DC Council Has a Spending Problem, Not a Revenue Problem

Gym owners and fitness aficionadas are up in arms over the D.C. City Council’s newly proposed sales tax on gyms and fitness studios. The 5.75 percent sales tax is part of the Council’s fiscal 2015 budget that revises the city tax structure. While the package offers critical income tax relief of which ATR is  supportive, the Council's recycling of the old canard that new taxes are necessary to supplant the reduced revenue is troubling.  What's worse, the sales tax hike was snuck into the budget in the 11th hour and announced the same day Washington was named the fittest city in the country.

The new sales tax has small gyms and studios concerned that new customers will be driven away by higher prices. Betsy Poos, co-owner of the Pennsylvania Avenue Southeast studio, says that her studio stands to “lose much of [its] overall profit margin” if it loses “even ten percent” of its new customers, who may be dissuaded from coming to the studio if prices go up.

DC Council Chairman Phil Mendelson reasons that the so called gym tax allows for a revised income tax that saves “the average resident taxpayer in the $50,000-$75,000 adjusted gross income bracket about $436 a year.” But is the expansion of the sales tax actually paying for the tax relief provided in the budget? In addition to the change in the tax structure, the new budget also contains spending proposals that can hardly be considered critical to the well-being of Washingtonians, and cost far more than the amount that the fitness tax will bring in (about $5 million a year). One of these is a $10 million proposal to build another park in the space between Q Street and Dupont Circle. The space in question is only a block long and next to the already existing park in Dupont Circle, as well as only nine blocks away from Meridian Park. Not to mention, the two mile long National mall is located under a mile away.

The budget also includes a proposal for spending $400 million over the next six years on the D.C. streetcar system. While the proposal calls for less spending than Mayor Gray’s original proposal for $884 million, it is a significant amount of funding for a project that has been in the works since 2008, and has been subject to promises and false starts by the District Department of Transportation over the last few years. Mayor Gray promised the streetcar line along H Street NE and Benning Road would be operational by February, and almost four months later the streetcar has yet to take on passengers.

Tax relief for District denizens is important, and the tax measures included in the Council's budget represent significant progress on reducing the government burden on residents of the nation’s capitol. However, the Council's claim that new taxes on services are essential to income tax relief is bogus. If the City Council were to cut spending on unnecessary city projects like additional green space and a flailing streetcar system, it would signal it is truly concerned about how the cost of government burdens its citizens.

 

TAGS: Spending, Excise Taxes, Transportation, Budget Reform

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