Bummer: Olympian Medalists Owe Major Taxes on Winnings

Posted: Aug 01, 2012 2:34 PM

If you're anything like me, you've spent the last few days absorbing every Olympic event in which the United States has competitors (so, yeah, sorry handball), and cheering on the amazing American men and women who are winning medal after medal. They represent our country with grace, and win with honor, all while providing us an opportunity to revel in the fact that we live in the greatest country on earth.

Thus, I found it absolutely galling to learn that the US government congratulates the medalists with a big, fat tax bill when they return stateside. Oh yes: Olympic prize money -- along with the value of the medals -- is considered taxable income in the highest bracket.

Americans for Tax Reform crunched the numbers and discovered that the IRS charges thousands of dollars for each medal an American competitor wins, thanks to our ridiculous tax code.

American medalists face a top income tax rate of 35 percent. Under U.S. tax law, they must add the value of their Olympic medals and prizes to their taxable income. It is therefore easy to calculate the tax bite on Olympic glory.

At today’s commodity prices, the value of a gold medal is about $675. A silver medal is worth about $385 while a bronze medal is worth under $5.

There are also prizes that accompany each medal: $25,000 for gold, $15,000 for silver, and $10,000 for bronze.

So how much will U.S. Olympic medal winners have to pay in taxes to the IRS?

American gold medal winners will pay the IRS up to $8,986. Silver medal winners will pay up to $5,385. Bronze medal winners will pay up to $3,502.

It gets even worse. Not only do our Olympic athletes have to pay taxes on their medals and prizes – chances are their competitors on the field will face no such taxation when they get home. Because the U.S. is virtually the only developed nation that taxes “worldwide” income earned overseas by its taxpayers, our Olympic athletes face a competitive disadvantage that has nothing to do with sports.

Is that really how we want to honor our greatest athletes? "Congrats on the win, now pay up!" Terrible!

Thankfully, Marco Rubio also finds this unacceptable: today, he proposed a bill that would end this practice, separate from the massive tax policy overhaul ("taxmaggedon") we're facing this winter.

“Our tax code is a complicated and burdensome mess that too often punishes success, and the tax imposed on Olympic medal winners is a classic example of this madness,” the Florida Republican said.

His bill would exempt the honorarium and the value of the Olympic medal itself from any federal taxes.

Congress is currently fighting over how to adjust the broader tax code and whether to let the Bush-era tax cuts expire. But Mr. Rubio said the Olympic winners shouldn’t have to wait until lawmakers finish that job.

“We can all agree that these Olympians who dedicate their lives to athletic excellence should not be punished when they achieve it,” he said.

Here's hoping Congress adopts this measure, and ASAP. There's no reason that America's Olympians -- some of whom are minors! -- should have to pay one red cent for their hardwork and dedication.