April 15, 2024

Economix Blog: Taxing Olympic Medalists



Dollars to doughnuts.

If I get a bonus for good performance, it’s taxed. If you get a bonus for good performance, it’s taxed. Heck, when Lloyd Blankfein gets a bonus for good performance (or bad performance!), even he pays taxes on it.

But if LeBron James — who, with a total compensation of $53 million, earns more than all three of us put together, I’m willing to wager — gets a bonus for performing well in a single athletic event, well, that should be tax-exempt.

At least that is what Marco Rubio, a Republican senator from Florida, and President Obama believe.

Senator Rubio has proposed exempting Olympic medals and the cash bonuses that accompany them from income taxes. These cash bonuses, awarded by the United States Olympic Committee, total $25,000 for gold, $15,000 for silver and $10,000 for bronze.

A spokesman for Mr. Obama said the president would enthusiastically sign such legislation.

“The president believes that we should support efforts — like, I think, the bill you are referencing — to ensure that we are doing everything we can to honor and support our Olympic athletes who have volunteered to represent our nation at the Olympic Games,” Jay Carney, the White House press secretary, told reporters earlier this week.

The Olympics have long allowed professional athletes to compete. The money they earn for succeeding is earned income, just like the income I earn from my chosen profession and you earn from yours. And for some Olympic athletes who earn a medal, a lot more income usually rolls in, too, in the form of professional endorsements. Just ask Michael Phelps.

In other words, if the proposed tax exemption is rooted in the sympathy Americans have for the many lesser-known Olympic athletes who make financial sacrifices to train without ever making LeBron-level cash, these struggling Olympians are not even going to benefit from exempting medal-related bonuses.

Perhaps more important, basing tax breaks on sympathy is dangerous. The moment you designate medal-winning athletes’ personal income as somehow more nobly earned than the personal income of other workers — including, I should note, social workers, teachers, artists and others who believe they labor on behalf of the “public good” — you can end up with a whole lot of me-too-ism from other people demanding similar preferential treatment.

For this reason, Mr. Rubio’s tax proposal is a great illustration of why tax reform in the United States is so darn elusive. Every tax break sounds like such a good idea, after all!

It’s no wonder, then, that tax loopholes and subsidies reduced government revenues by around $700 billion to $1.2 trillion last year, depending on how broadly you define the term. (For context, the federal deficit was about $1.3 trillion last year.)

That said, my colleague Floyd Norris offers an alternate economic rationale Mr. Rubio could try trotting out to support his bill. See if you agree:

Such a tax provision would provide an incentive for Americans to win more medals, which would in turn lead to better television ratings and more profits for NBC. The joy over the medals would lead consumers to buy more and cause home buyers to offer to pay more.

In other words, this is the stimulus that the economy needs.

Article source: http://economix.blogs.nytimes.com/2012/08/08/taxing-olympic-medalists/?partner=rss&emc=rss