The “yoga tax” has spurred debate in Washington as petitioners argue that healthy behavior should be encouraged, not taxed.
In June, the District of Columbia Council voted 12-1 to approve the controversial “yoga tax” as part of the 2015 budget. The budget calls for a broadening of the sales tax base in DC by taxing the following services:
• Health clubs and yoga studios
• Bowling alleys
• Billiard parlors
• Car washes
• Tanning studios
• Carpet cleaning services
• Storage facilities
• Water delivery services.
In DC, sales of services are generally exempted unless specifically designated as taxable. For example, catering, delivery services, job placement services and landscaping have already been designated as taxable services in previous budget cycles. Expansion of sales tax on specified services is a common approach by tax authorities to broaden the tax base and increase tax revenue, especially during tough economic times.
The “yoga tax” has spurred discussion and debate as petitioners argued that “healthy behavior should be encouraged, not taxed.” There has been a lot of discussion and public opinion related to discouraging unhealthy behaviors, such as taxing unhealthy foods and beverages (e.g., soda and candy taxes) and unhealthy behaviors (e.g., cigarette and tobacco taxes), and the acceptance of those type of “sin taxes” have grown over time. But some aren’t sure how to respond when tax is imposed on something we consider good for us.
While gym memberships, yoga classes and family bowling outings are activities for good health and fun, it doesn’t mean that they can’t be subject to sales tax as a way to drive revenue for tax authorities. Tax authorities face difficult decisions when deciding how to increase tax revenue, and there’s usually not a better option. DC could, for example, have increased the tax rate applied to tangible personal property and selected services instead. They could have chosen other services to tax rather than the ones they did. That might have changed the winners and losers, but not the bottom line—there’s never a solution that makes everyone happy when taxes are increased.