There are bills seeking passage, both in various states and in the U.S. Congress, to make the cash awards that come with Olympic medals ($25,000 for gold, $15,000 for silver, $10,000 for bronze), tax-exempt. New Jersey Assemblyman Jay Webber says we “should celebrate, not punish, the success of our winning athletes.”
Well, you know, there’s a firefighter who lives down on my block. Why should he be punished by having to pay taxes on the money he earns?
For that matter, why should I?
And of course all these bills are just political grandstanding anyway: the athletes’ training expenses are tax-deductible, so it’s unlikely many medal winners will have any significant taxable income (especially since the Olympics award might be their only income for 2012).
© 2012 by Bill Bickel unless otherwise noted.
Are Nobel Prize awards taxed? If so, then the Olympic ones certainly should be.The Nobel Prizes, after all, are for accomplishments which actually have meaning, whereas the Olympics are really just a minor form of popular entertainment.
Yes.
… and after all, people who win cash on game shows are taxed on their earnings. At a rate of about 50%.
It used to be that you had to return all your medals if you took money to play sports (ANY sports, not just the one(s) you won medals in.)
That was back when the United States was still dominant in basketball.
Specifically, it was when our amateur college basketball players were still better than Russia’s professionals.
I saw the story about 10 days ago where Florida Senator Marco Rubio suggested that the Olympic winners should not be taxed. I was left wondering if the senator was just confused and thought that the athletes were being taxed for the monetary value of the medal itself, and didn’t realize that the winners also received a cash honorarium. Otherwise, his rationale is just plain stupid, even by politicians’ standards.
A lot of people saw the headlines when they came out and thought “What, we shouldn’t tax these athletes on the value of their medals!”
Now that everyone realizes the taxes are normal income taxes on the honoraria, no one wants to be seen walking back their previous outrage.
You are exactly right about political grandstanding. Who would want to be the politician who votes against our athletes?
FWIW, in Canada the question was solved in 1987 (retroactive to 1983) by a regulation that exempts ” any prize that is recognized by the general public and that is awarded for meritorious achievement in the arts, the sciences or service to the public.” Nobel prizes are exempt, Olympic cash awards are taxable.
Oddly to Americans, lottery and other gambling winnings (unless you are a professional gambler) and game show prizes are exempt from Canadian income tax. However, if a Canadian has a win in the U.S., whether in Vegas, Churchill Downs or the Sony Pictures Studio (Jeopardy), they are subject to US tax law, with no treaty protection.
For any legislator to refer to income taxes as “punishment” is insane.
Ah, I see you haven’t been paying attention. This is now the official Republican stance on not just income taxes but all taxes.
“gross income means all income from whatever source derived”
26 U.S.C. section 61.
It’s not gross income that is taxed. It’s adjusted gross income that is taxed.
How much of the IRC did you want me to include?
Actually, isn’t it taxable income that is taxed?
It’s debatable whether the Olympics can be regarded as a source of income, or whether the honorarium awarded to a medal winner is a windfall.
The IRC shares a problem with some other countries’ (including Canada’s) income tax legislation: the definition of income is recursive: it boils down to “income means income”.
Well, that little phrase in the IRC is the core assumption… income is taxable unless some part of the tax code says it isn’t. There’s a LOT of sections of the tax code that describe things that either aren’t taxable or may be deducted from taxable income… but if you can’t find a section that excludes what you want to exclude, then it’s taxable.
Oh, and just for the record… Olympic medal winners from different countries receive different cash awards. Here’s a run-down.
I didn’t even know that medal winners got a cash award.
It’s obvious how this whole thing happened. Someone, for whatever reason, found out that countries pay bounties to their athletes for medals, and worked out what United States athletes would pay in taxes on those bounties, assuming that they were taxed at the maximum marginal rate. Not sure why they did that, but, whatever, it’s vaguely interesting.
This got spread around and twisted up until it made people think that athletes had to actually pay money to keep their medals. Which is, um. Not.
Of course, this sounded Wrong And Must Be Stopped, so people started speechifying about how they Were Going To Stop This.
Look, I get that. I’ve gotten myself into that sort of situation before. The embarrassing, frightening, and not at all surprising part, though, is how the speechifying folks react after finding out that, “Oops, I Misunderstood That.”
Now that it’s clear that we’re talking about a perfectly normal “paying taxes on income” sort of “income tax” thing, the kind that is not in the least objectionable or weird, a person who’d been speechifying against it has two choices: he or she can say, “Jeez. This is really embarrassing, but, y’know, I, um, made a mistake in what I thought that was about,” and back off.
Or can stick to their guns even though it’s now clear that it would be INSANE to hold that position.
And people would apparently much rather be dangerously insane than embarrassingly mistaken.