Ottawa -- Companies could offer Canadian workers transit passes with no income tax deduction if Ottawa makes a budget change promoted by the country's major cities.

The wide-ranging proposal would give a big boost to bus and subway use across the country. In Winnipeg, it would benefit bus service and riders, and in Canada's larger cities such as Toronto, it could help reverse declining use of extensive subway and street-car systems.

The tax-free transit idea was pitched yesterday by deputy mayor Jae Eadie on behalf of the Federation of Canadian Municipalities, and touted as a way to help Canada solve its greenhouse gas dilema.

"The federal tax system should support rather than hinder environmental sustainability," federation president Eadie told the parliamentary finance committee.

The federation's proposal would make employer-provided transit passes a non-taxable benefit, a move it believes would prompt more businesses to offer free passes and increase usage of public transportation.

Winnipeg Transit director Rick Borland said many businesses currently offer free parking to their employees, which is then claimed as a business expense. But workers who receive free transit passes from employers are fully taxed on that benefit.

According to the federation, that gives a federal tax advantage of about $570 per year to the average automobile commuter over the average public transit rider.

Eadie said the tax change would get more workers using Winnipeg Transit, and ultimately, produce more revenues that the city could use to improve bus service.

"The idea of this is to reduce the number of cars travelling on streets and to encourage greater use of public transit, thereby reducing the emissions into the air," Eadie said.

A Transport 2000 study estimates tax-free transit passes for workers could eliminate up to 300 million kilometres annually of urban vehicle travel within 10 years.

Such a decrease would result in a 35 per cent reduction in projected rush-hour traffic in Canada's major urban centres.

The federation argues those reductions would save billions of dollars in road construction costs, avoid tens of thousands of tonnes of greenhouse gas emissions per year and relieve traffic congestion.

Anne Lindsey of the Manitoba Eco-Network described the proposal as a "fabulous" idea to help Canada meet its commitment to fight global warming.

"People would support it 100 per cent," she said. "Public transportation is definitely the way to go."

Liberal MP Reg Alcock said he would back such a tax-change and called on the Finance Department to give it a close look.

"I think it is a very innovative idea," Alcock (Winnipeg South) said.

However, the Finance Department doesn't appear keen to make any transit tax changes.

"Our position is that while it is important to encourage public transportation, the income-tax system is not the best way to do it," a department spokesman said.

While the numbers haven't been crunched to see what it would cost the federal treasury, the finance official said there is also an inherent unfairness in giving some transit riders a tax break.

"It would be unfair to the bulk of people who have to purchase their own transit tickets or have to drive to work because there is no public transportation," he said.

The Manitoba Chamber of Commerce didn't think there would be a rush of employers eager to offer free passes as part of a tax change that doesn't directly benefit them.

"I don't see a groundswell of employers running out to do this kind of thing," said Lance Norman, MCC executive vice-president.