Tax Proposal Draws Protest From Capitol Hill Gyms, Yoga Studios
Betsy Poos tries to keep politics out of the classroom at Capitol Hill Yoga.
The co-owner of the Pennsylvania Avenue Southeast studio spent a decade working for members of Congress and the Democratic Party before opening, in March 2009, the small business six blocks from the Capitol. When teaching, her classroom philosophy is: “This is the time to let your day job go.”
But a tax change working its way through the D.C. Council has recently caused Poos to “measure the line” on her credos. The city is looking at implementing a 5.75 percent sales tax on gyms, yoga studios and other health club services as part of its fiscal 2015 budget, part of an effort to revise its tax structure and reduce the overall burden on D.C. residents. Poos and other wellness practitioners are worried the proposal will hurt their industry.
“This feels like a tax on healthy lifestyles,” Poos said Monday in an interview with CQ Roll Call, explaining recent efforts to mobilize yogis to push back on the proposal. Although she doesn’t believe the price increase — an extra 69 cents on a $12 class that lasts an hour, or $1.04 more for the 75- to 90-minute classes that currently cost $18 — would keep most of her current customers away from their mats, Poos is concerned the modest increase could deter the new students that are a key part of the studio’s revenues.
“In the past five months, 25 percent of our sales revenue have come from consumers brand new to our studio — first-time walk-ins,” Poos said. If “even 10 percent” are dissuaded from spending their first dollar at the business due to the tax on services and higher prices, “we stand to lose much of our overall profit margin.”
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The proposed tax hike was made public just 18 hours before the initial May 28 budget vote. It was part of a package of changes that would also revise the individual income tax, and it immediately sparked an opposition from the fitness industry, including the owners of Capitol Hill’s Biker Barre and local CrossFit trainers, plus the Capitol Hill Association of Merchants and Professionals, or CHAMPS.
“Once again the D.C. Council has let down small businesses in DC,” CHAMPS President Scott Magnuson, owner of Atlas District mainstay The Argonaut, wrote in a June 4 letter to the Hill’s small-business community. Magnuson criticized the last-minute timing and said the council’s actions “do not build confidence in an already fragile relationship between the District government and small business leaders.”
Others organized an online petition to try to convince the council to strip the sales tax on health-related services before the final budget vote, currently scheduled for June 17.
Despite the criticism, D.C. Council Chairman Phil Mendelson is standing by the so-called gym tax, which was recommended by a blue-ribbon tax commission chaired by former D.C. Mayor Anthony Williams; it is part of a package that would also revise the individual income tax. Other services that would be subject to the 5.75-percent sales tax beginning Jan. 1 include bowling, billiards, car washes, carpet cleaning and water delivery.
“The goal of the [D.C. Tax Revision Commission] was to recommend an overall tax structure that is fair, equitable and reduces the overall burden on District residents,” Mendelson said in response to the Change.org petition.
“If an individual’s health club membership is $75 per month, the tax will add $4.32 to the cost,” he reasoned. “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).”
Ward 6 Councilmember Tommy Wells cast the lone “no” vote on the 2015 budget after expressing concerns about cutting planned funding for the city’s streetcar project. He was not available by press time for comment on the health club service tax.
Councilmembers Muriel Bowser and David Catania, who are both campaigning for mayor, voted in favor of the budget, but say they do not support the tax on wellness services. D.C. Committee on Finance and Revenue Chairman Jack Evans has also said the city does not need the gym tax.
Wellness leaders say D.C. does not need to tax gym memberships, boot camps and yoga classes to offer a great tax break. They say the policy is misguided and raises the cost of preventative health care services.
“If a doctor prescribes you a pill, there’s no sales tax,” said Ian Mishalove, co-owner of Flow Yoga Center in Northwest D.C. “If the doctor prescribes you yoga, there’s a tax.”
Mishalove said the city should be encouraging wellness and thinks the tax sends the wrong message. For those who are already stretching their budget to afford a $100-per-month gym membership, an extra $50 or $60 annual increase could change their behavior, he said.
Later this week, some of the city’s most physically active people will get politically active. Mendelson has agreed to meet with local wellness leaders, according to Mishalove. The coalition may also organize a day of action at Freedom Plaza, as it did to protest a similar service tax in 2010.
Poos still keeps the politics out of the practice at Capitol Hill Yoga, but she said some students have approached her after classes to talk about the issue. She acknowledges the fact that teaching people who are professionally involved in advocacy, lobbying and government could be an advantage when it comes to the gym tax.
“Word is starting to get out,” she said.