Last week the DC City Council voted for a so-called "Yoga Tax", which would require health clubs to begin collecting sales tax starting Jan. 1, 2015. As in 2010, when a similar idea was floated, there has been a backlash from the fitness community.
Two petitions have been created on change.org encouraging city council members to vote against the tax when it is presented during the final budget vote on June 11.
The petition initiated by Fuse Pilates contains the following (from change.org):
"On May 29, 2014, DC Council passed a preliminary vote on the proposed FY 2015 budget which includes a new “gym tax.” If passed under the final budget, DC exercisers will have to pay a 5.75% tax on all fitness centers and exercise classes beginning in January 2015.
This means that whether you go to a large gym or a small yoga, Pilates or other specialty exercise studio, you’ll see an increase in your cost to exercise. Here’s a breakdown of what you need to know:
You’ll pay more: Gyms and fitness studios will have no choice but to charge patrons the tax. That means working out in the “fittest city in the U.S.” will cost you more money.
Small businesses suffer: New tax = higher cost = potentially lost business for small businesses. If smaller specialty studios lose students as a result of higher costs, they may be forced to cut back on classes or hours. Small businesses lose. Those who enjoy the awesome classes at local, specialty studios also lose.
Public health suffers: Fewer people going to the gym = more sedentary people. Less exercise introduces greater risk for being overweight or obese or suffering from associated illnesses – all of which cost the city more money in healthcare.
DC Council Finance Committee Chairman Jack Evans said the city can do without the taxes. "I thought it was a real mistake," he said. "The city doesn't need money. We have lots of money. We're producing record surpluses."
There’s still time to take a stand against the Gym Tax before the final budget vote on June 11. Four years ago, those who value fitness in the District stood up to a similar proposal and were successful in getting the DC Council to drop the initiative. Let’s not put our city’s health at risk over a few dollars the city doesn’t need.
Another petition initiated by Katherine Kennedy Allen raises the following issues with the tax (from change.org):
"1) Fitness activities are already really expensive. Adding almost 6% is an insult to anyone without much disposable income looking to stay healthy. And even if someone *can* pay? Not a reason to levy additional fees, and still discourages business services in DC.
2) There are ZERO full-service gyms east of the Anacostia River, and the small scale fitness businesses that have set up shop there don't need more reasons to have less customers.
3) DC is extremely divided on income and health lines. Obesity and diabetes rates are much higher in lower-income areas. This is essentially an exclusionary tax that further prohibits those that may need fitness services most from accessing services that encourage a healthier lifestyle."
Council member Phil Mendelson has responded, via change.org to both petitions with the following:
"I understand the argument that adding sales tax to a service has the effect of increasing the cost of that service, and that there are some services, e.g., health-related, that we ought to be favoring and, therefore, not taxing. The recommendation to expand the District’s sales tax to health clubs, work-out facilities, yoga studios, etc. came from the D.C. Tax Revision Commission chaired by former Mayor Anthony Williams. The recommendation was based on analyses by tax experts as to how to best structure the sales tax. It was also part of a package of proposed reforms that included revisions to the individual income tax. The goal of the Commission was to recommend an overall tax structure that is fair, equitable, and reduces the overall burden on District residents.
If an individual’s health club membership is $75 per month, the tax will add $4.32 to the cost. On the other hand, the revised income tax (also part of the tax package) will save the average resident taxpayer in the $50,000-$75,000 adjusted gross income bracket about $36.33 per month ($436 per year).
The following rationale is excerpted from the Tax Revision Commission’s final report (available at www.dctaxrevisioncommission.org):
“The District’s general sales tax is 5.75 percent, lower than the 6 percent sales tax rate in Maryland and Northern Virginia. …In presenting a paper on sales taxes to the Commission, Professor William F. Fox, director of the Center for Business and Economic Research at the University of Tennessee, Knoxville, noted that … the District, like many states, faces an eroding sales tax base as consumers shift their spending from goods to services. …The Commission recommended changes that will broaden the sales tax base without hurting the District’s competitiveness relative to neighboring jurisdictions. …While a broad tax base is optimal, Professor Fox cautioned that the District must carefully choose any new services to tax in order to minimize the economic effect.” Professor Fox recommended eight types of services be added to the sales tax, including “health clubs and tanning studios.”
I want to emphasize that the goal is not to increase revenue. Indeed, when fully implemented the tax package will reduce annual revenue by about $165 million. The goal is to have a stronger tax structure. What has been adopted is a package of changes – some increases, but mostly cuts. For the District government, we will have a broader, and therefore better, sales tax base. For District residents, there will be a lower tax burden.
I hope this explains what happened. I appreciate your taking the time to petition.
What does everyone think of Mendelson's response?