Why It Makes Sense to Modernize the Sales Tax– Yes, Even to Include Yoga Studios

May 6th, 2010 | by Katie Kerstetter

In the past 24 hours, DC Councilmembers have been inundated with emails from local businesses and individuals, including many members of the DC yoga community, protesting a proposal to expand the sales tax to more services in DC.   Expanding the sales tax to a variety of services is one of several revenue-raising measures supported by DCFPI and more than three dozen other organizations to help restore cuts to core services. 

The District’s sales tax is a critical source of revenue, paying for more than one-fifth of the DC budget.  It supports recreation centers and afterschool programs and helps make sure our trash is picked up on time and our streets are clean.  It helps make DC a better place to live and do business. 

But the strength of our sales tax has declined.  The sales tax was designed to tax personal consumption, which when the tax was created, largely consisted of goods.  However, over the past 40 years, personal consumption increasingly has shifted toward services.  To address this, DC – like many other states — began extending its sales tax to more services.  But there are still many that are left out. 

This creates a whole host of unfair situations.  A person who buys a treadmill pays the sales tax while a person who buys a health club membership doesn’t.  A parent who buys diapers for their child does, but a parent who uses a diaper service doesn’t.  Businesses that sell mainly services enjoy a competitive advantage over those that sell goods. 

You pay tax on your yoga mat, your leggings, your water bottle — even a yoga DVD.  Why do you not pay a tax on a yoga class?

The proposal to expand the sales tax is not about singling out yoga studios or any other business for that matter.  Instead, the goal is to make sure the sales tax applies broadly to consumer purchases, strengthening the sales tax and eliminating favoritism that exists with some purchases taxed and others not.  Also, it’s hard to argue that yoga shouldn’t be taxed because it promotes health.  By that standard, the sales tax shouldn’t apply to books, either, because they promote literacy.  That logic leads us in the wrong direction, toward a weaker sales tax. 

While the impact on businesses certainly should be taken into account, both research and logic suggest customers are unlikely to take their business elsewhere when the sales tax is applied to locally-purchased services.  It seems unlikely that a DC resident would give up their favorite yoga class and travel miles out of the city to a non-DC studio just to avoid a few dollars a month in sales taxes.  At 6 percent, the sales tax charges themselves are quite nominal.  Dropping into a yoga class for $18?  With sales tax, you’d pay $19.08. 

Allowing our sales tax base to weaken further hurts the family- and business-friendly city we all are working hard to create. Particularly at a time when the District doesn’t have enough resources to preserve core services, expanding the sales tax base to cover more services makes sense.

10 Responses to “Why It Makes Sense to Modernize the Sales Tax– Yes, Even to Include Yoga Studios”

  1. Doug says:

    I am confused. In what bill is the Council proposing to expand the sales tax?

    If a diaper service provides only reusable diapers, shouldn’t it be exempt from a sales tax? Disposable diapers are a significant part of municipal solid waste.

    I would support a sales tax on almost all of the services that you listed. I take exception to a tax on tickets and admission for arts and cultural events, as I explained in my reply to a previous post.
    http://www.dcfpi.org/new-revenue-resources-from-dcfpi#respond

  2. [...] help with that last sentence as he is is terrible with numbers]. The D.C. Fiscal Policy Institute responds with a blog post defending the idea of a yoga tax. This all makes the great Susie Cambria [...]

  3. Sarah Oldmixon says:

    I’m not sure whether I’m more bothered by the faulty logic of the reactionary anti-yoga-tax hooplah or the fact that it’s coming from my fellow yoga practitioners. I’m sharing my open letter to the folks at Faith Hunter Yoga – who sent out one of the emails that kicked off this silliness – in the hopes that other local yogis will also weigh in….

    Dear Faith Hunter Yoga:

    I was deeply disappointed to receive the email below from Faith Hunter Yoga yesterday. As you know, an important aspect of yoga practice is seva, or service to others. Like it or not, taxes are a part of our service to others in modern society, particularly service to the less fortunate members of our society. Unless the District is able to raise additional revenue, many local residents’ needs will go unmet. Proposed cuts include, among many others:

    * Adult education and training would be reduced by $7 million
    * Child care vouchers for low-income working families would be cut by $4 million
    * A 12 percent decrease in the Department of Mental Health’s proposed budget, including the elimination of 29 direct care positions

    As an active DC yoga practitioner, I find your claims that a small tax on yoga classes would deter individuals from participating hard to believe. Several local programs provide free or low-cost classes in low-income communities and the “middle-incomer” yogis you reference in your email can certainly afford a $19.08 class (6% tax) if they can afford an $18 one.

    As a yogi, I’m also struggling to understand how you can claim that it’s okay to charge individuals a fee – and frequently a high one at that – to participate in yoga classes **for the profit of the studio owners** but not okay to charge those individuals a fee (tax) that benefits our broader community? It is true that there are some nonprofit studios in the District. Why not argue for those studios to be exempted from the tax rather than call for a blanket exemption? The reality is that most studios are for-profit and thus should be taxed like any other for-profit services.

    Your email has been very successful in stimulating a tax protest by local yogis and gym goers and, as a result, I expect that the DC Council will not move forward with a tax on yoga classes and gym memberships this year. Regardless, work remains if we are to ensure that our neighbors are not going hungry, experiencing homelessness, or stranded without transportation while those of us who are more fortunate practice sun salutations. I sincerely hope that you will participate in the public dialogue around smart strategies for increasing District revenue with the same gusto as you have protested the proposed services tax.

    Namaste,
    Sarah Oldmixon

    • Robert Hanrott says:

      Well said! What a silly issue to choose. Maybe the proponents don’t quite understand how petty they sound. I hope Sarah Oldmixon is wrong and that a sales tax is extended to yoga and other currently exempt services. The tax regime is a mess and should be rational- ized.There is a strong argument for cutting out waste in the DC government, but that is a another matter. We should all rally round and make sure that poverty, homelessness and hunger are mitigated in the capital city of the United States.
      This message comes from someone whose wife is a passionate yoga advocate.

  4. Robin says:

    Which yoga studios are mobilizing their members? Can we call them and tell them to stop it?

  5. Downtown says:

    “To address this, DC – like many other states — began extending its sales tax to more services.”

    What are the current Taxed Services?

  6. David R. says:

    I think that you’re being disingenuous here. You haven’t explained why you’d tax this small list of services, in particular.

    I’d like to believe that you propose these particular taxes because they mark people in higher income brackets; because you see these services as luxuries; and because a tax on these services wouldn’t be regressive.

    And that, I think, is where a great deal of the outrage about your proposal comes from. Art restoration and armored-car shipments are not in the same class as gym memberships, yoga classes, and cultural events. Taxes on the latter services would indeed be regressive – and would tax some of the activities that people cherish most.

  7. Kelly says:

    This isn’t quite clear to me. If I buy a treadmill, I have a salable asset. If I buy a gym membership, I don’t. In one case, I’m buying a good. The other, I’m paying for access to someone else’s. I’m going to need some more convincing that my service interactions require a cut to the state. I already think the taxes I pay on labor (different from parts and waste disposal, which I’m happy to pay the tax/fee for)to my mechanic and my entire dry cleaning bill are ridiculous.

    Further, we don’t tax all good equally, and shoudln’t tax all services the same either. We don’t tax milk or fresh fruit, for example, because it’s a basic food, part of a healthy diet, and to tax such foods would be truly regressive policy. If that is the case, especially given our ballooning overweight and obese populations, which are only going to cost us more in health care services, shouldn’t we be encouraging healthy behavior, be it fresh fruit or exercise, with the same tax-exempt standard?

  8. Michael says:

    Why not increase the cigarette tax? Or increase the taxes on soda, sugary snacks, or junk food? Tax things that HURT you. With the obesity epidemic I think it’s ill-timed at the very lease to tax health clubs and yoga studios. I’m a yogi and someone that tans regularly, I’m fine accepting the tanning salon tax, I do not accept the yoga or health club tax.