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Evaluation of Active Pricing Schemes Expectations, Revelations, and Illuminations Donald Shoup, University of California, Los Angeles Edward Sullivan, California Polytechnic State University, San Luis Obispo Kristian Wrsted, Norwegian Public Roads Administration LESSONS LEARNED FROM cash-out to 63% afterward. For every 100 commuters, PAYING FOR PARKING parking cash-out induced 13 solo drivers to shift to another mode. In another study, of the 13 former solo Donald Shoup drivers, nine joined carpools, three began to ride public transit, and one began to walk or bike to work. With Employer-paid parking is the most common fringe ben- three times as many commuters switching to carpools as efit offered to workers in the United States, and 95% of to public transit, we see that parking cash-out can American automobile commuters park free at work. reduce solo driving to work even in cases where public Free parking at work amounts to a matching grant for transit is not available. commuting by car: employers pay the cost of parking at Parking cash-out increased the employers' costs by work only if commuters are willing to pay the cost of only $2 per employee per month, because they saved driving to work. Commuters who do not drive to work almost as much on provision of parking spaces as they do not receive an equivalent subsidy. This matching- paid in cash to commuters. In addition, federal and state grant feature of employer-paid parking helps to explain income tax revenues rose by $65 per employee per year why 91% of commuters drive to work and why 91% of because many commuters voluntarily traded their tax- their cars have only one occupant. exempt parking subsidies for taxable cash. And from a A few employers offer commuters the option to take human resources perspective, employers praised park- the cash equivalent of any parking subsidy offered. ing cash-out for its simplicity, fairness, and role in help- Offering commuters the choice between a parking sub- ing to recruit and retain employees. In summary, sidy and its cash equivalent emphasizes that even free parking cash-out provides benefits for commuters, parking has an opportunity cost--the forgone cash. The employers, taxpayers, and the environment. option to "cash out" a parking subsidy raises the effec- The cash-out provisions in California are unique tive price of commuter parking without charging for it. among the states, however. Federal policy actually subsi- Commuters can continue to park free at work, but the dizes solo commuting because federal tax law treats cash option also rewards commuters who carpool, ride employer-paid parking as a tax-exempt fringe benefit. To public transit, walk, or bike to work. solve this problem, I suggest one simple amendment to California law requires many employers to offer the tax code: condition the tax exemption for employer- parking cash-out if they subsidize commuter parking in paid parking on that employer's offering commuters the spaces rented from a third party. The evidence suggests option to cash out. The nonitalic text quoted below is the that parking cash-out produces significant benefits. Internal Revenue Code's existing definition of employer- Case studies in Southern California found that the solo- paid parking that qualifies for a tax exemption; the italic driver share fell from 76% before the offer of a parking text is the proposed amendment. 39