Updated 4:07 p.m. | The wonks at the DC Fiscal Policy Institute want to explain why the so-called gym tax, a 5.75 percent tax on health club services that has outraged some fitness buffs , makes sense for the District.
"Taxing health clubs isn't anti-fitness," according to DCFPI policy analyst Wes Rivers. Rather, it's one piece of a larger package that will broaden the city's base of sales tax, making it fairer and more reliable as the economy shifts from goods to services, Rivers explained in a Thursday blog post on the topic.
DCFPI points out that promised tax cuts for Washington residents and businesses — about $400 for those with incomes between $50,000 to $75,000 — will more than offset the price of an annual gym membership, and benefit gym and yoga studio owners. "Some 22 states across the country already include health clubs in their sales tax, and DC residents already pay sales tax on exercise equipment, running shoes, and yoga mats — it is hard to argue that this deters people from exercising," Rivers writes, adding that if the sales tax were only applied to "bad" things, it would leave the District with fewer dollars to pay for things that promote public health, including bike lanes, parks and nutrition programs.
The nonpartisan think tank, established in 2001 by the Center on Budget and Policy Priorities, focuses on budget and tax issues with a particular emphasis on issues that affect low- and moderate-income residents. Beyond gyms, it points out that the fiscal 2015 budget proposal would also levy a tax on services such as carpet and upholstery cleaning, car washes and bottled water delivery for home use.
Wellness industry leaders who are opposing what they see as a tax on healthy lifestyles and a potential job killer for local businesses continue to fight the proposal, which is expected to receive a second and final vote on June 17.
Mayoral contender David Catania, an at-large member of the D.C. Council who is running as an independent, has invited fitness center owners, employees and local gym rats to City Hall to speak in opposition to the tax Friday afternoon. Although Catania voted along with 12 other councilmembers to advance the fiscal 2015 budget proposal, he has expressed concerns about the tax.
Flanked by yogis and fitness buffs at City Hall, Catania announced he will move an amendment during next week’s council meeting to undo the gym tax.
“Rather than penalizing and discouraging residents in their effort to improve their physical well-being, we should be doing everything in our power to support them,” Catania said.
He’s pitching the amendment as a revenue neutral solution that would eliminate the sales tax on gym services, and replace it with business income taxes. The current budget proposal includes a reduction in the business income tax rate that would be phased in over five years. Catania’s office says the reduction could be phased over six years instead, amounting to about a little less in annual average tax savings for small businesses.
Catania said he wants the city’s tax policy to reflect “our shared desire to help residents lead healthier, longer lives.”