Gym Memberships & Workout Classes Should Be Tax Deductible
The United States tax code is notoriously complex. Tax policy is one of the most powerful methods through which the government can encourage, or discourage, a range of actions. As a result, the tax code is filled with deductions(and some penalties), for engaging in various behaviors.
If you obtained a mortgage to purchase your home, part of your mortgage interest payments will be tax-deductible. If you own a rental property, you can deduct for depreciation in the value of the property. Real estate isn’t the only field with substantial deductions. You can deduct from your taxes for childcare expenses, student loan interest, medical costs, business expenses (for those who are self-employed), and much more.
There are also penalties, for those actions which the government views as being less than optimal. If you withdraw money early from your 401(k) account, besides income taxes on the amount taken out, in many cases, you’ll be assessed a 10% penalty. Until the recent tax code changes signed into law by President Trump in late 2017 (which apply to future tax filing years), if you couldn’t provide proof of health insurance, you’ll be fined either a flat penalty, or a portion of your income.
All of this can make filing taxes quite complicated. Yet, whether or not we agree with any particular exemption or penalty, it is clear that each one reflects the priorities of the federal government, and so can help promote (or discourage) certain behaviors.
In July 2018, the House Ways and Means Committee approved legislation which allows gym memberships and workout classes (like Orange Theory, Crossfit or Soulcycle), as well as certain other fitness costs, to be applied towards the broader medical tax deduction. This deduction is limited to $500 for individuals, and $1000 for couples who file joint returns (or file as the head of a household). Also, for those with health savings accounts, or other flexible spending accounts, the passage of the bill means this money can be used towards qualifying healthare expenses. This proposal enjoys rare bipartisan support.
It is no secret that Americans spend far more on healthcare, than citizens of other developed nations. Per capita expenditures on healthcare in the United States are over $10,000 per year. This is nearly double the average for other affluent nations, such as Germany, Japan, France and the United Kingdom. The United States spends around $3.3 trillion on healthcare annually, which accounts for around 17.9% of gross domestic product in the United States. This is also a higher share of GDP than any other developed nation. Health care costs are a major cause of personal bankruptcy filings in this country.
The reasons why we spend so much on healthcare are quite complex, and have been the subject of voluminous research and analysis. It is simplistic to think that altering one part of the tax code, will be a panacea for astronomical health care costs.
With that said, illnesses caused (at least partially) by a lack of exercise or poor diet, account for quite a large portion of aggregate medical spending in the United States. According to the Center for Disease Control, 37.9% of adults over the age of 20 are obese, and 70.7% are either overweight or obese. Since obesity is closely associated with a range of health problems, including cardiovascular disease and diabetes, it often results in large healthcare expenses. Studies suggest that obesity-related complications cost between $147 billion to $210 billion every year, with those who are overweight and obese facing higher average costs for emergency rooms visits, and being more likely to require prescription drugs.
Weight challenges aren’t the only health conditions caused by a lack of exercise. The National Institute of Health lists physical inactivity as a substantial factor in numerous health conditions, including heart disease, hypertension, stroke, diabetes, and at least several forms of cancer. By contrast, regular exercise reduces the risk of many of these conditions, as well as depression, congestive heart failure, osteoporosis, bone fractures, and other ailments.
Despite the many benefits of greater physical exercise, most Americans are falling short. Less than 5% of American adults obtain at least 30 minutes of physical activity each day, while nearly 80% of Americans fail to exercise the suggested amount each week.
It is clear that if we exercised more (and improved our diets, which can result from improved exercise habits), we would be healthier. As a result, health care costs would fall. How do we set this cycle in motion?
Employers could reimburse employees for gym memberships, or offer other wellness programs, since this could help reduce healthcare costs for employers, as well as absenteeism from work, due to illness. Researchers have found that if implemented properly, workplace wellness programs can be quite effective. Of course, whether to implement such programs, is the choice of individual employers.
People might be financially penalized for a lack of exercise — a large body of psychological research makes it clear that we are more averse to losing a dollar, than the possibility of gaining one. However, this approach presents challenges in terms of monitoring compliance, and has a distinctly paternalistic, Bloombergesque feel to it.
Allowing tax deductions for gym and exercise expenses, allows the government to clarify that increased levels of fitness and exercise are a valued goal — one which is rewarded financially. This allows people who currently make use of a gym or other exercise program to benefit, and offers incentives for those who don’t, to consider doing so in the future. It is also available to everyone, regardless of whether their employer offers health incentives. This reform does not guarantee that more people will exercise or stay healthy, but it does provide an additional reason to do so.
We live in a time of great political rancor, both as private citizens, as well as at the legislative level. There seems to be little we can agree on, and an abundance of issues which tear us apart. Sadly, this doesn’t appear likely to change anytime soon.
Yet, the work of building a better society cannot be put on hold. We have to find common ground somewhere, and implement smart approaches to facilitating positive change, even if these changes aren’t widespread or sweeping at first.
The ability to set tax policy, is one of the federal government’s most important powers. Like most other political issues, it is often a source of bitter partisan disagreement. At the same time, voters express greater concern over healthcare (particularly healthcare costs and quality), than any other issue.
Reducing demand for medical treatment, through improved patient health, is a no-brainer. Exercise and diet are the simplest ways for us to get there. The federal government can’t make us exercise or eat better — nor should it. However, rewarding people for moving in the right direction, and making exercise and gym attendance just a little more desirable, a nudge of sorts, is a great start.
