Washington, D.C. – Today, Councilmember David A. Catania (At-Large), flanked by leaders of the District’s wellness industry and District residents, announced his intention to move an amendment that would undo the Wellness Tax—an application of the sales tax to fitness centers, yoga studios, and other similar business—at the Council’s final vote on the fiscal year 2015 budget on Tuesday, June 24th.
“Government should be doing everything in its power to encourage and assist residents in living healthier lifestyles,” said Councilmember Catania. “Rather than penalizing and discouraging residents in their effort to improve their physical wellbeing, we should be doing everything in our power to support them. I firmly believe that our tax policy should reflect our shared values, the amendment I will offer to undo the Wellness Tax reflects our shared desire to help residents lead healthier, longer lives.”
Catania will introduce an amendment that will eliminate the Wellness Tax in a revenue neutral manner. On May 28th, the Council voted in favor of a proposed FY15 budget that would phase in a reduction of the District’s business income tax from 9.975% to 8.25% over 5 years. By simply implementing the same proposed business income tax reduction over 6 years instead of 5 Catania’s amendment will ensure the District has sufficient revenue without the Wellness tax. [SEE CHART]
Extending the implementation of the business tax reduction by one year will have a minimal impact on the bottom lines of small businesses. Specifically, the difference in the average annual tax savings for small businesses between the current version of the FY15 budget and the Catania Amendment amounts to just $15 or $1.25 per month. When factoring in all businesses—including the very largest—the difference in the total average business tax savings is only $346 annually or just $28.83 per month.
Conversely, the Wellness Tax could cost consumers upwards of $100 annually each, depending on monthly membership costs and individual usage. These additional costs could force many to consider reducing the number of classes they take or canceling their memberships all together, costing small and local businesses potentially tens of thousands of dollars. As a result, the Wellness Tax is much more likely to impact the bottom lines of businesses than Catania’s amendment, which would protect consumers from a counterproductive tax on their healthy lifestyles and still provide tax savings to businesses.