Once again, Kosmo from The Soap Boxers passed a noteworthy news article my way. This article about taxes of Olympians bordered on the ridiculous on Fox News. The title? “The price of gold: Taking first place in Olympics could cost US stars as much as $10G in taxes.”
At first glance it seems like an important article. It would seem to be very, very wrong to tax athletes extra for performing extremely well. However, a brief reading shows that this is making a big deal out of nothing. It seems like the title was created to just to rile people up and get them reading. (I really don’t like this tactic as it leads to disappointment and wasted time. I hope people don’t come away with that after reading my articles).
Here’s what’s going on. When Olympians win a medal they get a cash bonus. The United States, correctly considers this earned income like any other earned income and requires that taxes be paid on it. As Kosmo put it in his email to me, “I’m pro-Olympics, but the basic concept here is a cash award. My cash bonuses are taxed, too.” (Side Note: Kosmo has a very unnatural obsession with the luge.)
The Fox News article also made the point to bring up the most extreme case where someone like Shaun White who has millions in endorsements would find himself in the top tax bracket and a gold (having the highest cash bonus) would have produced the 10K in taxes. Allow me to counter that with a “So what?” Is the average American supposed to be outraged White has to pay $10,000 of taxes for receiving a $25,000 bonus when he’s worth millions and millions? Can’t you think of at least 72,391 other things to get more outraged about?
I thought I’d play devil’s advocate and bring up the point that they represent the country. I asked whether foreign diplomats get tax exemptions (they do) and noted that our family (due to our active duty military status) receives some tax brakes. So maybe there is something to representing the country? Kosmo wisely shot down my off-the-cuff logic by pointing out that the are employed by the government.
In the end, I had to agree, I can’t see any reason why Olympians should get their bonus money tax-free.
Even though I implied previously that Fox News is just creating headlines for attention, it does seem like a politician backs the idea of creating a special exemption for athletes. The article states:
On Tuesday, Texas GOP Rep. Blake Farenthold re-introduced legislation — the “Tax Exemptions for American Medalists (TEAM) Act” – that would exempt U.S. Olympic athletes from paying taxes on the medals and the accompanying money.
“This needless tax illustrates how complicated and burdensome our tax code has become,” he said. “We need a fairer system for all, and eliminating this unnecessary tax burden on our athletes is a good way to start.”
It seems to me that Farenthold is suggesting with this legislation that they should make the tax code even more complex… adding a special exemption to the existing tax code for Olympic athletes. He then takes it a step further and suggests that this is somehow a fairer system. I fail to see how it is fair to give people with physical skills a tax-break, while other talented people such as Bob Costas covering the games wouldn’t get one.
I can’t follow the logic there. Fox News should have challenged Farenthold to explain his logic.