What You Need to Know About the D.C. "Yoga Tax"

On May 28, 2014, the Washington, D.C. City Council voted in favor of a draft budget for 2015 that would implement a 5.75 percent tax on six service-sector businesses, including gyms, fitness clubs and yoga studios based in the District of Columbia. Yoga Alliance® opposes the so-called "yoga tax" and is encouraging the community to speak out before the final vote on the budget scheduled for June 24. Here are some reasons why:

1. Taxing yoga = taxing essential healthcare. Washington, D.C. does not tax essential health care services -- like doctor visits, medications and medical procedures. It should similarly exempt essential preventative health care services -- like yoga and fitness -- that keep people healthy in the first place. Washingtonians are no strangers to stress, stress-related illness, depression, anxiety and obesity. Yoga and fitness are among the most potent antidotes to these problems and can encourage people to become more productive. This not only builds D.C.’s tax revenue base, it also reduces stress on city resources devoted to providing physical and mental healthcare, and to managing secondary ills from gaps in this care.
   
   
2. In the long run, taxing yoga, health and wellness services will cost the city more money in additional costs in the physical and mental health care necessary for citizens who forego these services as a result of the tax's disincentives. This new tax would cover yoga, meditation and all things fitness-related, as well as other service-based industries, including water delivery services, storage lockers, carpet cleaning, car washes, and bowling and billiards. Exempted from the tax are barber shops, beauty salons and construction contracts for reasons left unexplained.
   
   
3. D.C. does not need the "yoga tax" to generate income. According to City Council member Jack Evans, chairman of the District’s Committee on Finance and Revenue, Washington “doesn’t need money” because the city is already “producing record surpluses.” [Source] As he wrote in an op-ed, “Taxes are not simply to raise revenue, but also express our policy preferences. With that in mind, why would we want to create disincentives for our residents who want to make healthy choices by joining health clubs, especially when it is clear that we do not need the extra money?” [Source]
   
   
4. Beauty salons and construction firms are exempt. The "yoga tax" is part of a comprehensive tax proposal [Source] which included other services exempted from the budget bill voted on by the City Council-- including taxes on construction firms, beauty salons, and spas located in corporate-owned hotels [Source]. If council members found sufficient reason to exempt them, we would like to know why they won’t exempt essential services like yoga and fitness too.
   
   
5. The tax on health clubs and yoga studios would fall hardest on young people who can least afford to pay it and who city officials want to live in D.C. While national surveys show the median annual income of the average yoga practitioner is higher than the national median income, yoga teachers themselves on average earn considerably less money. Meanwhile, many yoga studios only serve a few dozen or a couple hundred customers. Losing even a few students due to an unnecessary tax increase could put small studios out of business.

The City Council can still remove the tax but time is running out. Mendelson argued the tax must stay to keep the budget balanced or the Council would have to find another source of revenue. However, Council Member Jack Evans, the chairman of the Committee on Finance and Revenue, disagrees with the stated necessity of the tax and opposes it, saying the city already has plenty of money in its coffers.

If the City Council does not remove the tax, passes the bill for a second time, Mayor Vincent Gray signs it and the U.S. House of Representatives approves of it, this new tax will take effect January 1, 2015. The tax will discourage District residents from maintaining their health and will also hurt many small businesses in the city, including yoga studios.

Yoga Alliance opposes the tax on the health and fitness community. We call on the D.C. City Council to remove the tax and encourage the local yoga community to urge their representatives on the council to stand against the tax. We've included a list of the councilors' contact information below.

Here is how to reach the councilors:

Want more information about the D.C. "yoga tax"? Read our FAQs, below.

FAQs About the D.C. "Yoga Tax"

What is it?
According to the Washington Post, the initial budget bill for 2015 approved by the Washington, D.C. City Council includes six new taxes on service-based industries. That includes water delivery services, storage lockers, carpet cleaning, health clubs, car washes, and bowling and billiards. The “yoga tax” specifically refers to the tax applicable to health clubs. A similar tax was introduced in 2010 but did not become law.

How much would it cost?
Consumers would pay a tax of 5.75 percent, based on the existing sales tax rate applied to service-sector businesses.

When did this happen? / When is the next vote? / When does this go into effect?
The D.C. City Council voted in favor of the larger budget bill containing the tax on May 28. The council is due to vote again for final approval of the budget on June 24. If approved by the City Council, mayor and U.S. House of Representatives, the "yoga tax" would go into effect on Jan. 1, 2015. (Source, Source)

The fitness community helped defeat a similar tax in 2010. This time, however, City Council Chairman Phil Mendelson introduced the budget bill and the council voted on it with less than 24 hours of public notice about the new tax even though Mendelson argues the proposed tax has been in the public domain for six months. That suggests local business owners take time away from their work to routinely read cumbersome tax commission reports and organize opposition to proposals included in them if they have reason to object to certain provisions.

Who does this affect?
Applicable businesses operating in the city of Washington, D.C. will be taxed. That means surrounding jurisdictions in Maryland and Virginia will not be affected.

Who are the major players with direct influence over the budget bill?

• Mayor Vincent Gray (D) - The mayor can sign or veto the bill. It takes two-thirds of the council to override a mayoral veto.
• The D.C. City Council
• Former Mayor Anthony Williams (D): led The D.C. Tax Revenue Commission that recommended the "yoga tax." (Source)

What City Council members support and oppose the tax?
On May 28, the D.C. City Council voted for the larger budget bill margin, despite stated opposition to the specific tax, largely due to the benefit of the proposed income tax cut.

Media records show three council members have stated their opposition to the tax:

• Council Member Muriel Bowser (D)
• Council Member David Catania (I) and
• Council Member Jack Evans (D).

• Council Member Phil Mendelson (D), council chairman and lead sponsor of the budget bill
• Council Member David Grosso (I) and 
• Council Member Mary Cheh (D), chairwoman of the Committee on Transportation and the Environment.

Calls placed to the offices of the other seven council members by Yoga Alliance the morning of June 3 provided no information about their stances.

At-large City Council candidate Eric Jones (I) said he opposes the tax (Source).

*Updated June 5, 2014 at 4:25 p.m.: Mayor Gray opposes the tax.

What are proponents of the bill saying?
The Associated Press reported Mendelson "says he doesn't expect the council to scale back or undo a proposal to apply sales taxes to yoga classes and gym memberships. Mendelson said Monday that the tax increase is part of a package of reforms that will reduce the tax burden of the average District of Columbia resident. He says the yoga and gym tax is 'insignificant' compared to the hundreds of dollars in savings that residents will see on their tax bills over the next few years. The Democrat adds that the council would have to find another source of revenue if it scraps the yoga and gym tax." (Source) Yoga Alliance received information contradicting that last point, stating there are about $50 million worth of cuts to the budget that could be made without the need to raise revenue.

Williams told WRC-Washington (NBC 4) he supports the tax: "What we overall wanted to do was we wanted to broaden the base and lower the rate. If everyone does their fair share, we can lower taxes for everyone and that's what we set out to do... Again, I'm not for raising anybody's taxes but I am for everybody paying their fair share."

Are people outside of the Washington, D.C. area talking about it?
Former House Speaker Newt Gingrich (R) criticized the tax on May 29 during a segment on the nationally broadcast CNN political talk show "Crossfire":

Gingrich: "You know, here at home, incompetent politicians with incompetent bureaucracies always need new money. Welcome to Washington, D.C., where the city council just took taxation to new heights of absurdity. If you get your carpet cleaned, you'll pay a new tax. If you go to the car wash, you'll pay a new tax. There's a new tax on bottled water if you have it delivered. Yoga studios and gym memberships now carry a new tax. So, in D.C., you can't be clean, healthy or thirsty without being taxed. Apparently, D.C.'s politicians have decided they're in competition with New York City to be the capital of the nanny state but there'll probably be a tax on that, too." (CNN / Video)

What are health and fitness advocates saying?
Several members of the general fitness and well-being community in Washington, D.C. have spoken out against the tax and are rallying against it.

The Washington Post reported, "Vida Fitness alerted its members to the ‘fitness tax’ and urged them to contact lawmakers with their concerns. A 'Say NO to DC Gym Tax' Facebook group had more than 500 members by midday Monday, and an online petition urging the council to reverse course was near a goal of 1,000 signatures by that time." (Source)

The Washington City Paper reported eight fitness advocates protested by performing “burpees” June 3 by the Wilson Building (1350 Pennsylvania NW ), one burpee for each of the city's eight wards. (Source)

Has the City Council considered taxing other service businesses?
The Washington Post noted "that the council rejected extending the sales tax to two other sets of businesses — beauty salons and construction firms — that were recommended for taxation last year by the blue-ribbon D.C. Tax Revision Commission, in a proposal that it said would generate an additional $28 million combined in 2015." (Source)

In addition, the health club provision specifically exempts “health resorts and spas where recreational facilities are combined with sleeping accommodations,” i.e., hotels. That means gyms and exercise facilities in hotels are also exempt from the tax.

When Council members argue they are just following the Tax Commission’s recommendations, that is not entirely accurate. They specifically exempted certain businesses that the Commission included in its report.