American athletes who win gold in London this summer will also earn a $25,000 honorarium in addition to their gold medal, which is gilded with at least six grams of plated gold. The medal, which is estimated at $620.80, comes with a cost however. The gold medal winner is then taxed $8,986 by the IRS, which covers both the honorarium and the tax on the value in the medal itself.
Silver medals, made out of 92.5% pure silver and estimated at $330, come with a $15,000 honorarium. Silver medalists from the U.S. are taxed $3,502 from the IRS.
Bronze medals, containing 97% copper, 2.5% zinc, and 0.5% tin, are only worth about $4.70, but come with a $10,000 honorarium. Bronze medalists from the U.S. are taxed $3,502 from the IRS.
Wednesday, Sen. Marco Rubio (R-Fla.) introduced a bill to eliminate the federal government’s tax on Olympic medals, stating that the levy amounted to yet another “punishment” tax in which the government imposes on those who succeed. Rubio’s bill would exempt the honorarium and the value of the Olympic medal itself from any federal taxes.
Congress is currently in the midst of figuring out how to adjust the broader tax code and whether to let the Bush-era tax cuts expire, but Rubio believes Olympic athletes shouldn’t have to wait for lawmakers to make a decision.
Americans for Tax Reform claims it is unlikely any of America’s competition will be taxed the same as U.S. athletes are because virtually no other developed nation taxes “worldwide” income earned overseas (like the U.S. does).
This is a great example of why the tax code in this country is so complicated. It’s also the reason for the many infamous loopholes. For politicians like Rubio, gaining ground on reducing taxes takes finding a category of earning that is regarded as “unique,” whether it advances on a larger ideological agenda, helps in campaigns, or -- in this case -- because is a category of popularity within American culture. This loophole accords with any typical American who believes prize money and medals from an Olympic victory shouldn’t be considered “regular income,” which is normally subject to routine taxes. The fact remains, however, that prize money from athletic victories is considered income, and there isn’t any reason why the government should be treating this any differently.
Conservatives will use this to showcase support for removing “punishment” taxes, but it’s more important to remember these aren’t corporations worth billions of dollars—these are mostly professional athletes who are living a dream—living a dream that doesn’t always have the greatest yield. If a federal tax like this is fair and just, something else has got to give for athletes at the Olympics, especially those who are taxed for winning their event.
Although the idea of taxing American Olympians isn't appealing, an honorarium should be federally taxed, just like any other prize monies would be in domestic and international competition. Medals however should be untouched. It’s obscene to be taxing the iconic prize of the Olympics, regardless of the current market price on precious medals.
Conservatives can’t justify advocating for tax code simplicity while picking winners and losers. This impulse to simplify by singling out and creating loopholes is what American tax code complexity derives from and it’s going to take a lot effort on the tax-code reform front to make sure Olympians are aren’t getting unfairly taxed for a multi-year effort, income spike. That being said, it is a form of income, and athletes should be taxed just like anyone else. Whatever the outcome, the extrinsic value for winning a gold medal at the Olympic games outweighs additional costs for any athletes. The medal is what athletes will remember, not the tax.