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Oregon’s bike tax revenue is far below expectations, while admin overhead is going up

Posted by on December 18th, 2018 at 10:37 am

Customers at Universal Cycles on SE Ankeny are greeted with these signs at the checkout counter.
(Photo: Jonathan Maus/BikePortland)

Through three quarters of its first year in existence, Oregon’s $15 bicycle excise tax has added $489,000 into state coffers. That’s a lot lower than state economists expected. Overhead costs are also more than expected and are likely to climb even higher as officials beef up filing enforcement efforts.

As OPB reported last week, officials from the Department of Revenue, Oregon Department of Transportation and the Legislative Revenue Office have been updating lawmakers on receipts from the slew of new taxes and fees included in the $5.3 billion transportation package passed in 2017. Among them was the infamous $15 tax that applies to every new bicycle valued at $200 or higher sold in Oregon.

The tax was pitched as a way to force bicycle riders to have some “skin in the game” when it comes to funding transportation infrastructure. It was seen by advocates (The Street Trust opposed the fee but supported the package it was integral to) as a part of the compromise needed to pass a bill with funding for Safe Routes to School and public transit, while raising fees and taxes on motor vehicle use. The tax was also seen as a way to answer some voters who — despite it being terrible and ineffective — have long dreamed of making “cyclists pay their way.”

We’ve railed against the bike tax from a policy perspective in the past. Why on earth would Oregon want to tax a form of transportation that adds such tremendous value to our roads and lives? Given cycling’s return-on-investment, it makes more sense to pay people to ride them than to tack on a clumsy tax.

Now it turns out the bike tax isn’t an efficient revenue tool either.

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(Chart: State of Oregon)

Back in September, an official from the Department of Revenue told members of the House Committee on Transportation that the bike tax had raised just $289,000 through its first six months. Of that, only $133,000 had been transferred to ODOT’s Connect Oregon grant program where it will be earmarked for path and trail projects outside of the highway right-of-way. (Yes, that’s right, the way the law was written, the money can’t be used for on-street bikeways.)

“At this point it’s pretty labor intensive.”
— Xann Culver, Oregon Department of Revenue on their efforts to collect the bike tax

Now state officials estimate the bike tax will likely bring in about $900,000 in its first two years. That’s less than half of the $2.1 million they told lawmakers it would bring in every two years. At another committee meeting last week, officials released a chart showing that future year estimates will be even lower. Instead of $2.8 million every biennium, they now expect just $1.1 million. And that’s before subtracting administrative costs. ODOT Economist Daniel Porter told lawmakers that in hindsight, their estimates for the bike tax were, “A real shot in the dark.” He blamed Oregon’s lack of sales tax data and a misunderstanding of the “seasonalities” of new bike sales.

Back in September, Department of Revenue staffer Xann Culver said they had less than 100 retailers filing the tax. Joint Committee on Transportation Co-Chair Caddy McKeown (D-Coos Bay) commented that the number of retailers seemed low. “Was there some sort of plan to increase that number to make sure everybody is paying their fair share?” she asked. “Yes,” the DOR staffer replied. She then explained how they plan to bump up filing enforcement efforts do more research on their list of 350 bicycle retailers to see which ones are selling taxable bicycles, and follow-up on tips from retailers about others shops who aren’t filing. The state also plans to hire an additional auditor in the coming months to “do more enforcement.” “At this point,” Culver said, “It’s pretty labor intensive.”

So, while the estimated revenue from the tax goes down, it appears as though the amount it takes to collect it will be going up.

For more on how the bike tax is doing, read the OPB article. And tune into OPB’s Think Out Loud show today at noon where I’ll be sharing my views as a guest.

— Jonathan Maus: (503) 706-8804, @jonathan_maus on Twitter and jonathan@bikeportland.org

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NOTE: We love your comments and work hard to ensure they are welcoming of all perspectives. Disagreements are encouraged, but only if done with tact and respect. BikePortland is an inclusive company with no tolerance for discrimination or harassment including expressions of racism, sexism, homophobia, or xenophobia. If you see a mean or inappropriate comment, please contact us and we'll take a look at it right away. Also, if you comment frequently, please consider holding your thoughts so that others can step forward. Thank you — Jonathan

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katie
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katie

lol yeah no shit

Chris I
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Chris I

They got $15 from my 3 year-old for her $400 Islabike. Nice work, guys. This is really a great idea…

oliver
Guest
oliver

Awesome! Maybe we should try a bicycle licensing scheme.

J_R
Guest
J_R

Of the first $289k collected, only $133k was transferred to use on intended projects.

For those who struggle with basic arithmetic (state legislators, for example): the administrative costs are 56 percent of the collections. Wow!

David Hampsten
Guest

$489,000 / $15 = 32,600 bicycles for the first 3 quarters = 43,467 $200+ bikes sold annually in Oregon = at least $8,693,333 in annual sales of $200+ bikes.

Given a population of a little over 4 million in the state, slightly more than 1% of the state population received or bought a $200+ bike this year.

Portland has about 650,000 people, which is roughly 16% of the state population, so theoretically they bought 0.16×43,467 $200+ bikes = 6,955 $200+ bikes sold in 2018.

Given 50 shops that sell bikes in Portland (including department stores), each shop sold an average of 139 bikes this year.

No wonder both Performance and you LBS are going bankrupt.

Bjorn
Guest
Bjorn

This was entirely predictable, and in fact many including myself did predict it. This follows the pattern of bicycle licensing programs in other areas many of which have been repealed over the last 20 years because they either lost money or barely broke even. Tiny fees on many things is an awful way to raise revenue, the only good reason to impose a fee like this is to discourage a behavior, and I don’t see a lot of public benefit to discouraging bicycle sales. If you want to raise revenue do it through property or income taxes where an increase in the rate has no impact on the administrative costs.

Bobby
Guest
Bobby

I’m curious whether there’s been an attempt (or whether there will be an attempt in this future session in light of the SCOTUS Wayfair decision) to collect this tax from online retailers. I imagine that with a $15 disadvantage, people have/will turn to online sales at the cost to local bike shops.

Al
Guest
Al

This was a hateful piece of legislation brought about by rural Republican legislators who wanted to protect rail terminal and airport project funding in their districts. In effect your bike tax money was always intended to shore up rural rail terminal and airport projects. No kidding! You can’t make this stuff up.

The fact that it’s a complete debacle is of no interest to them. Their mission was accomplished.

What boggles my mind was that the Democratic majority was simply unwilling to stop this and even orgs like The Street Trust gave in. The bike tax is a complete negation of The Oregon Bicycle Bill, which incidentally was promoted by Oregon Republicans of a bygone era based on the simple economics of bicycling saving the state money on transportation infrastructure.

Racer X
Guest
Racer X

Has anyone done an audit of the bike sales from big box stores for compliance? Yes, they do have a lot of $100 bikes but now they retail many more >$200 bikes due to the value of the US Dollar (plus rising overseas wages and Trump Tariffs).

Sounds like an interesting research project for a PSU, etc. student.

CaptainKarma
Guest
CaptainKarma

So what’s the best road towards repeal?

Matt
Guest
Matt

> they plan to bump up filing enforcement efforts do more research on their list of 350 bicycle retailers to see which ones are selling taxable bicycles, and follow-up on tips from retailers about others shops who aren’t filing

Here’s a tip (or snitch, if you will): IBD’s (independent bicycle distributors, aka local bike shops) aren’t the only places selling taxable bikes. Your Walmarts, Dick’s Sporting Goods, and other sellers of less-cool bikes sell plenty that are over the taxable threshold.

Johnny Bye Carter
Subscriber
Johnny Bye Carter

Great, now we have to hear about how this is proof that cyclists don’t pay their way.

(gets the road cost infographic ready)

Al
Guest
Al

Repealing the bike tax could fit into Governor Brown’s agenda items 2. spend every dollar wisely and 4. reduce state’s greenhouse gas emissions (I used my words to abbreviate her agenda for this term).

Contact your legislator and ask them how THEY plan to eliminate the bike tax! They are unlikely to have an answer. Tell them that you expect one before the session begins in January and follow up on it. Also, meet them in person. They often have public meetings. Even if you can’t get a face to face, talk to a staffer. This puts the issue on their radar as I’m sure they are completely oblivious to it.

Serenity
Guest
Serenity

What did these state economists expect? Did they expect the cyclists they’re trying to screw to continue to buy their fancy new bikes in Oregon?

Middle of the Road Guy
Guest
Middle of the Road Guy

At least we get to tell drivers that we pay taxes – because I am sure that’s going to change their mind.

Joe
Guest
Joe

LAME

Steve Scarich
Guest
Steve Scarich

Today on Think Out Loud (OPB), there was a rare guest who did not obfuscate, spin, lie, or otherwise completely blur their message….Nice work Jonathan

OldRider
Guest
OldRider

Do we really expect laws from the moroons in Salem be rational ?

jered
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jered

To quote Nelson from the Simpsons (while pointing at Oregon Legislators) “HA HA!”

SD
Guest
SD

…And people were losing their minds over the Arts tax exceeding a 5% administrative cost.

Why can’t the legislators just admit it was a stupid idea. They don’t even have to tell the truth that it was political theater at the expense of a constituency that is too small to fight back.

soren
Guest
soren

I would like to point out that the bike tax was proposed by democratic party of oregon legislators.

As if we needed any more evidence of the democratic party’s committment to supporting transportation equity and mitigating climate change!

pengo
Guest
pengo

anyone who thinks bicycle sales will generate significant revenue has clearly never talked to a shop owner

Lester Burnham
Guest
Lester Burnham

The bike tax along with the Arts tax needs to go!

AndyK
Subscriber

Backwards and embarrassing. This should be a post about how people who buy bicycles get tax credits.

Al
Guest
Al

While several members of the committee made statements about the bill, the bike tax specifically was championed by Brian Boquist who also put this forth in prior sessions and has advocated for bike licenses and registrations in the past. As I wrote before, “What boggles my mind was that the Democratic majority was simply unwilling to stop this.” I speculate that there was some trade off but have no idea what possible benefit(s) Democrats on the committee or the general legislature extracted from going along with the bike tax. I have been tracking this issue for several years now and would love to learn more. Do you have specific feedback from committee members beyond newspaper quotes?

John Dovydenas
Guest
John Dovydenas

“We’ve railed against the bike tax from a policy perspective in the past. Why on earth would Oregon want to tax a form of transportation that adds such tremendous value to our roads and lives?”

Hey Jonathan, I thought you said this site was just a neutral source of news and wasn’t pro-bike? Not that there’s anything wrong with that. But this is just too ironic. You think that when something is valuable there should be no tax on it? I mean talk about hypocrisy and moral entitlement. Maybe we should eliminate income tax, because that crimps employment. And also property tax, because home ownership is decreased and rent is increased.

This line of argument makes you look extremely entitled. As if your some sort of protected class. Meanwhile that vast majority of freight, consumables, and people are transported via petroleum powered vehicles.

mark smith
Guest
mark smith

Is the bottle bill a tax on the poor? Pish Posh. Just work hard to make sure this funny money is routed to the right place, show the rolling coal types “see we are paying” (which we always are/were) and keep calm and carry on.

Daniel Bittinat
Guest
Daniel Bittinat

Life Hack: Buy in Washington, save receipt for tax remittance from Washington State, avoid $15 Excise Tax since bicycle wasn’t purchased in Oregon.