chief need one as their cars are probably not as dependable. I am not sure why we couldn't just give them $.50/mile instead of buying an expensive car. Mr. Johansen has brought this forward to Selectmen, people have written both to newspapers and this blog about it, and, no one picks up on it; not the papers, not the BOS, not the finance committee. Randy, great subject, great idea about giving to charity (please let me know where the money does go, I would be most interested), but Randy, it might be great if you could find someone in the know that would write about these town owned vehilces going home, maybe Carl Johansen. I know his investigation will have the facts straight and the people have a definate need to know. How about it Carl?

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  7. Carl Johansen,Good afternoon MR. Hunt.

    I realise that Lance is not part of the legislative process that you soon will be sworn in to do.
    Given that Lance may be pulling down some reimbursment for travelling from his newly found job working for our Congressional Rep?
    Perhaps, I assumed to much and judging from the above responce it may have hit some sort of a button.

    One thing for sure over the next severel years, you will get plenty of information about those in need.

    It goes with out saying that we have many charitable organizations that are in need of a little extra cash. It also is worth noting that most of us really do not know how many groups are in need of an extra boost.

    Once you determine the amount of the donation it will be, you may want to really look at what good the donation may do and even consider making a donation to 6 worthy groups rather then 12.

    Once you announce this intent in a more public manner it may even be worth setting up some type of a grant and have those that enter, explain the use of your grant. Then choose a few unbiased members at large to decide the charity that the donations will be going to.

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  8. Who can be a legislator is an interesting way to put it. One might also consider, who should be a legislator? I started in Federal Government in 1974 and it probably was my midAmerican work ethic but I found what I use to call the "get over attitude" among some government workers dissapointing and disturbing. I feel the same about those who take on the business of government. If there is to be compensation, than it needs to be reasonable and not developed from the perspective of government dollars grow on trees and I want my share.

    I believe in a professional government. Defining what that means at the local or state level is the issue as you point out. Salary and benefits need to stay in line with the private sector in my view. Of course the original intent of the citizen/legislator was quite different.

    No matter what level of government people in it should not take advantage of the taxpayer. Policy when it comes to any expense needs to be rational. AS they say, what goes around, comes around. The lack of trust many American's have in Government is not surprizing when it comes to issues like these.

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  9. Mrs. Grundman, have you become a Republican and walked away from the corrupt,(D)emocratic dictatorship of the gluttons?

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  10. I had a difficult time today reading the Cape Cod Times, front page story with that tiny little picture of Randy Hunt.....you would think that such a liberal rag would pick up the gauntlet that Randy has thrown down with respect to the travel per diem issue. What really irritates me is the attitude of 'entitlement' that even the newly elected officials have on Beacon Hill. I respect what Randy has offered particularly, giving to charity and not putting that money back into the big black hole known as the general fund. I am sure that he will receive a 'talking to' by the senior members with respect to their entitlements. Something like this...'Hey, new guy, you haven't been here long enough to stir up the pot, so back off and leave our entitlements alone...you won't last long around here doing this fellah...you Sandwich Cape Cawders...nothing but trouble....what do they put in the water down there anyway' How can anyone justify a benefit such as this when the entire world of everyday working men and women cannot receive payment for commuting to work? These things cause tea parties. To Randy, my total support and respect for trying right from the git-go!

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  11. Greg,

    The question is who can afford the commute. Obviously, Randy can afford it as he is giving the reimbursed funds to charity, but what about the "average Jane" who runs on a shoe string and needs the commuting money. Maybe she would be a great legislator, but not be able to commute. It does go both ways. Congrats to Randy for his humanitarian spirit.

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  12. Sam, I here ya, however what about that long line of auto's I watch going over the bridge every morning filled with folks who work in Boston....everyday....and I would wager for less money than our almost part time representatives. Perhaps we should model ourselves after New Hampshire....do they really need to assemble on Beacon Hill as much as they do in order to justify per diem payments? Sam, how do you balance the entitlement with those who do it every day for gratis? It just doesn't pass the smell test for me and I am not sure someone who truly runs for office for the good of the people....would they choose not to run if they paid their own way? Its all about fairness.... and I be you Randy could find use for that money on a personal level except for that outstanding conscience he has developed over time....he's the beginning of a new breed I hope...gives me faith....almost!

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  13. Greg,

    Many of the cars lining up to go over the bridge to Boston and environs do have the commuting paid for. They just pad their travel and the IRS doesn't know. Also, those who take the bus are reimbursed by employers. Yes, it is a "gift" to get the perk, but its not an outrageous perk.

    Lionel Train

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  14. @Lionel Train: Some employers provide parking and/or reimburse employees for commuting. The excludable amount from income for employer-provided parking is $230/month. The excludable amount for mass transit/EZ-Pass is $120/month.

    Anything more than that is taxable and the associated expense is not deductible.

    Compared to $45/trip for a state rep from Sandwich, the $120 is pretty light.

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  15. Randy,

    I think the question I was trying to answer was who gets paid to commute, not how much. I gave several examples. You did respond to the traveling to Boston part, but never said a word about police cars going home for inside people, town planner, town building inspector, health agent etc. These guys may need the vehicles (not that I said MAY NEED), but do they all need SUVs. Who pays for it? Do they include it in their income?

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  16. @Lionel Train: The question of whether a town employee "needs" any vehicle or "needs" an SUV is a good one.

    Certain public employees are allowed by tax law to have government vehicles at their disposal without their employers including them in their W-2s. Not everyone falls into this category; primarily it's for emergency personnel.

    Doug Lapp, assistant town manager, put together a complete listing of all town vehicles, age, who uses them, etc. In my opinion, tt would make sense to adopt a plan to move to as few different vehicles as possible and ensuring that the vehicles aren't overkill for their intended use.

    On the other hand, the town saves money by having other departments inherit used police cars, for example. A used police car with a souped up engine is probably overkill for the fence warden, but it's a "free" vehicle.

    On the other other hand, trading that used police car in on a used car that's appropriate for its assignment might be a better strategy, especially if we always buy the same model of used car for all similar purposes. That might open the door to operating a motor pool efficiently.

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  17. Is it true that a State Representatives can deduct their entire legislative pay from their Federal taxes?

    Is it true that if you donate your travel per diem you could deduct that “donation” for tax reporting purposes?

    Forget who gets a work car to drive and who gets paid to drive to work, where do us private sector guys get a job where our entire salary is tax deductable?

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  18. @Anonymous 1/3/2011 11:29am:

    1) For all intents and purposes, yes, if the legislator lives more than 50 miles from the capitol. The manner is not as you describe, but it is true. See Internal Revenue Code Section 162(h).

    2) Yes, I will deduct my charitable donations on Schedule A, but keep in mind that I'll be reporting that travel stipend as income, so it's a wash. I'm happy to contribute this money to charity but I don't want to be on the hook for paying federal income taxes on it. And, since charitable donations are not deductible on the MA income tax return, I will be paying state income taxes on that amount even though I'm turning it over to a charity.

    3) As far as I know, the only job you can do this with is state legislator. Anybody can run for state rep or senator if you're a citizen, old enough, and live in the district. But I agree with you on your point that politicians have created a separate set of rules for themselves.

    On a side note, I'll be paying federal income taxes because of my CPA practice. Much of the benefit of the large write-offs disappears for those of us with other jobs (or whose spouses have jobs) because the alternative minimum tax calculation disallows the legislator travel deduction. That nullifies most of the benefit derived from 162(h). Nonetheless, it is true that if someone's only job is state legislator and they live more than 50 miles from the capitol, they can deduct enough to avoid paying federal income taxes.

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