Vaulting to the Gold in Tax Policy Gymnastics

It’s been about three weeks since the Rio Summer Olympics ended, but the finals for the political gymnastics around the mother of all sports competitions are just now beginning. The clear favorite in the competition is a bill proposed by Senators John Thune (R-SD) and Chuck Schumer’s (D-NY), the United States Appreciation for Olympics and Paralympians Act, which would designate the income athletes receive from their medals’ cash prizes tax-exempt. The bill made a strong showing in the qualifiers of the competition, passing by unanimous consent in the Senate on July 12, 2016.

This leaves the House to judge the bill’s performance, and the House Ways and Means Committee passed the bill out of committee with little debate. It looks like the bill is set to coast through the remainder of the legislative floor routine, as President Obama has already voiced his support of a failed, identical bill with similar bipartisan support which was the Congressional response to the Sochi Winter Olympics. Unlike the previous bills, Thune and Schumer’s bill is poised to bring home the gold—while politicians come in dead last on tax reform.

Spurred on by dubious claims that Olympians face onerous tax bills for their athletic success, the crux of the bill’s argument rests on the notion that we should not financially punish medal-winning athletes “for representing our country and reaching the pinnacle of their sport,” but this argument is a weak one at best. To start, the U.S. tax code does not financially punish athletes for pursuing their Olympic dreams, in fact it encourages them to strive to do better.

The IRS allows Olympic athletes to deduct their training as a business expense from their taxes, disproportionately helping the large number of athletes with Olympic ambitions that do not win medals, but train just as hard—often while also working a part- or full-time job in addition to their intense training. This tax proposal would only help the small percentage of Olympic athletes that win medals at the competition, and would disproportionately help the even smaller percentage of athletes who win multiple medals. The only reasonable measure of the bill is that, thanks to an amendment introduced by Rep. Pascrell (D-NJ), this tax break would not apply to medal winners with an annual income over $1 million, which means it avoids giving an exorbitant tax break to athletes who also have lucrative endorsements from sources ranging from sporting goods companies to cereal brands.

None of this is to say that Olympians do not deserve to profit from excelling in their fields of expertise or that Olympians do not do a great job at representing our country (though some do it better than others). The point made here is that the U.S. tax code must be impartial in terms of how individuals earn their income and that the hardest working Olympic athlete is no more deserving of a tax break than the hardest working nurse, teacher, or firefighter.

For almost a decade now, the mantra of tax reform has been to broaden the tax base by cleaning out the various special interest breaks that have made the tax code so complex. This bill moves in the exact opposite direction by providing an extremely small subset of people a new special tax break. If members of Congress are truly committed to reforming the tax code, the first thing they should do is to stop making the code more complicated with bills like this one.