As far as I can tell, the D.C. Council has not actually proposed a sales tax on yoga classes. That is, I do not believe it appears in the proposed "Fiscal Year 2011 Budget Support Act", B18-731, that was introduced in mid April. I'm not being snarky. I just can't find it, and I find stuff like this to pay the bills...At any rate, the proposal to tax yoga classes (and gym memberships and other services) appears to arise from an outside source.
In response to the effects of the recession and the District of Columbia's ongoing budget issues, the D.C. Fiscal Policy Institute recommends several taxes to increase revenue. According to its website, the D.C. Fiscal Policy Institute (DCFPI) was established in 2001 by the Center on Budget and Policy Priorities, one of the nation’s premier policy organizations working on federal and state issues that affect low- and moderate-income residents. DCFPI "conducts research and public education on budget and tax issues in the District of Columbia, with a particular emphasis on issues that affect low- and moderate-income residents. By preparing timely analyses that are used by policy makers, the media, and the public, DCFPI seeks to inform public debates on budget and tax issues and to ensure that the needs of lower-income residents are considered in those debates." The nature and extent of DCFPI's relationship with the D.C. Council or its members is unclear. It is also unclear whether or how DCFPI's recommendations were made to the D.C. Council.
Among DCFPI's recommendations is an expansion of the sales tax to include more services. Expansion of what is taxable is not an uncommon trend in the past few years. DCFPI's rationale in expanding the tax base is framed as a "modernization." One undated document* on the DCFPI website states: "DC’s sales tax was created at a time when people spent more on goods than services. Today it’s the other way around. Adding more services to DC’s general sales tax — like pet grooming, health club memberships, and theater tickets — would raise more than $14 million." Presumably, yoga classes would fall under the "health club memberships" category.
Several other states have grappled with this issue of imposing a sales tax on yoga classes. The tax exists in Missouri, although, in January, a repeal of the tax was proposed. I have not yet checked the status of the repeal. I believe that yoga classes in Missouri previously escaped taxation because they were considered spiritual, and thus, tax exempt. Either yoga then lost its status as "spiritual," or the sales tax was created specifically enough to include yoga. I also believe that Washington State considered, but did not pass, a yoga tax in 2008. I need to research these legislative histories a little more.
What is the proposed "Fiscal Year 2011 Budget Support Act"?
It's a bill. When enacted, the Budget Support Act is a piece of local legislation. It makes the changes to District law that are necessary to implement the budget. These changes can include adjustments to tax rates, legislative establishment of new programs, and other amendments to the DC Official Code.
The DC Council prepared a notice of public hearings and committee markup schedule for the bill. There is a public hearing on May 7. There are some who believe that DCFPI will use this opportunity to advocate an expansion of the sales tax.
Let me know if you'd like to borrow my Schoolhouse Rock DVD.
* The proposal is on Fair Budget Coalition (FBC) letterhead. The relationship between FBC and DCFPI is unclear.
More research to follow.....
