The statutory limitations on medical deductions also reduce the number of taxpayers that can utilize them. For gym fees to qualify as a medical expense, the taxpayer must satisfy three requirements: (1) a physician must diagnose the taxpayer with a specific disease, (2) the taxpayer must use the gym to treat the specific disease, and (3) the taxpayer would not incur the gym fees but for the specific disease. Taxpayers who do not have a medical diagnosis and prescription for gym use (perhaps because they cannot afford such customized medical care) but choose to use a gym to manage their weight and health will not qualify for a gym fee medical deduction. Even if a taxpayer has the requisite doctor support, the taxpayer must establish that these gym-related expenses are not routine spending: i.e., that the taxpayer would not have paid that expense absent the medical condition. This third requirement means that many taxpayers are ineligible for the deductions.
B. Athletic Facilities as Fringe Benefits
Another set of hurdles for a nontaxable gym experience is provided by the section 132 fringe benefit provision. To be eligible for treatment as an excludable fringe benefit, an athletic facility must be located on the employer’s premises (or on a property rented by the employer for the on-premises facility), operated by the employer, and used by the employees of the employer, their spouses, and dependent children.
For most fringe benefits , availability requires nondiscrimination—essentially, an employer cannot provide a fringe benefit exclusively to highly compensated employees. These rules prevent discrimination and favoritism toward high earners in corporations unless a benefit is available to all or to a large group of employees that can also utilize the fringe benefit. On-premise athletic facilities, however, are not subject to the non-discrimination limitation: a business can provide highly paid executives an exclusive fitness facility benefit.
What if an employer pays for an employee’s private gym membership? Currently, payment of a private gym membership is treated as compensation that is taxable to an employee at its fair market value. What this means in practice is that an athletic facility fringe will not be available to employees whose employers either do not have the resources to build and maintain such a facility for all their employees or choose only to have such a facility available to high-paid executives.
C. The “Upside-Down Effect” of Tax Subsidies for High-Income Earners
Limitations to medical deductions and fringe benefits make both of little use in fighting the obesity epidemic—especially since, as shown, most who benefit from either are in higher-income brackets. As a result of the medical deduction mechanism, “persons with higher incomes, and thus with larger disposable income will likely spend more on medical matters than those with fewer resources.” William Andrews called this an “upside-down effect” through which a system intended to help poorer taxpayers instead subsidizes wealthier taxpayers to get expensive medical treatments. As Andrews noted, the medical deductions are most effective “in reducing differences … at the upper end of the income scale” thus making them a “a useful tool” with a limited application.
As for fringe benefits, since the value of an employer-provided gym membership is excluded from gross income only for those who work for wealthier companies able to maintain facilities, this system disadvantages employees at small businesses who cannot subsidize the costs of an on-premises athletic facility or lease. The inapplicability of nondiscrimination rules also shows the imbalance across income thresholds. Interestingly, because private gym memberships are clearly “too valuable to be considered de minimis,” the requirements are more stringent than for other benefits, such as parking.
II. Behavior, BMI, and Outreach to Disadvantaged Communities
Scientific studies that going to the gym incentivizes a change in behavior that leads to substantive health outcomes; furthermore, rebates and subsidies aid in incentivizing gym use because they remove an economic barrier for people who otherwise could not afford it.
A. Changing Behavior
A Canadian study on sports medicine with participants of largely European ancestry (the Ready Study) investigated not only the positive health effects of fitness, but the effect gym use had on other behaviors that accompany regular physical activity, framed within the Health Promotion Model that considers healthy behavior as a function of environmental, personal and behavior factors. Comparing results for 688 adult members of a fitness center to local community members, the Ready Study concluded that members exercised more frequently: 90% of fitness center members exercised regularly as opposed to 54% of nonmembers. Fitness center members were also more likely to consult several health care providers than non-members: about 90% of fitness center members visited a general or family physician (often for preventative healthcare visits) as compared to 74% of nonmembers.
Incentive and rebate programs can stimulate gym use with the same positive health benefits, with added behavioral factors based on the conditions for the rebate. The Homonoff Study examined an American university’s bi-annual rebate program offered through student insurance that provided a 50% reimbursement of the annual gym membership fee for participants who attended the gym 50 times during one of the two semester reimbursement periods: participants who attended the gym more than 50 times during both semesters had their entire membership fee reimbursed. The Homonoff Study noted that the reimbursement program led to an average of 4.6 more gym visits per semester, a 20% increase from the mean of the study, with increases among both higher and lower frequency gym users.
Two further items are worth noting here. First, the Ready Study and Homonoff study dealt with mostly homogeneous populations (white and college student communities, respectively) and did not cover minority populations, leaving uncertainty about applicability to low-income taxpayers. For example, introduction of a conditional co-pay in one study caused 80% of participants to drop out of a program that previously had a no-cost membership. Second, another behavioral impact is peer support, sometimes noted as one-on-one training or group-based peer health coaching. Group activity at the gym provides another type of peer support. Various studies have suggested that group exercise leads to higher levels of physical activity and may be another reason for positive outcomes resulting from organized classes and group activities like yoga, spinning, and Pilates.
B. Health Benefits
The positive behavioral outcomes from gym use are accompanied by tangible health benefits including weight and cardiovascular health. Ryan E. Rhodes conducted an international study that showed there is epidemiological evidence from the Rhodes Study of international research that routine physical activity is associated with a lower risk for “all-cause mortality”: the greatest reduction of all-cause mortality occurs when a person goes from no physical activity to low volumes of physical activity. The Rhodes Study shows that regular physical activity has been associated as “the primary prevent[or] of more than 25 chronic medical conditions.”