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Gear Talk: Jim Baugh, PHIT America, Part One

Monday, February 11, 2013 /by

I recently spoke with Jim Baugh, former President of Wilson and the TIA (Tennis Industry Association). Baugh is now leading the day-to-day operations for PHIT America, an advocacy group started by the SFIA (Sports and Fitness Industry Association), which is bridging corporate sponsors, legislators, and the grass-roots organization Kids in the Game as a way to both expand industry sales and encourage Americans to live more healthfully. In part one of our interview, we discuss PHIT America’s principal goal—the passage in Congress of the PHIT (Personal Health Investment Today) Act, which seeks to incentivize all Americans to exercise and play sports, tennis included, by subsidizing related expenses.

(Stay tuned later this week for Part Two of our interview, on PHIT America’s efforts to conserve current levels of federal funding for P.E. programs in schools, as well as its message that regular exercise can improve Americans’ health, reduce healthcare costs, and balance the federal budget.)

Disclosure: The Tennis Media Company is a PHIT America Alliance Sponsor.

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Justin diFeliciantonio: As part of your work to encourage Americans to live healthier, more active lifestyles, PHIT America is advocating that Congress pass the PHIT (Personal Health Investment Today) Act. If passed, PHIT would allow Americans to place up to $2,000 a year in existing pre-tax medical accounts to pay for physical activity expenses, including but not limited to the costs associated with joining leagues and health clubs, hiring personal trainers, and buying sporting equipment. Is this premise valid? Is it true that if it doesn’t cost as much, people will exercise more?

Jim Baugh: Oh, there’s no question. There are a lot of families in this country who are struggling to pay their bills and sign their kids up for physical activities. Parents have told us, “I just can’t afford to put my kids in little league baseball, or put them in a league tennis program.” Many of the costs of these programs have gone up over the years. Even worse, a lot of schools are now saying, “It you want to play, you’ve got to pay.” We’ve got to reduce the costs of these programs and give Americans an incentive to get more active, fitter, and healthier.

JD: It seems like the PHIT Act would have a pretty wide bearing. For tennis players, what types of expenses could PHIT cover? Racquets? Tennis balls? Court reservations?

JB: If PHIT passed, you could pay for lessons, for programs, for equipment—racquets and balls—anything that’s used specifically for activity. It wouldn’t cover footwear, because a lot of footwear’s for street wear. But if you’re buying a tennis racquet, you’re getting active. So it has broad applications to the tennis industry. Everybody sees the benefit of this. The whole industry realizes that it’s not just good for the industry, but it’s good for America. The Tennis Channel, at their expense, is even producing a PSA promoting PHIT America, and a number of tennis companies are behind us as sponsors.

JD: So PHIT could be used to pay for membership dues at a racquet club?

JB: Yes, as long as it’s not a private club. It’d have to be a public facility. That’s the way the legislation is written now.

JD: Getting into the nitty-gritty of the bill: Why pre-tax medical accounts? Why do you believe these are the best vehicles to get people to, say, start playing tennis?

JB: It’s been proven through the years that tax incentives, such as mortgage deductions and pre-tax accounts, have been very influential in America’s life. The biggest thing we want to do is find a way for the federal government to give Americans an incentive be physically active. That’s the PHIT Act. It’s been around for a few years—until now, we haven’t been talking about it too aggressively—but now, given the state of our country’s budget and healthcare situation, we feel it’s time to push to influence Americans’ lifestyles for the better.

JD: Are you saying that a pre-tax medical account is the best way to ensure that people use the money for physical activity expenses?

JB: Well, they don’t have to use it. Not everybody who has a pre-tax medical account uses it. But I think the PHIT Act would give Americans more of an incentive to use it overall, and it would control how the money’s spent, as there would be clear definitions about what would qualify.

But look: What we have today is primarily sickcare. We use pre-tax medical accounts primarily for pills, for doctor appointments, for surgery, all this after people have gotten sick. Our message is: Let’s use pre-tax medical accounts to prioritize prevention in our healthcare system. It’s a fixed dollar amount, there’s a process set up, and it’d be a way to give Americans relief to fix a huge problem in our country.

JD: So it’s not necessarily that the amount that you could put in pre-tax medical accounts would increase, just that you could use it for additional purposes.

JB: Right. The legislation doesn’t increase the threshold: It’s still $2,000 a year for families. All it does is expand the classification. So that, rather than using it for drugs and doctors appointments, etc., you can use it for health- and activity-based expenses overall, which would incentivize health and prevention.

JD: Are there any healthcare providers that already offer plan holders the ability to spend money on exercise-based preventative care? How many Americans, in all, have pre-tax medical accounts?

JB: Some providers do, some don’t. But again, this would put into law that pre-tax medical accounts could be used for it. Granted, there are some companies that are offering their own incentive programs in these areas, but PHIT legislation would expand their reach.

As for your second question: About 50 percent of Americans have pre-tax accounts. The PHIT Act would expand the net, so that we would capture a lot more of these Americans. And, a lot more Americans would be encouraged to use them. Right now, the way this works, Americans deposit money into their pre-tax medical accounts at the beginning of the year, and then they draw out those amounts as the year goes on. Well, knowing that they could use it to absorb the expense of a kid, say, playing in a USTA League, or a 10-and-Under Program, or to buy a tennis racquet, a lot more Americans would be, I think, encouraged to use such accounts.

JD: Would this tax incentive be available to all Americans regardless of income? Or would it apply only to those who make under a certain amount? If the former, why should pre-tax incentives be allowed to the wealthiest Americans, e.g., those that make, say, $200,000 a year?

JB: It’d be available to Americans regardless of their income, as long as there are pre-tax medical accounts offered through their employer, whether that's a private company or the government. In response to your second question, we are just working under the existing pre-tax medical account legislation. We are only focused on what should be eligible and not who is eligible for pre-tax accounts.

JD: In practical terms, if PHIT passed, how much could it save an American in physical activity expenses?

JB: Well, if they only use their pre-tax medical accounts for physical activity expenses—again, they’re typically used for medical expenses—that’s $2,000 a year of income that can be spent before taxes. This can amount to a lot of savings, depending on your tax bracket. For example, let’s say you used all $2,000, and you’re in a 30 percent tax bracket, that’s an extra $600 in your pocket you wouldn’t have had otherwise. You’re using pre-tax dollars to pay for physical activity expenses, similar to how those dollars are used to pay for medical expenses. Families would use it. It’s savings.

JD: Where does the PHIT Act currently stand in Congress? Who are its major co-sponsors?

JB: As I alluded to earlier, PHIT’s been around for about three years. But we’ve been very slow to bring it to a higher level, simply because of what has been going on in Washington, D.C. It’s been impossible to try to get action on such legislation. Now, having said that, with the new Congress and with the healthcare and budget crises, we feel it’s time to bring it forward now. We have a solution: It’s called PHIT America through the PHIT Act, which is the overall mission of our organization.

With respect to who’s behind this, if you visit our website, you can see a list of all the co-sponsors of the bill. We’re going to push this legislation heavily this year. We have some major advocacy days coming up, like National Health Through Fitness Day on March 12th. The tennis industry will be very active that day.

JD: What do you think PHIT’s chances are of passing?

JB: I think it’s very good long term. It may not happen overnight, but we’re going after it hard this year. And if we don’t succeed, we’ll even go after it harder next year. In fact, there’s been a couple major sponsors that have said, “Jim, if we’re not successful this year, let’s do a Million Mom March on Washington, D.C. for fitness, for our kids.” You know what? We can do this. Through this campaign, reaching out to our sponsors’ audiences, we could have a lot of people come help us lobby on Capitol Hill for something our country drastically needs.

JD: What kind of presence does your organization have in Washington? What do you believe is key to getting this legislation passed?

JB: First of all, the SFIA [Sports and Fitness Industry Association] has its own advocacy team there. We also employ a lobbying firm that helps us. But more importantly, it’s this coalition we’ve brought together through PHIT America. The tennis industry, the fitness industry, the bowling industry, the golf industry, Beach Body (which does P90X)—120 companies are now working together to advocate for PHIT, where, in prior years, we were kind of fragmented. We may have been talking about it, but now we’re talking as a united voice. This campaign is reaching out to a lot of Americans, and by doing so it’s uniting a lot of organizations in the sports and fitness industry.

JD: What should readers do if they want to support the Act?

JB: If you go on any page of PHITAmerica.org, on the right hand side is an Advocate button. It’s so simple. You put in your zip code. It shows your members of congress and a copy our letter. You fill in all your personal information, and then click send.

It’s easy for Americans to get involved, and so important. We have to find solutions to budget deficits and the healthcare crisis now more than ever. Just look at what it’s doing to the overall system. We’ll never fix the budget crisis until we can control healthcare costs. We’ll never fix healthcare costs until we build prevention into our system. And how do you prevent people from getting sick? One area is to get them healthier! And how do you get them healthier? They eat better, or they get more physically active and fit. And we have the solution for the second piece of it.

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