There have been some complaints and shock that American Olympians are taxed on the medals they win and the bonuses they make for winning.* Senator Rubio (R-FL) has positioned it as the burdensome tax code punishing people for success, and he’s introduced a bill to further complicate amend the tax code for the athletes.
Olympians should pay taxes on their earnings. Or they shouldn’t. But taxing athletes’ earnings is fair under the law. Complaints about Olympians being taxed should be directed at the US tax code and/or the Federal government’s decision to not fund Olympic sport.
*Follow @SportsTaxMan for a good rundown of the amounts and related taxes
No. Successful Olympians are earning more because they do their job better than others, and they are paying more in taxes for it.
However, these taxes are consistent with the American tax code and general views on income-based progressive taxation. These athletes are earning money practicing a trade in which they are adept. An exterminator who is great at getting rid of ants pays taxes on his earnings, as does the chemist who’s a wizard with polymers. The only difference with athletes is there are a lot fewer Franklins than there are Franks.
But they’re representing America!
Why is that relevant? Government employees, including Sen. Rubio, work to make America function. But they have to pay taxes. Servicemembers in the military pay taxes too (though there is some reprieve for those in a combat zone). In those cases, the individuals are paid with tax money. When a CEO has a great year, he/she receives a bonus; just like the bonuses received by the successful athletes. If the CEO’s bonus should be taxed, shouldn’t athletes be held to the same standard?
Funding for US athletes
US Olympians, unlike almost every other country in the world, are not funded tax dollars. They are privately funded through broadcast rights, sponsorships, donations, etc. Making a tax exemption for Olympians is akin to the Federal government funding its athletes. The government would be passing on a revenue source to which it is rightfully entitled (under an income tax-driven tax system).
If you believe that the USA should fund its athletes, that’s fine. Though I’m sure that policy would also raise ire, particularly among those upset with the economy or government spending.
Gold medal for Red Herring Tossing
While one may find the idea that our athletes pay taxes objectionable, it is appropriate given US tax code. If these taxes are truly problematic, then the fault lies with the income tax as a whole (blame Donald Duck), not with this one quirk. If you don’t think we should have income tax, fine. There is plenty of material to support that as a smart view (economists often prefer a consumption tax).
It’s one thing to use Olympians as an illustration of the folly of an income tax, but taxing their earnings is perfectly consistent with how other Americans are treated.