Health clubs sweat taxes

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A health club is not the place you would expect to discuss tax policy.

But at Sport Fit gym in Bowie, exercisers are being asked to write their state lawmakers to oppose a proposal by Gov. Martin O'Malley, a Democrat, to expand the state sales tax to include health clubs.

As the General Assembly convenes in Annapolis this week for a special session to consider Mr. O'Malley's budget plan, his proposal to expand the sales tax to services that currently aren't taxed is getting a lot of attention in certain quarters.

"It's ridiculous," said Joe Bottner, who works the front desk for the gym's 10,000 members. "It defeats the purpose of trying to keep obesity down and keep people in good health."

Mr. O'Malley also proposes to legalize slot-machine gambling and increase other taxes, including the state sales tax and personal income tax, to resolve the state's $1.7 billion budget shortfall.

Taxing services might seem like an easy fix as the country moves from a manufacturing economy to a service economy, but Maryland officials have found strong opposition to the plan. Service-industry groups call it a terrible idea, and a 6 percent sales tax on pricey services such as accounting or legal representation could add hundreds, or even thousands, of dollars to the cost.

A plan to expand the sales tax was considered, then abandoned, during the regular session earlier this year. When Mr. O'Malley proposed an expansion of the sales tax for the special session, he included three services: health clubs, massage therapy and property management.

But even with only three industries on the table, lawmakers are being bombarded with phone calls and e-mails opposing the idea.

"I've gotten, like, 100 e-mails" from one health club in my district, said Delegate Barry Glassman, Harford County Republican.

"They're saying, 'Why are you taxing something that is health-related?' " he said. "You tax tobacco, people understand that. People are just maxed out on what they can pay."

Delegate James J. King, Anne Arundel Republican, owns a restaurant and also opposes the sales-tax expansion. He said the plan would have a ripple effect for business owners.

"At my place, you've got accounting, you've got pest control, you've got all these services you're using all the time," he said. "At the end of the month, it would be hundreds of dollars. You're talking about a whole list of taxes."

The proposed expansion also has opened the governor to criticism of burdening the working class more than the rich. The property management tax, for example, likely would be passed on to renters. Real estate agents are so upset that they are planning a rally tomorrow at the State House.

"This is going to be passed on to the consumer, the tenants," said Carole Maclure, president of the Maryland Association of Realtors.

Mrs. Maclure said a move to increase rents would only worsen the state's housing crunch.

"It affects the housing affordability factor," she said.

Even lawmakers who generally support Mr. O'Malley's tax plan concede that sales-tax expansion will be a tough sell.

"On first blush all taxes look fairly easy, but as you start hearing from constituents like health clubs, to tax people trying to go in and get healthy, it becomes very difficult," said Sen. Thomas McLean "Mac" Middleton, Charles County Democrat who leads the Senate Finance Committee.

At the gym in Bowie, workers said they understand that the state is in financial trouble but think lawmakers would be increasing other costs if they levy a tax on gyms and discourage exercisers.

"Everybody's complaining about the cost of health care," said office manager Maureen Stargel. "Well, this is one of the best things you can do to stay healthy."