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Misperception of the commuter allowance

Experts say the commuter allowance increases income inequality in Germany and contributes to higher pollution. But, as Konstanz researchers show in a recent study, the public perceives the effects differently. Informing individuals about the true effects increases support for policy reforms that would be better for the environment and social inclusion.

More than 20 million taxpayers in Germany benefit from the commuter allowance (“Entfernungspauschale” in German) in their annual tax returns. A representative survey by Konstanz researchers Adrian Rinscheid and Marius Busemeyer now reveals that misperceptions about the true effects of this policy instrument are wide-spread among the population: Many Germans consider it to be fair and ecologically sensible. However, according to authorities and expert associations such as the Federal Environment Agency and Öko-Institut e. V., the allowance in fact leads to increased environmental pollution and promotes income inequality. Providing targeted information on the actual disadvantages of the policy can, however, help correct perceptions, as the researchers explain in their current policy paper.

Reality and public perception
In tax declarations, the commuter allowance enables individuals to claim tax reimbursements for their daily commute to work, thereby promoting increased traffic and the trend for long commutes, since it compensates for travel expenses. Demonstrably, this has negative effects on the environment and climate protection. For example, the Federal Environment Agency has calculated that the allowance results in greenhouse gas emissions equivalent to 4 million metric tons of CO2 per year. In addition, it increases inequality: High-income groups benefit from the commuter allowance more than low-income groups because the latter pay less taxes and are less likely to exceed the standard deduction for income-related expenses. "The commuter allowance therefore reinforces income inequality while costing the state budget billions in lost tax revenue," Rinscheid says.

In their representative survey of 4500 German citizens in August 2022, Busemeyer and Rinscheid showed that public perceptions of this instrument are very different from the real effects: For example, 43 percent of Germans do not believe that abolishing the policy would have a positive impact on the environment, according to the survey. This compares with just under 17 percent with the opposite opinion. More than 46 percent of Germans believe that social inequality would increase if the allowance were abolished. Only slightly more than 12 percent assume that abolition would not have this effect.

Public support due to a lack of information
"We assume that, to some extent, public support for the current regulation is based on a lack of knowledge about the impact of the commuter allowance," Busemeyer says. The researchers tested this assumption in their survey with an experiment: Respondents were randomly divided into groups, which were given different background information on the commuter allowance. They were then asked for their approval of four possible reform options.

The information showed a clear effect: For example, when respondents were informed about the distributional impact of the policy, they were more likely to support the introduction of an income-independent "mobility premium." Information on the environmental effects of the commuter allowance led to increased support for the Scandinavian model, which provides for the deduction of car journeys only if there is no public transport alternative. "We therefore recommend that information on the social injustice and environmental disadvantages of the commuter allowance be introduced into the public debate, while publicizing alternative models that mitigate these negative effects," the researchers concluded.

This article is based on a press release from the think tank "Das Progressive Zentrum."

Key facts:

  • Original publication: A. Rinscheid & M. R. Busemeyer: Die heilige Kuh des deutschen Steuerrechts: Wie sich das verzerrte Bild von der Entfernungspauschale korrigieren ließe. Policy Paper No 10; 24 February 2023
  • All previously published policy papers can be found at: https://www.exc.uni-konstanz.de/ungleichheit/forschung/publikationen/policy-papers/ 
  • Professor Marius R. Busemeyer is professor of political science with a focus on comparative political economy at the University of Konstanz and speaker of the Cluster of Excellence "The Politics of Inequality".
  • Adrian Rinscheid is an assistant professor of environmental governance and politics at Radboud University in Nijmegen (Netherlands) and visiting researcher at the Cluster of Excellence "The Politics of Inequality" at the University of Konstanz.
  • Funding: German Research Foundation (DFG) within the framework of the Excellence Strategy.