At the beginning of this year, the state of Oregon began charging a sales tax on new bicycles as a result of a state-wide transportation bill passed in July of 2017.
In a part of the country known for being bicycle friendly, the law has proved quite controversial with critics saying it unfairly burdens consumers who are making environmentally conscious transportation choices, while others call the law petty.
The $15 tax was originally to be levied only on adult sized bikes retailing at $200 or more, but as of June this year, an amendment to the bill cast the net wider to encompass both e-bikes and children's bikes, too.
The industry publication Bicycle Retailer said this week that taxes collected through August total $290,000 on just over 19,000 bikes sold in the first two quarters of the year. Lawmakers had predicted receipts of about $1.2 million in the first year, and although a seasonal bump in bicycle sales may boost tax revenues over the summer months, it seems likely that revenues could fall short of expectations.
But whether or not the state generates its expected revenue from the tax, more fundamentally, many consider it punitive to cyclists. So, does the tax make sense? And is it helping or hurting Oregon’s bicycling community?
In the long run, cyclists stand to gain overall when this tax is viewed in the broader context of Oregon’s House Bill 2017 (as the law is known). Despite the fact that Oregon is the first (and as yet only) state to levy a specific tax on new bicycle sales, it comes as part of a range of new revenue sources encompassed by the transportation bill.
As Forbes explains, the bill also levies a four cent per gallon gas tax increase, a $16 dollar vehicle registration increase, a 0.1 percent payroll tax, and a 0.5 percent tax on new car sales. In other words, all users of transportation infrastructure will pay a price.
A proportion of funds collected from these new revenue streams will flow back to cyclists too. The League of American Bicyclists, (while not in favor of the bicycle sales tax) says the transportation bill will dedicate $1.3 billion to biking, walking and transit spending, from a total budget of $5.3 billion metered out over 10 years. This includes $125 million for safe-routes-to-school investments alone, a cycling program for children.
So overall, Oregon’s planned spending is good news for cyclists. While no consumer wants to see a bicycle tax, state funding for cycling infrastructure and programs looks like it will be far in excess of the revenue recovered from the bicycle tax over the 10 year time span.
But the question remains, is it the best thing to tax cycling, a behavior you want to encourage, when it generates a relatively meager return? Consider also, that according to the Portland bicycle advocacy group Bikeportland.org, the state estimates it will cost $50,000 a year just to administer collection of the tax.
The League of American Bicyclists thinks the approach to transportation funding should be to recognize cycling as a low-cost burden on society and as such, not bear any costs at all.
Instead, they think taxes should fall where societal costs are greatest. The organization says: “For motor vehicles, this would suggest that taxes should be higher, potentially much higher, to account for the costs of air pollution, health problems, congestion and other issues associated with the use of motor vehicles. For bicycles, this might suggest negative taxes.”
Whether that’s a fair way to to fund infrastructure is no doubt a matter of opinion, but the aforementioned Forbes piece suggests Oregon’s approach is a matter of having one eye on the future, and trying to figure out ways to fill its coffers as the transportation mix changes in years to come.
For example, the state is looking at things like a vehicle per-mile tax which may become necessary at some point in the future to replace gas taxes. After all, infrastructure will still need to be paid for even if all drivers in Oregon were to own (or share) electric cars. Viewed in the context of a transportation system in flux, a sales tax on bicycles may similarly be seen as a way of generating new revenue streams for a transportation mix increasingly diversifying away from fossil fuels.
The tax may lend an advantage to the cycling community too, by giving it a voice. Taxation demands representation and so paying the tax might give the cycling community greater leverage to ensure cycling infrastructure and safety projects are implemented.
It’s also worth noting, bicycle specific taxes are not entirely unprecedented. For example, Hawaii charges a $15 new bike registration fee, which while not technically a tax, is collected by retailers at point of sale (as is the case with the Oregon tax). Another precedent is found in Colorado Springs, where $2.3 million has been raised from a $4 per bicycle sales tax in effect since 1988.
The difference between both these examples compared with the Oregon law, is that cyclists paying these fees might enjoy a more direct individual benefit in return.
For example, Hawaii’s bicycle registration program has helped stolen bicycles to be recovered for their owners, while in Colorado Springs, because the tax is at the city level, infrastructure spending is highly localized. This returns value directly to the cyclist paying the taxes in their local community, as opposed to money being collected centrally and dispersed across the state, perhaps unevenly.
In the end though, the matter boils down to whether consumers are prepared to pay the price. As the Forbes article outlines, consumers are said to grumble when they see the tax on their sales invoice, but when dealers explain it goes towards bike infrastructure they are more accepting. As one cyclist interviewed for the piece commented, “I feel, as a biker, I’ve received great benefits in the past years living in Oregon, specifically Portland. The bike lanes have improved, the new bike laws and bike boxes at intersections have provided more security, and the overall environment to be a biker is improving. But there is still more to do! Given the moderate onetime cost of $15 at the time of purchase of a new bike, I feel it’s not overtaxing on most of us.”
Image credit: Oregon Department of Transportation/Flickr
Phil Covington holds an MBA in Sustainable Management from Presidio Graduate School. In the past, he spent 16 years in the freight transportation and logistics industry. Today, Phil's writing focuses on transportation, forestry, technology and matters of sustainability in business.