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Going to the Gym is Taxing

BY RON SHULTIS

August 23, 2018 11:47AM

We all know that it’s good to exercise and live a healthy lifestyle. However, if we’re being honest, nobody actually likes working out, unless you’re one of those weirdos or a Crossfitter. How do I know this? If working out were fun, everyone would be in shape and choose extra helpings of kale (which is nothing more than spinach with hair) and burpees for fun. Instead, we choose pizza and Netflix marathons. Sure, we may be glad we went to the gym and feel accomplished afterward, but I don’t think most of us would describe it as “amusement.” Unless, that is, you’re the state of Tennessee.

Recently the Tennessee Department of Revenue sent out a notice reminding the public and physical fitness facilities about a little-known tax in Tennessee: the “Amusement Tax.” The Amusement Tax, originally created in the 1980s, is a tax on dues or membership fees to sports and recreation facilities, ticket sales to sports or recreational events, and rental equipment, such as bowling shoes or golf carts. The tax even includes any service provided by any facility covered under the tax, like personal training. Ronald Regan famously once said, “If you want less of something, tax it.” So does it make sense for Tennessee—the state with the highest child obesity rate in the nation and fourth highest obesity rate overall—to be taxing people for the “amusement” of trying to live a healthier lifestyle?

Even Tennessee lawmakers agreed taxing people for choosing a healthier life makes for bad public policy. Well, at least for some types of gyms. What the Department’s notice left out was a special exemption that was created for certain gyms years after the tax was put into place. You may wonder, “What gyms qualify for the exemption?” In order to qualify, your gym must be open seven days a week for at least seventy hours, have at least 15,000 square feet of space dedicated for physical fitness, and offer at least three of the following: racquetball courts, track or swimming, aerobics, exercise equipment, or blood chemistry and urinalysis health assessments.

This exemption amounts to a discriminatory tax break for large national gym chains at the expense of small, independent, and specialty gyms. Buy a membership to LA Fitness on January 1 and never go back, you don’t pay a tax. Like sweating it out at your spin studio? You’re going to have to pay extra for that. I don’t know about you, but I found filing my taxes so stressful last year that I thought about going to a yoga studio to help find my inner chi, but then I realized I’d have to pay the tax. Never!

Seriously though, governments need to do a better job of recognizing and admitting the unintended consequences and bad incentives tax policies create. Better policy would be to have lower rate broad-based taxes—like sales taxes—or, at the least, not have the government picking winners and losers by punishing small gyms to carve out exemptions for “big gyms” (literally and figuratively).