Rio 2016!

rioThe Rio Olympics start this weekend.[fn1] And, in spite of the catastrophe that the Rio Olympics may potentially be, we’ll be watching (in the same way John Oliver excoriated FIFA for 12 minutes before announcing that he was “still so excited” for the World Cup).

U.S. Olympians are likely to win a collective 100 or so medals over the next couple weeks. And, in addition to medals, winners will receive cash payments from the U.S. Olympic Committee—it will pay $25,000 for a gold, $15,000 for a silver, and $10,000 for a bronze.

Under current tax law, this prize money is gross income to the winners. And that has certain quarters outraged.

Last month, the Senate unanimously passed S.2650, the United States Appreciation for Olympians and Paralympians Act. The bill would exempt from gross income the value of medals received by Olympians (not a huge tax reduction, as apparently a gold medal is worth about $587), as well as any prize money paid by the U.S. Olympic Committee.

Senator Schumer is pushing the House to immediately pass the same legislation. And why, according to Schumer, is this such an important loophole to pass? He offers two reasons:

  1. Other countries subsidize their Olympic athletes.
  2. “After a successful and hard fought victory, it’s just not right for the U.S. to welcome these athletes home with a tax on that victory.”

Frankly, these justifications are nonsensical. Should we, like other (unnamed) countries, subsidize our Olympic athletes? I have no idea. But if we decide to subsidize them, why only subsidize that tiny percentage that win? And why do it through a tax reduction? It would make more sense, if we really want to subsidize Olympic athletes, to provide all of them with some sort of stipend.

And the idea that it’s not right to tax individuals who fought hard? I mean, I’m not entirely sure how to respond to that: we always tax individuals who successfully work hard. We tax Beyoncé when she works hard to produce an album or a tour. We tax Steph Curry when he sets new records for three-pointers. We tax Mark Zuckerberg when he creates a successful social media platform. We tax Ken Jennings when he wins 74 episodes of Jeopardy! in a row. What distinguishes Olympians’ hard-won winnings from countless other hard-working athletes and others?

Americans for Tax Reform’s Brady Wilson seems to argue that it’s the outrageous amount that an Olympian might owe that justifies the bill. After all, a gold medal winner might owe an additional $9,900 in taxes on her $25,000 prize money.

While he acknowledges that this is the most an Olympic gold medal winner might owe, he elides how unlikely it is that the gold medal winner would owe that much. To owe $9,900, the Olympian would have to be in the top tax bracket. That means that, if she were single, she would have to have at least $415,050 of taxable income, and, if she were married, at least $466,950. Which means the U.S. men’s basketball team, should it win gold, may face an additional $9,900 in taxes, but that’s probably about it.

See, the median income for most U.S. national-team athletes is under $20,000. Most gold medal winners will owe less than $4,000 in taxes.

It’s nice that the Senate wants to do something for U.S. Olympians; they work hard and perform amazing feats. But opening a new and unjustified loophole in the tax law is not the way to do it. It complicates an already-complicated Code, it provides an unjustified loophole for one type of athlete without providing it to other, similar, athletes and hard workers, and it unjustifiably discriminates between Olympians.


[fn1] Actually, apparently women’s soccer started yesterday, and men’s started today. But they really get going Saturday.

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