A Philosopher's Blog

Taxing Gold

Posted in Ethics, Law by Michael LaBossiere on August 6, 2012
English: Bronze medal from the 1980 Summer Oly...

English: Bronze medal from the 1980 Summer Olympics (Photo credit: Wikipedia)

In addition to winning the medal and cash prize, Americans who medal in the Olympics will also “win” a 35% tax from the IRS. While capital gains taxes are capped at 15%, medals and prize money are apparently taxed at 35%. This is also, interestingly enough, the tax percentage I paid when I have received a “bonus” (which we got at Florida A&M University in place of a raise to offset the cost of living increase). It is certainly an interesting tax system that hits Olympic medalists and educators hard while allowing folks like Mitt Romney and Obama to enjoy rather light taxes.

An athlete who takes home the gold will also need to shell out $236 in taxes on the medal (the medal is valued at $650) and $8,750 for the $25,000 prize. Those winning silver and bronze medals will still owe 35%, but will receive less (since the bronze medal is worth $5 the winner would only owe $2 in taxes). While this bite sounds harsh, it could have been worse: Britain decided to set aside the rather harsh tax laws in regards to international athletes earning money on British soil.

Naturally, Olympic medalists can get far more than a medal and a cash prize. The big prizes for American athletes include deals with corporations to help them sell Wheaties and Gatorade. This income is, of course, taxed. However, I do not feel particularly upset that an athlete will pay taxes on a million dollar contract. However, the taxing of medals and Olympic prize money does bother me a bit.  It also seems to bother Marco Rubio, a fellow Floridian. He has proposed a bill to waive the taxes on prizes won by US athletes in London.

I do find it rather tempting to go along with Rubio. After all, there seems to be something both odd and petty about taxing the medals and prizes won by American Olympians who are representing their country. After all, they can be seen as doing a great national service by winning medals. Doing well at the Olympics is a matter of national pride and international status and it seems problematic to take away 35% of what an athlete earns. It seems especially absurd to tax an athlete for the medal s/he wins.

That said, it can be pointed out that the Olympic athletes enjoy considerable support from the state and, as such, it makes sense for them to share a portion of their earnings. Naturally, it would make more sense if the money was put directly into the Olympic program to support athletes rather than just being taxed.

It can also be argued that although the athletes are serving their country in sport, people who serve their country in the military, public service, education and so on still pay taxes. As such, the athletes should be no more exempt from taxes than a soldier or police officer.

That said, the Olympics does seem to be something special and it does, as noted above, seem rather pretty to tax the athletes at 35%.

Having felt the cruel bite of the 35% tax myself, I am inclined to argue that at the very least the athletes should not be taxed at that rate. Rather, the prize money should be treated as normal income (which is still taxed higher than capital gains) and taxed based on the athlete’s normal rate. A medal should also not be taxed, at least not until an athlete sells it. This seems fair.

Given the anti-tax rhetoric about how taxes destroy incentives, it is interesting to note that athletes keep on competing despite that tax (and that I and others keep on working despite the fact that our bonus-instead-of-a-raise gets taxed at 35%). But, perhaps this is because we have different motivations than the 1%.

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4 Responses

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  1. T. J. Babson said, on August 6, 2012 at 10:23 am

    Mike, I really thought we had a breakthrough going first with your support of gun rights and then your acknowledgment of the blatant anti-Romey bias of the (left-leaning) world media.

    You are backsliding. Check out snopes.com for the facts on the Olympic tax issue:

    http://www.snopes.com/politics/taxes/olympics.asp

    The key point is that the athletes receive cash awards in addition to their medals. And maybe 35% is withheld, but that does not mean they pay 35% on the award.

    • Michael LaBossiere said, on August 6, 2012 at 11:25 am

      True, the end tax might not be 35%. However, the athletes still get 35% taken out in taxes (as I did with my bonuses). So, when tax time comes most athletes would probably end up paying less (once the prize money is added into their yearly earnings).

      However, even if the tax bite is not always 35% in the end, taxing an Olympic athlete for the medal seems a bit petty. Of course, it does have some value and hence is “income.” Perhaps the state could treat the medals and prizes as capital gains and take 15% rather than 35%. But perhaps Olympic medalists don’t work as hard as the “job creators.”

      I think I got the info from a HuffPost/AOL article-which should have been a warning sign. :)

  2. FRE said, on August 6, 2012 at 4:26 pm

    If the prize money and the medal can be taxed, perhaps expenses needed to prepare to enter the Olympics could be deducted, such as gym memberships, athletic clothing, transportation, etc.


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