IRS To Olympians: Congrats! Now Pony Up
Published: February 9, 2014
IRS To Olympians: Congrats! Now Pony Up, The better the medal in Sochi, the higher the tax bill U.S. athletes can expect to pay back home., The Olympics are often spoken of as the purest athletic competition in the world, an event based on participants’ honor, love of country and sheer respect for their chosen sports. In practice, though, every Olympic Games, including the one currently taking place in Sochi, is driven by a whole lot of money. Hosts spend a lot of money to make them work, official sponsors pay large sums for advertisements and associations with athletes, and many others find a way turn the results into profit-making ventures, too. It’s all pretty unavoidable – anything this popular is going to involve people trying to make a buck.
While prizes are not an athlete’s primary motivation for performing well, many national Olympic committees pledge money to anyone who brings home a medal. The United States is no exception – gold medalists earn $25,000, silver medalists get $15,000, and bronze medalists nab $10,000. Not bad, of course, but far off Azerbaijan’s high of nearly $510,000 for a gold. (Then again, they’ve never had a Winter Olympics medalist of any kind, so it means a little more.)
On the other hand, Americans should expect to hand over a portion of their medal prizes to Uncle Sam. As noted by the group Americans for Tax Reform (via FoxNews.com), headed by anti-tax zealot Grover Norquist, the United States taxes earned income abroad, which means that all medalists will be taxed for their prizes. According to ATR, those in the top tax bracket (39.6 percent) – like, say, Shaun White or any Team USA hockey player – will pay $9,900 on a gold medal – while those in the bottom tax bracket (10 percent) will pay $2,500 for a gold. Many developed nations do not tax Olympians for their medal prizes. On the other hand, others such as Great Britain don’t give their medalists cash prizes at all.
On Tuesday, Rep. Blake Farenthold (R — Texas) introduced the Tax Exemptions for American Medalists (TEAM) Act, which, as you can probably guess from the name, would waive these taxes for Olympic medalists. Similar proposals were supported by both President Barack Obama and Governor Mitt Romney during the 2012 election.
Despite this argument playing out as an Olympic issue, it appears to have much more to do with long-held political debates over the role of taxes in government. Arguments from ATR, Rep. Farenthold, and Senator Marco Rubio in favor of waiving this tax cover the same ground as familiar conservative arguments about taxes punishing success and limiting the most talented Americans. While liberals haven’t been quoted much on this issue, it’s easy to imagine an argument that taxing Olympians is plenty ethical considering that they were helped by the infrastructure of the nation and the United States Olympic Committee. Yet these rules only affect a few dozen medalists per year, to the point where politicians must have ulterior motives in focusing on this issue.