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Differing Opinions Over Tax Breaks For US Olympians

by Mike Godfrey, Tax-News.com, Washington

18 August 2016


The introduction into the US House of Representatives of legislation to exempt Team USA from income tax on medals or other prizes awarded to them during Olympic and Paralympic Games has caused sharp differences of opinion.

The value of medals won, as well as the cash prizes awarded by the US Olympic Committee, are presently considered "earned income abroad" and therefore subject to US federal taxation. The legislation – the United States Appreciation for Olympians and Paralympians Act, which has already been passed by the Senate – would retroactively apply to the 2016 Olympic and Paralympic Games in Rio De Janeiro, Brazil.

"Our Olympic and Paralympic athletes make numerous personal sacrifices while training to represent the United States on the global stage," said Bob Dold (R – Illinois), a member of the House of Representatives Ways and Means Committee, who is to introduce to bill. "But when they return home with a medal for Team USA, the Internal Revenue Service (IRS) forces the athletes to pay a penalty for their success. Our bill will … ensure that our athletes can remain focused on fulfilling their Olympic dreams without fear of the tax consequences."

It was also pointed out that the bill would have a negligible effect on federal revenue and would not affect taxes on endorsement or sponsorship income earned by athletes.

Ways and Means Committee Chairman Kevin Brady (R – Texas) has committed to moving the bill through the Committee next month. "When America's Olympians and Paralympians bring home the gold, our nation should congratulate them - not send the IRS to claim a share of their medal," he stated. "This common-sense bill has strong public support."

However, there has been some opposition to the bill. For example, in the opinion of the Reason Foundation's Ira Stoll, it could be another example of lawmakers "picking and choosing a lucky few."

"The point is that a whole lot of other income subject to federal taxation is also the result of hard work," she stated. "When politicians establish favored classes of those whose hard work gets better treatment than those of others, it adds complexity to an already egregiously complex tax code. The politicians would probably be better off just lowering everyone's taxes, rather than picking and choosing a few already lucky Olympic athletes to reward with tax cuts."

In addition, Howard Gleckman from the Tax Policy Center called it "the season of Olympic madness, … [with] politicians predictably trotting out a terrible tax idea."

"In reality," he added, "much of this shameless subsidy would help professional athletes who need it the least, and do almost nothing for the true amateurs who are desperate for financial support. … Congress should just man up and establish some sort of fund aimed at helping those who need it most. They could pay for it by cutting the tax exemption of the US Olympic Committee, which does remarkably little to support individual athletes."

TAGS: tax | law | Internal Revenue Service (IRS) | tax authority | legislation | United States | tax breaks | individual income tax | Tax

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