Oregon has had a $15 tax on all new bike purchases for almost six years now. It passed as part of the House Bill 2017 transportation funding package and went into effect January 1st, 2018. At a meeting on Tuesday that included state lawmakers, Oregon Department of Transportation staff, and leaders from various interest groups, there was an that made it seem like a change in the tax is imminent.
The Bicycle Excise Tax was a political compromise stuffed into HB 2017 in order to lessen the blow of other taxes targeted toward car owners, buyers, and sellers. It was supported by advocacy group The Street Trust and other leaders who wanted to pass a bill in order to garner set-aside funding for Safe Routes to School and it gave cycling and active transportation advocates an answer to the perennial bad faith argument that, “bikes don’t pay their fare share.” The tax raises an average of about $833,000 per year on sales of about 51,000 new bikes purchased in Oregon (or by Oregonians from online sellers). The $5 million raised so far has been put into a grant program that funds off-highway paths.
The tax was discussed at the final meeting of a workgroup convened by the Oregon Legislature’s Joint Committee on Transportation that is setting the groundwork for a new transportation spending package that will be proposed in the coming session. In that meeting, Oregon Department of Revenue Policy Coordinator Xann Culver shared a presentation about the tax to inform the lawmakers and advocates in the workgroup.
In response to Culver’s presentation, Duke Shepard, a workgroup member and senior policy director for Oregon Business & Industry (a nonprofit advocacy group based in Salem) said, “It struck me as puzzling that it’s a $15 fee regardless of the price of the bike.” It’s a good point, given that the tax begins at bikes costing as little as $200. That triggered a conversation about the tax.
House Representative Susan McLain (D-Hillsboro) was one of the architects of HB 2017 and is now a co-chair of the Joint Committee on Transportation. She responded to Shepard by saying that, essentially, there wasn’t enough time to analyze the fairness of the bike tax and $15 was just the number they came up with. “We hadn’t had a bike tax before,” McLain said. “And so the idea of even having a bike tax was a big lift.” McLain added that they wanted a number high enough to make the tax worth it, but not high enough so that it discourages bike use.
But what we’ve been left with is a regressive tax that is much higher than a similar tax on new cars that was also passed in HB 2017.
State of Oregon Senior Economic Mazen Malik was also in the meeting. He called the $15 the “least acceptable compromise at the time” and that a 7.5% tax on the retail price of new bikes was also considered. “The idea was primarily to start this process [of a bike tax] and see if it sticks, and then if the progressivity element needs to be injected into this subsequent legislatures would look into that.”
For Oregonians who purchase a $200 bicycle, which is about the cheapest you’ll find even at a big box retailer, the $15 bike tax equates to 7.5% of the total purchase price. By comparison, Oregon’s “vehicle privilege tax” (also passed in 2017) that’s charged to car dealerships, is just .05% of the retail price of a new car. For a $20,000 entry-level car, sellers pay tax of just $100. If they paid at a rate similar to the bike tax they’d pay $1,500.
Put another way, in the current system, the tax rate on an entry-level bicycle is 15 times higher than that of an entry-level new car.
That point was made by Oregon Trails Coalition Executive Director Steph Noll at Tuesday’s meeting. “That $15 tax is such a higher percentage that what our vehicle privilege tax is,” she said. “So if we’re looking at making it more progressive, even if we were to double the current bike tax, it really doesn’t do much towards filling the revenue gaps that we are looking at.”
House Rep (and now Senator-elect) Khan Pham, who was facilitating the meeting, echoed Noll’s sentiment. She said that even if a bike tax raised $1 million per year it would be an almost unrecognizable amount amid the multiple billions Oregon needs to raise. Changing the bike tax is, “Something that we definitely do need to address in the coming up, the upcoming session,” Rep. Pham said. “Because you’re right; those are very different price points, and we want to make sure we’re being equitable.”
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7.5% is a crazy tax especially for a vehicle that does significantly less damage to our roads, environment, and health especially compared to the vehicle rate. The fact that it was even discussed in 2017 is absurd. The flat tax is equally absurd. To be charged the same rate as the vehicle tax you would need to buy a $3,000 bike anything less than that and you’re paying a higher percentage.
If I remember correctly the justification was so that we’d have skin in the game. So based on that drivers have stopped complaining about new bicycle infrastructure and cyclists being “in their way” right? No that didn’t happen? Well then perhaps we should get rid of it.
I’d be totally fine with 7.5% IF we taxed other vehicles at proportional amounts. For a typical sedan that would likely end up at a 200-300% tax if not higher.
But yes, we should just get rid of the bike tax. Should have never existed.
We should be paying people to bike
Regressive taxes are a social ill and if anything we should give incentives to bike purchases and perhaps even to bike shops. At the same time, I’d like to have some voluntary channel for contributing to a fund for bike infrastructure, on the order of duck stamps (which were required, but never mind that) so that a concerned person can move public policy by just writing a check. I’m not made of money but I could find $100 right now that I’d put in the pot.
I’ll likely never buy another new bike, so the state of Oregon will continue to interpret my need for bike infrastructure as zero.
Taxing something you want to encourage is absolutely insane. We should be doing the exact opposite, applying a negative tax to anyone who walks, bikes and/or takes public transit while applying at least a 100% tax on cars.
You tax the things you want to discourage and give rebates on the things you want to encourage. We’re just fighting basic logic with the status quo and slapping ourselves in the face.
Yes — the larger taxation issues make this $15 just bitter icing on a poisonous cake of false incentives. It’s galling that my coworker got a tax rebate (or credit, I don’t know) for purchasing an electric car, but I got nothing for purchasing an electric (pedal-assist) bike. We each commute using these vehicles, but with vastly different impacts on public health as well as individual health.
It’s not really the same thing… we have a very strong public interest in getting drivers to switch to electric cars when they buy a new vehicle. We do not have a similar interest (maybe even a negative interest) to get bicycle riders to go electric. It makes sense to subsidize one and not the other.
That said, I would happily subsidize (even up to 100%) bikes for people who gave up driving to ride. (I have no idea how to do this in practice, but I agree with the principle.)
The tax was a dumb idea, and was primarily a political stunt. It doesn’t generate much money and it is very inefficient.
It’s hardly surprising that The Street Trust supported it.
“Skin in the game”
Street Trust hasn’t seen a tax they don’t like, because they know how their bread is buttered.
Gee, I wish I could have paid just Oregon’s tax when I just bought an ebike here in NC and paid a bit over $158 in sales tax on it.
Is that a tax targeted only to ebikes? Or only to bikes?
Or are you just complaining about a sales tax? Oregon is the only state with a stupid bike tax; most states have a sales tax.
McLain : ‘essentially, there wasn’t enough time to analyze the fairness of the bike tax and $15 was just the number they came up with.’
So instead of even pretending to do any sort of due diligence as one would expect of a politician (I kid, I kid, man I crack myself up), they just pulled a number out of their ass…?
Ugh. Seems about right.
A lot of folks have always purchased used bikes, and always will. This tax did not affect them.
(Anecdotally, the prices on used bikes have tanked for all but the fanciest makes and models. A mountain bike that sold on Craigslist for $300 in 2017 is now fetching half of that or less, depending on condition and location. Some prices on mid-range bikes are coming back up but it’s not definitive for the whole used bike market.)
This was a stupid idea meant to quell the specious and inaccurate “bikes don’t pay their fair share” argument. I wouldn’t be surprised if the cost-benefit analysis was anything other than marginal at best.
“She responded to Shepard by saying that, essentially, there wasn’t enough time to analyze the fairness of the bike tax and $15 was just the number they came up with.”
The transportation committee has some incredibly careless people on it. The best option was to say that a tax that is sufficient to cover admin costs without being unfair or an undue burden on bike purchasers or sellers was not possible. So, let’s be adults and not enact a silly tax for political reasons. She is such an embarrassment for Oregon.
What I’ve noticed from following these committees for a long time is that they are indeed careless sometimes and unserious… But that carelessness is more of a problem when dealing with things they care less about – like bicycling. If it’s a policy about the state highway fund, they are very very serious and careful. It’s another way that biking and active transportation is marginalized.
Also, I am a firm believer that we need to pay legislators a lot more money so we get real ambitious professionals.
Nevermind the math and fractions. Can we just agree that, as a basic economic principle, that we should tax the things we wish to discourage and not tax the things we want to encourage? The article fails to mention that the Street Trust administers the Safe Routes to School program. Their support of the tax was a clear conflict of interest.
No. I do not want to discourage earning money or property ownership or retail transactions, for example, but I still think it’s reasonable to tax them. I do want to discourage shoplifting, but I don’t think taxation would be an effective mechanism for doing that.
Of course there are plenty of cases where what you say is correct, but as a general principle, I don’t think it holds.
Yup, we could fix an immense amount of problems in this country if we simply taxed negative externalities. It’s a basic economic principle so doesn’t surprise me our political system totally failed at applying it.
I work at a bike shop in town and always mention the tax when adding to an invoice for anyone’s new bike. A lot of people don’t know about or have forgotten its existence, but judging by folks’ most common responses: everyone finds it very silly. We all joke that the $15 pays for a few inches of bike lane paint (which we all know is highly effective at providing safety for cyclists).
If a lawmaker proposed a 7.5% sales tax on new motor vehicles they would be rounded up by an angry mob and dumped into the ocean. This is an insane double-standard.
So, how much does the Oregon “system” propose to credit the bicycle tax from Federal money received for Oregons infrastructure?
There was an What, now?