D.C.’s sales tax reforms – including the controversial “yoga tax” – go into effect
Local leaders argue that new provision’s in Washington D.C.’s sales tax code, which will tax health clubs and yoga studios, runs counter to public health objectives.
In July, the D.C. Council approved a sales tax reform to increase the low-income tax credit, but this means sales taxes will now now be applied to businesses that were previously exempt. As of Oct. 1, a 5.75 percent sales tax was levied on the following items:
- Bottled water delivery
- Storage rentals and leases, including self-storage
- Carpet and upholstery cleaning
- Health club and tanning services, including gym and fitness memberships
- Car washes
- Bowling alleys and billiard parlors
The tax on health club memberships was the most controversial, with mayoral candidate David Catania vowing to veto it. Online news source D.C.ist reports the candidate tweeted “As Mayor I will submit an FY16 budget that will repeal the Wellness Tax” with the hashtag #DontTaxWellness.
However, in a conversation with The Washington Post, David Umansky, a public affairs officer in D.C.’s Office of the Chief Financial Officer, said the tax would be levied appropriately and fairly.
“For the purposes of the new tax on the services of a health club, “health club” is defined to include fitness club, fitness center or gym,” Umansky told the paper. “The purpose of which is physical exercise, includes the use of, access to, or membership to, an athletic club, fitness center, gym, recreational sports facilities featuring exercise and other active physical fitness conditioning or recreational sports activities including swimming, skating or racquet sports, or other facility for the purpose of physical exercise."
Additionally, the taxing of health clubs and wellness centers is far from a novel idea. In a recent investigation, The Tax Foundation found 24 states apply sales taxes to fitness memberships and services, as illustrated in the map above.
The Tax Foundation found that if you compare the statistics with the United Health Foundation’s American Health Rankings report, only two of the top 10 healthiest states, Massachusetts and Colorado, exclude gyms and fitness club memberships from sales taxes.
Additionally, the Tax Foundation argues D.C.’s restructuring will help most residents. Benefits include:
- Middle-income taxpayers (those between $40,000 and $350,000) will see their tax rate drop from 8.5 percent to 7 percent next year, then 6.5 percent the year after that.
- Individuals earning up to $1 million will see their tax rate drop from 8.95 percent to 8.75 percent.
- All taxpayers will see increased standard deductions and personal exemptions, as they will be increased to match federal levels.
- Childless low-income workers will see a larger Earned Income Tax Credit, from 40 percent of the federal credit to 100 percent of the federal credit.
- D.C’s business tax is structured to decrease in the coming years from the current 9.975 percent to 9.4 percent (2015), down to 9 percent (2016-17), 8.5 percent (2018), and finally to 8.25 percent (2019).