Oregon's Unique Bike Tax Is Pulling In Far Less Than Expected

Dec 12, 2018

Oregon’s one-of-a-kind tax on bikes doesn’t have much air in its tires.

The Oregon Department of Transportation said Tuesday that it now expects the $15 flat tax on some new bike sales will bring in less than half of the expected $2.1 million this tax year — and even less than anticipated moving forward.

The reason, ODOT economist Daniel Porter told lawmakers, is that officials didn’t know what to expect when estimating what the tax would generate.

“Economists like to think that we can estimate anything and we can give you a number, but this one was a real shot in the dark,” Porter told the House Revenue Committee, meeting for routine “legislative days” at the Capitol.

Lawmakers created the bicycle excise tax in 2017, as part of a $5.3 billion tax package that will pay for transportation improvements around Oregon. It took effect in January 2018, and slaps a $15 tax on sales of new bikes that cost at least $200.

Money from the tax is set aside for bicycle and pedestrian-oriented transportation projects, but that wasn’t enough to stop derision from active transportation advocates last year. They argued the tax fed into a false narrative that bicyclists don’t pay their share of the cost for infrastructure improvements, and that it could dissuade people from purchasing bikes.

The website StreetsblogUSA called it a “preposterous bike tax that accomplishes no discernible transportation goal except dampening demand for new bikes.”

Jonathan Maus, who runs the website BikePortland, lamented the passage of the tax at the time, saying: “We are taxing the healthiest, most inexpensive, most environmentally friendly, most efficient and most economically sustainable form of transportation ever devised by the human species.”

Porter told lawmakers Tuesday that economists had attempted to look at national trends in bicycle prices and purchasing to discern how much Oregon might gain from the tax. The state’s lack of a sales tax, he said, made it impossible to use Oregon-specific data.

With three quarters of data in pocket, ODOT now believes its estimates might have been wildly wrong. This biennium, for instance, they anticipate the tax will bring in around $900,000, as opposed to the expected $2.1 million.

Going forward, they say the tax will stall out at around $1.2 million a biennium, when $2.8 million had been expected.

The bike tax isn’t the only piece of the 2017 transportation bill that economists failed to adequately predict. A new 0.5 percent tax on cars bought outside of Oregon has far exceeded expectations. It’s on track to draw in $11.8 million this biennium, nearly $10 million more than expected.

News of the shortfall from the bike tax isn’t entirely a surprise. As Maus noted earlier this year, initial receipts from the tax did not appear to be meeting projections, but ongoing lowered expectations weren’t clear at the time.

Lack of reliable data might not be the only reason revenues have lagged expectations, Porter told lawmakers Tuesday. He said it’s also not entirely clear all bicycle shops are paying the tax.

“What we didn’t know is how well we could get compliance from retailers,” he said. “It’s a combination of things that didn’t get us to where we are today.”

Rep. Nancy Nathanson, D-Eugene, chair of the revenue committee, suggested that the outlook might improve in coming years.

“I think probably with several of these things, it’s just a little too early, and we shouldn’t jump to conclusions that this is a permanent trend,” she said. “It’s the startup phase, right?”

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