An Olympic Tax

August 8th, 2012

flickr / U.S. Army

There’s very little our lawmakers won’t do to show their patriotism. And this week Senator Marco Rubio took the prize when he introduced a bill that would exempt American winners of Olympic medals from federal taxes on their cash prizes.

In case you haven’t heard yet: when an Olympian wins a gold, silver, or bronze medal, he or she receives a cash prize of $25,000, $15,000, or $10,000, respectively. At the moment, Olympians pay taxes on those prizes just as they would on any other income. Under the Olympic Tax Elimination Act, they would not.

As someone who was once an aspiring Olympian in a completely obscure sport—you’d probably think that I’m in support of this proposal.

I’m not.

The fact that President Obama has pledged his support of this bill might lead you to believe that this bill is a shining symbol of bipartisanship in this time of great political discord.

It isn’t.

It is more tax delusions parading as a symbol of support.

Whether they intend to or not, proponents of Rubio’s proposal have used the Olympic medal tax cut to perpetuate some of the really disgusting misconceptions about our U.S. tax system.

Let’s start with Senator Rubio himself. In his support of his bill, the Senator said: “Olympians who dedicate their lives to athletic excellence should not be punished when they achieve it.”

Key word there is “punished.” Either Senator Rubio doesn’t understand how a marginal tax system works or he doesn’t know what punishment is. Receiving a cash prize for a medal is not punishment. Receiving a cash prize is, as the name implies, a prize. You are taxed on your prize. This isn’t punishment either.

Here’s another little gem. This one belongs to Illinois Congressman Aaron Schock: “Apparently, the sacrifices they make for their success doesn’t stop once they receive their Olympic medals.”

Paying taxes on a gold medal is not a sacrifice, nor is it anything like the sacrifices these athletes make to get earn it. Most athletes must choose between their sport and a career, a degree, a relationship, a family, or a combination thereof. They spend hours every day devoting every waking (and sleeping) moment to the pursuit of excellence. To liken a real sacrifice like these choices to a tax is ridiculous.

Last one. In another statement in support of the bill Senator Rubio said: “Our tax code is a complicated and burdensome mess that too often punishes success, and the tax imposed on Olympic medal winners is a classic example of this madness.”

Our tax system is not—and should not—be used as a value judgment. In theory, a farmer who grows tobacco is taxed at the same rate as a farmer who grows apples. In the eyes of the law, winning a prize at the Olympics should not be more or less worthwhile than winning a Nobel or a scholarship.

What Rubio is probably talking about is not an award, but an incentive. Our taxes do, and arguably should, incentivize and dissuade certain activities and products. We give subsidies for hybrid cars and we toll the sales of cigarettes beyond the simple sales tax. But our athletes do not train hours a day, year round, for the cash prize. They do it for the glory, for the fulfillment, for the love of sport. Not the money. There are more productive ways to earn a living.

And that’s what these lawmakers don’t understand. Money—and the pursuit of it—is not the world’s only incentive. Yes, we wake up in the morning, drink our coffee, and head to work every day because if we didn’t we wouldn’t be able to pay the rent. But Olympians—just like investment bankers—don’t work grueling, endless hours for the money. They do it for reasons the IRS cannot tax.

I would add that the proponents of this bill that are not using it as a subliminal anti-tax sentiment are those, like President Obama, that mistakenly see the bill as a way to support and honor our Olympians. It’s a grandiose gesture that in the scheme of things does virtually nothing to actually support the athletes who represent our nation at the Games.

Because we have a progressive tax system, the athletes that need the money will pay very little tax on their prizes—after all most of their substantial training expenses are deductible. And superstars like Michael Phelps that do pay the full tax rate will do so because they are earning millions from endorsements and don’t really need the relief.

Every year, thousands of athletes who have devoted their lives to the pursuit of excellence will compete, will train, and will make sacrifices. They will do so without a medal, without recognition from Senator Rubio, and without a dime of direct government funding. That’s right. The U.S. government does not fund the U.S. Olympic Committee in any way. The USOC depends on private contributions, television deals, and the blood, sweat, and tears of its athletes.

To say that a tax break on medals is supporting our athletes—even symbolically—is a joke.

This is not the time to perpetuate myths about our tax system, nor is it the time to make hollow gestures to represent support of our Olympians.  If we would like to support them financially, let’s do it. But let’s not add yet another loophole to our already burdensome tax system in a fallacious symbol of nationalism. Our athletes should pay taxes at a rate proportional to their income, just like everyone else. Save the political grandstanding for another time.

Attribution Some rights reserved by The U.S. Army

Written by Ann Hollingshead

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