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Tuesday, January 25, 2022

Surprise McKee budget item exempts motorcycles from sales tax

Dare we ask why?

By Steve Ahlquist

There are tax cuts built into Rhode Island Governor Daniel McKee‘s proposed 2022 budget, but the likelihood of the average Rhode Islander benefitting from them is extremely low. Instead, a small number of high income, mostly white, mostly male taxpayers will benefit.

In this series of articles we’ll be diving deep into the Governor’s budget proposal. 

There are good things in the budget: The promise to cover medical costs for all Rhode Island children and the extension of postpartum Medicaid benefits from 6 weeks to 12 months are excellent and long overdue. 

But there are many, many bad things in this budget, often reflective of a deeply conservative and fiscally irresponsible tendency towards long disproven trickle down economics which includes tax cuts for the rich and cuts to social programs like Medicare and Medicaid.

I’ll get into a more technical aspect of the tax cuts for the rich in the second part of this series tomorrow, but I thought I’d start with something easy: The provision of a sales tax exemption for the trade-in value of motorcycles.

This new sales tax exception can be found on pages 173 and 174 of the Governor’s budget. It will affect motorcycle riders, putting extra cash in their pockets. But who are motorcycle riders? Into whose pocket will this money go?

According to the 2018 Motorcycle Industry Council Owner Survey, 81 percent of motorcyclists are male, with a median household income of $62,500. The average household income for motorcycle owners was $85,300 in 2015. The median age of these riders has been skewing older for a decade now, from age 45 in 2012 to age 50 in 2018.

Finding details about motorcycle ownership by race has been more challenging, but “women, the 18-34 age demographic, African-Americans, and Hispanics” had been targeted as potential motorcycle sales growth areas by Harley-Davidson in 2015. A movement into new demographics is a good sign that the sales to the traditional demographic – high income white males – has been saturated.

A call to the Motorcycle Industry Council about the racial demographics of motorcycle riders in the United States has not been returned as of this writing, but in this piece by Elise Willets, the author contacted Scott Lindsay, owner of Grand Junction Harley-Davidson and Black Canyon Harley-Davidson, who noted that as of the second quarter of 2007, 2 percent of Harley-Davidson sales went to African Americans.

As motorcycle sales increase nationwide, so does the number of accidents, property losses, injuries, and fatalities. From 1997 to 2003 there was an astonishing 94 percent increase in motorcycle related injuries. And there is evidence that Black motorcycle drivers are far more likely to die in crashes than white drivers.

This is not a polemic against motorcycles. They are fun and culturally important vehicles that are enjoyed by millions of Americans. This is about taxes – Who pays them ad who doesn’t? Who is prioritized for tax relief and who isn’t? 

We need to understand that a tax cut for motorcycle riders is a tax cut for mostly rich, mostly white, mostly male taxpayers. A motorcycle, for most owners, is not the primary vehicle they use for getting around town. Motorcycles are more often the second or even third vehicle, and the use of motorcycles is primarily recreational, (though owners use them for commuting “as the weather allows for it.”)

Governor McKee’s tax break for motorcycle riders is targeted at a demographic that Governor McKee happens to be a member of: rich white males. This tax break does nothing for Rhode Island as a whole – except for lowering tax revenues – and perpetuates racial and class inequities.

In part two, we’ll discuss McKee’s less obvious but even more odious tax breaks for the rich when we get into his interest rate cut for delinquent tax payers that covers only certain forms of income and business taxes but not the property taxes paid by average Rhode Islanders.