Coming to grips with Oregon’s Bike Tax

Earlier this month the Oregon Legislature passed a transportation bill that will dedicate $1.3 billion to biking, walking, and transit over the next 10 years out of a total of $5.3 billion. The bill includes $125 million for Safe Routes to School investments. Notably, this exceeds 2% of the transportation package, somewhat fulfilling a key feedback point from our 2015 Bicycle Friendly State report card. Unfortunately, this great win for bicycling is also paired with a disappointing tax on new bicycles. New adult bicycles that cost more than $200 will be subject to a $15 flat fee.

Oregon’s bicycle tax is not particularly surprising – it has been a part of their transportation funding debate for years and was always part of this most recent funding legislation in Oregon. The Street Trust, formerly the Bicycle Transportation Alliance and currently the largest active transportation advocacy organization in Oregon, has been fighting against various forms of bicycle tax proposals for years. In this most recent legislation their dedicated lobbyists became convinced that there was no positive way forward without working with a package that included a bike tax.

Making bicyclists pay is not new or novel. Most efforts to make bicyclists pay have been through registration or licensing at the state or local level. Hawaii has required bicycle registration since at least 1988 with a one-time $15 fee and a $5 fee when a bicycle is transferred. Many local jurisdictions have registration requirements, including Madison, WI, a Platinum Bicycle Friendly Community, which requires a bicycle to be registered every 4 years for a $10 fee. The League Board even adopted a formal position on bicycle registration several years ago. The Oregon bicycle tax is probably consistent with that position which states: “The League of American Bicyclists supports effective bicycle registration programs that do not impose a significant financial or statutory disincentive to bicycling. Any registration fees should be dedicated to the costs of establishing and maintaining the registration program or to other programs or facility improvements that directly benefit cyclists.”

So, should we be worked up about Oregon’s bicycle tax? Does it mean an inevitable wave of bike tax legislation that makes bicyclists pay into transportation funding? Will we see similar taxes in other states that do “impose a significant financial or statutory disincentive to bicycling?”

My answers are maybe, probably, and almost certainly yes.

Why should we get worked up about Oregon’s Bicycle Tax?

As discussed above, bicycle registration schemes exist and we have learned to live with them. While not an ideal policy, they can be compatible with local efforts to promote bicycling. They can also be used to discourage bicycling and discriminate against certain types of people who bike.

Oregon’s bicycle tax is different than bicycle registration schemes. Bicycle registration schemes, when done well, provide a service to bicyclists who receive better theft protection, bicycle theft recovery, and other potential benefits such as crash victim identification. Oregon’s bicycle tax does not provide any services directly. To the extent it provides a service, it provides the service of creating a funding stream associated with bicycle use, ensuring that bicyclists have a place at the transportation funding table because they now have a “user fee.”

The value of having a “user fee” is entirely dependent upon the theory of taxation that motivates transportation-related taxes. A “user fee” is generally associated with the benefit principle — that people who pay taxes should receive benefits. This principle has motivated our transportation investments for years and attempts to tie transportation investments to the funding sources for those investments. It essentially frames the “user fee” of a gas tax as a fee for service and promotes the idea that everyone else is not entitled to that service.

Problems with the “user fee” theory

The “user fee” concept and its associated benefit principle have historically been used to advocate for dedicating gas tax revenues to automotive infrastructure and has led to approaching transportation problems from the perspective of where money comes from rather than what would solve the problem. Under this theory bicyclists — and all people not using cars — should only receive benefits from the gas tax if the benefit is actually a benefit to cars. In a 2014 report on the history and inadequacies of the federal Highway Trust Fund, the Eno Center for Transportation said “As long as a user fee structure remains in place it will likely be more challenging to create an approach to transportation spending that directs investments on the basis of maximum effectiveness, regardless of mode.” The bicycle tax, rather than solving any real problem, can be seen an attempt to solve the problem of bicycles having no associated “user fee” and no basis for receiving something for their own benefit from the transportation system.

The “user fee” concept is problematic in a variety of ways:

• The “user fee” concept is problematic because it feels correct emotionally but is not correct factually. It is true that only motorists pay the gas tax, and feel that payment every time they face the pump, but it is not true that the gas tax is the only thing that pays for our transportation system. At federal, state and local levels of government gas taxes and other vehicle-related fees are supplemented by general revenues, bond proceeds, property taxes and other revenue sources. If transportation funding was limited to motor vehicle user fees only then there would likely be at least 40% less funding available. We all pay for transportation investments – that gas taxes are the most noticeable and most directly tied to transportation does not discount the tens of billions of dollars contributed from other sources each year.
• The “user fee” concept is problematic because, once it is accepted, it drastically limits what is appropriate to consider in assessing the effectiveness of transportation investments. There is no room to consider the deaths and serious injuries of people who do not pay the user fee, no room to consider healthcare costs associated with vehicle use, no room to consider environmental costs of roadway construction and use; the focus is entirely on the benefits secured by the fee and whether they accrue to the payers of the fee.
• The “user fee” concept is problematic because it collapses into absurdity when applied to all road users. Nobody seriously makes proposals to tax shoes to pay for sidewalks, or to tax wheelchairs to pay for ADA-compliant ramps.
• The “user fee” concept is problematic because people don’t actually support it. In a recent poll only 50% of respondents said motorists should pay tolls and user fees to pay for roads. Charging for parking is also notoriously unpopular. At this point, the “user fee” concept is used to justify transportation funding as it has existed since the 1950s without confronting the explicit and implicit subsidies for cars of an estimated $1,100 per year per household or more.

The “user fee” concept is problematic specifically for bicyclists because it is not clear what bicyclists should pay for or how it is possible to efficiently collect a bicyclist user fee.

• What do bicyclists pay for? Paint? Roadway space? Wear and tear associated with bike use? Most fees based on things associated with bicycle use, like wear and tear, do not justify taxes that pay for their own collection, in part because they are hard to measure and in part because costs specifically associated with bike infrastructure are small.
• Bicycles by their nature are low-cost and do not have many variable costs. There is no equivalent to gasoline aside from the food we eat. The very efficiency of the bicycle means that any tax sufficient to cover the costs of even minimal investments in bicycling infrastructure would be likely to end up costing a significant portion of the final price of the item taxed. This would mean that the tax would be likely to significantly alter the behavior of people, including discouraging bicycling and making purchases that contribute to a well maintained and safe bicycle.

If not a “user fee” then how should we pay for transportation?

There are at least two good alternatives to “user fees”:

1. General funds. Separating revenue sources from transportation funding policy would help people see transportation policy as less of a modally-oriented competition for scarce resources and more of a public good that should take into consideration the diversity of issues associated with transportation decisions.

2. A tax based on the costs associated with transportation modes. As discussed above, the “user fee” paradigm is associated with the benefit principle – that the payer should benefit. Alternatively, we could embrace a cost principle – when an activity imposes costs on society the activity should bear those costs. This approach, often referred to as a Pigovian tax, is concerned with the repercussions of transportation modes and seeks to assign the costs of those modes appropriately. 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: At least one analysis of societal costs and benefits found that society benefits found that cars cost society 28 cents per mile while bikes benefit society 30 cents per mile.

One idea common to both alternatives is that how we pay is not necessarily related to what is paid for. If general funds pay for transportation investments, then the investments should be made to benefit society the most. Similarly a Pigovian tax seeks to raise revenues in a way that benefits society. Once the revenue is raised then its distribution would also be based on what benefits society, rather than the source(s) of the revenue.

Does Oregon’s bicycle tax mean we will likely see more bike tax legislation, including bad legislation?

Oregon has long been an innovator in bicycle-related policies and practices. Given its long-time position as an innovator, leader and the state where the greatest percentage of commuters use bicycles there is every reason to expect other states to follow its lead by proposing or adopting similar bicycle taxes. It is also not difficult to imagine that other states will be less concerned with the effect of their proposed bicycle taxes on local businesses, low-income persons and family bicyclists.

Some states will likely propose a punitive fee as a tax and say that Oregon was their inspiration. Legislators in other states that have proposed far more oddball legislation, such as requiring bikes to be mounted with 15-foot-tall flags, are unlikely to pay close attention to the considerations that went into Oregon’s tax and its structure or theoretical basis for what a bicyclist should pay as a “user fee.” As bicyclists, we need to be prepared to argue against that all but inevitable proposal and organized so that we can effectively resist it at a political level.

The Oregon bike tax is not good policy. It is a sign that transportation investments are likely to remain tied to revenue sources rather than community preferences. It is a sign that transportation-related taxes are not seen as tools of broader public policies, but primarily as revenue sources for transportation investments. It is a sign that policymakers care more about ensuring that people who drive feel assured of their return on some of the lowest gas taxes in the world than about confronting the public health and environmental issues caused by prioritizing automotive infrastructure.

I hope that Oregon’s bicycle tax isn’t a sign of a reversal of Oregon’s embrace of bicycling or a precursor to similar taxes without similar associated investments. It is possible that Oregon’s tax will lead to more investments in making streets safe for bicyclists and be successful by changing the conversation that starts when someone says bicyclists “don’t pay for roads.” Perhaps states that have not sought to make significant investments in bicycling before will emulate the tax and make investments in bicycling they could never justify before. Time will tell whether this tax shows the persistence of an antagonistic “user fee” theory of transportation funding or is a prologue to more inclusive transportation funding policy and decisionmaking where outcomes, not funding sources, are what matters.