Olympians who devote their lives to their sports for no money must pay some pretty severe taxes if they medal, according to The Weekly Standard.
Think about this. The wonderful 16 year old Missy Franklin who won the gold medal is already in debt to the IRS just for winning a race and standing on the podium.
Americans who win bronze will pay a $2 tax on the medal itself. But the bronze comes with a modest prize—$10,000 as an honorarium for devoting your entire life to being the third best athlete on the planet in your chosen discipline. And the IRS will take $3,500 of that, thank you very much.
There are also prizes that accompany each medal: $25,000 for gold, $15,000 for silver, and $10,000 for bronze.
Silver medalists will owe $5,385. You win a gold? Timothy Geithner will be standing there with his hand out for $8,986.
So as of this writing, swimmer Missy Franklin—who’s a high school student—is already on the hook for almost $14,000. By the time she’s done in the pool, her tab could be much higher. (That is, unless she has to decline the prize money to placate the NCAA—the only organization in America whose nuttiness rivals the IRS.)
ATR notes that the real twist of the knife is that most other Olympians won’t pay any taxes on their medals because America is one of only a handful of countries which taxes “worldwide” prize income earned overseas.
I’m surprised that Michael Phelps hasn’t declared bankruptcy after winning so many medals.
I think the least we could do is exempt our Olympic athletes from having to pay taxes on their medal winning performances.
August 1, 2012 at 5:33 pm
It's just more proof, they didn't earn that.
August 1, 2012 at 5:41 pm
I just came across the same news story. This is outrageous – the IRS is a monster.
Hopefully – if these taxes are levied, the athletes can deduct years of training expenses, travel costs, and so on, and get it all back.
They should not be taxed at all!
August 1, 2012 at 6:58 pm
Why is this in any way objectionable? Medal winners get a cash prize. When you receive a cash payment for doing something that's called "earnings" and it is taxable.
Professional athletes (and that is what people who get paid – cash – to perform in a sporting contest are) pay taxes on their earnings, just like everyone else.
Your quote:
"Olympians who devote their lives to their sports for no money must pay some pretty severe taxes if they medal"
…is simply wrong. The athletes are getting money. And they are being taxed at a rate commensurate with the amount of money they receive.
To Terry Nelson's comment – yes, the athletes should be able to (and presumably can) deduct their out-of-pocket training costs from their taxable income. But that's neither here nor there. There is nothing inappropriate about the IRS levying taxes on people who receive income in exchange for services.
The fact that Missy Franklin (or anyone else) is only 16 years old is irrelevant. A 16 year old who has a job at McDonalds pays taxes.
The fact that these athletes are "national heroes" is irrelevant. Soldiers pay taxes on their income, as do firefighters, policemen, teachers, priests, etc.
The dollar figures for the tax bill quoted in the linked article are painfully stupid. The figures are arrived at by applying the top MARGINAL income tax rate (35%) to the prize money (and medal). To qualify for the top marginal tax rate currently a single filer (presumably all of these young athletes) would need to be making approximately $388,000 in 2012. In which case why exactly should they get some sort of special exemption? If they are indeed poor amateurs with little or no other income then they would likely pay no tax or a tiny amount of tax.
If we exempt Olympic medal winners from paying taxes on their income then every single dollar of foregone tax revenue will need to be made up for either by collecting the same dollar in taxes from some other citizen (who doesn't stand to cash in from Nike and Wheaties sponsorship deals) or by adding a dollar to the public debt.
August 1, 2012 at 7:16 pm
Considering the sacrifices made by the athletes and their families on the way to the Olympics, and the inability of the athletes to accept any money related to their chosen activities, this is a travesty.
I wonder whether, as with TV show prize winners, there is an IRS agent literally in the wings, to get their signatures.
August 1, 2012 at 8:59 pm
I agree with Stephen but would also like to add, that, Hey! As has been amply documented in the news earlier, these athletes are getting a whole lot of free condoms that are not being taxed, so I'm okay with them paying some taxes. USA! USA!
August 1, 2012 at 9:55 pm
One wonders if Dear Leader will seize the medals for redistribution to more deserving people. After all, he made the tough decision to win those medals.
— Mack
August 1, 2012 at 9:55 pm
In response to Stephen, so by that working logic we can exempt people from some tax if they haven't been paid for their jobs in over a week? Because if tax is based only on cash income solely (and not how that cash came to be) then this would be a fair trade off. And you know this isnt how things work. Medalists win the cash prize and it is just that a prize, taxing them for bringing glory to their home countries if they get rewarded for it is shameful, no onw should tax Olympians for winning, Not in any country.
August 1, 2012 at 10:21 pm
Servant of the Chief:
I have no idea what point you're trying to make in the first half of your comment.
The second half of your comment seems to suggest that because we call some income a "prize" that it's somehow metaphysically different from other income. But it's not. If it were I could make my employees very happy by awarding them tax-free "prizes" for successfully doing their jobs rather than wages. The "prize" here is payment based on performance of an agreed-upon task (in this case, running, swimming or jumping out better than your peers). Professional football players pay taxes on their earning – and not just their fixed annual salaries but also on the extra incentive bonuses that they earn for making it to the playoffs and winning playoff games. As well they should. Winners on game shows pay taxes on their earnings. As well they should.
The idea that Olympians should not be taxed on their income implies that Olympians are somehow better than other citizens, or that what they do to generate their income is somehow more important that what other citizens do. The idea that a soldier stationed in a forward area, under constant threat to life and limb, should be paying taxes while an athlete does not is ludicrous. And while it's a source of legitimate good feeling to see one's countrymen do well in international athletic competitions, the idea that Olympians are "bringing glory" to their countries (and thus should be exempt from the normal rules of society) is one I associate more with North Korea, China, the old Soviet Bloc, etc. rather than the United States.
August 2, 2012 at 1:24 am
SherryTex, I laughed out loud when I read your comment – thanks for the chuckle. And Stephen, I was just about to fire up Excel to calculate the marginal rates that resulted in those tax amounts, so thanks for saving me the trouble. You are absolutely right, if these athletes have no other income it's unlikely that they will actually pay tax on their prizes.
August 2, 2012 at 1:37 am
The tax on the honorarium: defensible. Though I disagree that the government should be taxing income earned while overseas, a reasonable argument can be made in its defense.
But… Taxing the medal itself?! Even if the athlete declines the honorarium, he still owes $236 just on the value of the medal! That's the real injustice.
August 2, 2012 at 1:38 am
To be clear, that's the tax owed on a gold medal…
August 2, 2012 at 3:45 am
Contractors who work overseas get paid without having to pay taxes. So, why shouldn't the Olympians who win overseas have to pay taxes?
August 2, 2012 at 2:24 pm
Jonathan, the IRS routinely taxes income earned overseas. I don't know what the threshold is these days, but if a citizen lives in a foreign country, paying income tax to that country, and earns in excess of whatever the threshold is (probably around $100K, at a guess), then the US taxes money above that threshold. It's been that way for many years. To my knowledge, the only way to avoid it would be to renounce your citizenship.
August 2, 2012 at 3:54 pm
I am aware of that, I think the current threshold is $97K.
My real beef is taxing the value of the actual medal, not the cash.
August 2, 2012 at 4:00 pm
They said to Him, "Caesar's." Then He said to them, "Then render to Caesar the things that are Caesar's; and to God the things that are God's."
I hope Missy doesn't get audited and God Bless her for her service and her faith.
http://afterthemass.blogspot.com/
August 2, 2012 at 7:48 pm
Not all the athletes are pros, and the award from the USOC doesn't count against amateur status it seems since Missy Franklin hasn't indicated that she'll return the money. Also, I do think it's ridiculous to tax $4.75 (amount of medal in a bronze medal…).