Abstract:
Amid global climate change concerns, policymakers worldwide are increasingly scrutinizing environmentally harmful regulations. This study examines the tax deductibility of job-related commuting costs, which has faced criticism for promoting longer commutes and greater congestion. Through a controlled, randomized survey experiment, we confirm that the tax deductibility of commuting costs increases subjects' stated willingness to accept longer commutes, albeit with minimal economic impact. Increasing the deduction rate by €0.10 per km leads to an average acceptance of 327-meter-longer (0.2 mile) commutes. In contrast, we do not find subjects to be attentive to changes in the size of the tax deduction when such changes are presented as tax-deductible expenses rather than as direct cash effects. However, abolishing tax deductibility significantly reduces stated commuting distances by approximately 1.82 km (1.13 miles). These findings highlight people's responsiveness to the mere presence of the commuter tax break, while being less sensitive to its specific size. Policymakers should consider these findings when evaluating the effectiveness of such tax deductions in mitigating climate change or their economic efficiency effects.
