Ridiculous Olympic Tax Break Would Complicate the Tax Code

As thousands of athletes compete in the Rio Olympics later this week, U.S. lawmakers appear to be competing for the most ridiculous legislative tax proposals. One gold medal contender is Sen. Chuck Schumer (D-NY), whose proposed plan would make cash prizes won by Olympic athletes exempt from the federal income tax. Though the Senate passed the bill through unanimous consent, the House won’t be able to vote on it until lawmakers return from recess in September (and after the Olympics are over).

The proposed tax break for Olympic cash winnings conveniently pops up every couple of years from grandstanding legislators. A bipartisan group of lawmakers championed an identical proposal before the 2014 Winter Olympics, with even President Barack Obama supporting the measure. In 2012, Sen. Marco Rubio and his counterparts in the House also proposed the Olympic cash prize tax exemption (puzzlingly, Rubio called the current tax code “a complicated and burdensome mess” in the same press release detailing his plan to add the Olympian tax exemption and thereby further complicate the tax code.)

These legislative proposals have been fueled by a fear-mongering 2012 press release put out by the Grover Norquist-led Americans for Tax Reform (ATR) asserting that Olympians could face up to $10,000 in taxes on their gold medal cash prizes. (The U.S. Olympic Committee awards $25,000 to gold medalists.) Politifact rated the claim as “mostly false,” since less than one percent of Americans pay the top tax rate of 35 percent that the ATR report falsely assumes.

There is no moral or economic case for exempting the earnings of Olympic athletes over other categories of workers. Is the work done by athletes really more important than that of computer programmers, doctors, firefighters, or soldiers?  Why exempt Olympic prizes while taxing recipients of the Pulitzer or Nobel prizes? It’s not the place of the federal government to decide whose profession is more valuable than anyone else’s, so Olympic athletes should receive no special treatment in the tax code.

The irony of the Olympic medal exemption proposal is that it is antithetical to the tax reform rhetoric coming from most lawmakers, which calls for the cleaning out of exactly these kind of special interest exemptions. In fact, the bill’s bipartisan support suggests that lawmakers on both sides of the aisle may be more interested in appealing to the public than in achieving true tax reform. Lawmakers would do better to pursue principled tax reforms that would raise revenue, decrease income inequality and close down pervasive corporate tax loopholes. If they did this, they would be truly deserving of a gold medal.