Mr. Catania, at-large independent, took shots at the fitness tax when he announced Friday that he intends to introduce an amendment to strip from the budget the 5.75 percent sales tax proposed on gyms, yoga studios and fitness centers.
“I can’t help but think that it plays into the politics of his campaign,” Mr. Mendelson, a Democrat, said of Mr. Catania’s plan, adding that the amendment had not been discussed with him prior to the Friday announcement.
“Ordinarily when one is serious about an amendment, they talk to the sponsor of the bill,” he said. “The fact that he has not suggests it is partisan.”
The fitness tax is part of a larger proposal, introduced by Mr. Mendelson, that would reduce most income taxes while broadening the District’s tax base, in part by expanding the number of services that would be subject to the city’s sales tax. It has come under recent attack by health club owners and other fitness enthusiasts who worry that added costs will discourage people from joining gyms.
“One of the most important aspects of tax policy is to privilege the things you want to encourage and burden the things you don’t,” said Mr. Catania, who would like to offset the fitness tax by drawing out the implementation of a business tax cut. “Thanks to hard work and a growing population, we have a treasury that is well filled. Therefore, the need to look for additional sources of revenue, to me, doesn’t make sense.”
The suggestion that the city tax additional services was originally made by the D.C. Tax Revision Commission, which for more than a year considered ways to diversify the city’s tax base.
Mr. Mendelson defended his budget plan, which includes only six of the eight services the blue-ribbon commission sought to tax. He noted that because the District is barred from taxing the incomes of nonresidents, he was sensitive about including taxes that would primarily draw from the pocketbooks of those who live in the city.
“That restricts our tax base so we are often mindful of whether a tax or fees will fall on residents or nonresidents,” he said.
The D.C. Fiscal Policy Institute supports the fitness tax but also all of the eight sales tax recommendations made by the tax commission, executive director Ed Lazere said.
“In general, the best thing is to expand the sales tax as broadly as possible,” he said. “If the sales tax were limited only to the things that people thought were bad for us then we wouldn’t have much of a sales tax.”
Acknowledging that the barber tax would be levied upon a large swath of D.C. residents, Mr. Lazere said he could see why politicians might want to leave it out.
The six services taxed under the plan however, could just as easily fall upon residents of neighboring Maryland and Virginia as they could D.C. residents, Mr. Mendelson said.
Focusing on the debate over the fitness tax, Mr. Mendelson reasoned that residents of Maryland and Virginia may well use D.C. gyms if they work in the city and would be unlikely to seek out another facility outside the District on account of a 5.75 percent sales tax increase.
“Gyms and tanning salons, those generally are services that tend to be location oriented,” he said. “One goes to a gym near where they live or where they work.”
Mr. Catania has suggested the city could offset the $5 million annual income from the fitness tax by extending the time the city will phase in cuts to its business franchise tax – from 9.975 percent to 8.25 percent – over six years instead of five years. Despite having a plan to recoup the tax, Mr. Mendelson seems unlikely to compromise.
“I understand that these gyms believe a 5.75 percent sales tax will drive them out of business. I do not think that will happen. I say that because of the analysis of the tax revision commission,” he said. “Anecdotally, we have a higher tax on restaurants, and restaurants are booming in this city.”
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