Tomorrow, the 2016 Summer Olympics will begin in Rio de Janeiro, Brazil. Americans have participated in the summer Olympic games since 1896, and have won more summer gold medals than any other country.
How do you like them apples, world?
Americans should be proud that we athletically kick butt. This year, our nation will root for 554 Americans competing in 27 different sports. As we cheer in support of our athletes donning the red, white, and blue, the government has a different message: win – and you’ll pay.
That’s right, our government levies a tax on every Olympic medal won. Currently, the U.S. Olympic Committee (no, not part of the government) awards cash prizes to accompany medals won. A gold medal comes with $25,000, a silver $15,000, and $10,000 for bronze.
That may sound like a lot of dough. But, in the world of international competitiveness and sport, that’s reasonably low compared to some countries. In 2012, Russian and Italy paid substantial sums to their Olympic winners. Russia, for example, pays $135,000 per gold medal, $81,600 for silver and a bronze will fetch $54,400.
Yet, the cash awards won by Americans – and the value of the medals themselves (valued at $600 per gold, $315 per silver, and $3 per bronze) – are considered “earned income from abroad” from the IRS’s perspective. The amount of tax each athlete would have to pay depends on the amount of other income that athlete earns, in addition to the medal and cash prize.
Take America’s most decorated Olympian of all time, swimmer Michael Phelps. In 2014, he received lucrative endorsements from companies including Under Armour, Visa, Subway, and HP, just to name a few. It was expected that such endorsements brought him a yearly income in the millions.
Therefore, assuming that Phelps makes at least $400,000 each year, he likely pays the top marginal income tax rate, or 39.6 percent. So, one could reasonably assume that if Phelps wins more gold for the U.S., he’ll have to pay the government roughly $10,000 in taxes – per gold medal.
Some congratulations, right?
Sure, Phelps can afford $10,000 per gold medal. But Phelps is a bit of a phenomenon. Most Olympians aren’t necessarily rich, and many live off meager stipends or wages while they train. Others must take on part-time jobs. U.S. Olympian wrestler, Jared Frayer, worked, for example, as a teacher; Gwen Jorgensen, a U.S. tri-athlete, works as an accountant. The list goes on.
If anything, it’s the principle that should matter. I mean, really, upon the glorious return of those who represent America, should we really be so eager to slap them with a tax bill? It’s as Hillary Clinton said in 2009 in Pakistan, “We (the United States) tax everything that moves and doesn’t move …” Apparently, moving too fast in some aspects (swimming, track, biking, etc) gets you taxed even more!
I agree that the U.S. taxpayer should not subsidize our Olympic athletes – and the government doesn’t. In fact, the U.S. is only one of three countries that avoids offering financial help to Olympians; and as successful as we have been in those games, perhaps we’re all the better for it.
To be fair, the IRS doesn’t merely just pick on U.S. Olympians. They tax anyone who is awarded a monetary prize. As their website claims, prepare to pay a tax penalty if you’ve been awarded, “in a drawing, quiz show program, beauty contest, or other event.”
Surprisingly, these screwy tax laws have even convinced certain individuals to forfeit great achievements over the years. One Forbes article states:
Most people just pay the tax, but you could avoid taxes by declining an award. One famous example was George C. Scott, who declined a Best Actor Academy Award for Patton. You can even decline a Nobel Prize, and six Nobel laureates have done it.
Even Obama, the lover of taxes, avoided paying a chunk of taxes on his $1.4 million Nobel Peace Prize (eye roll) by donating it to charity.
In the end, I don’t believe in just giving Olympians better tax treatment. Instead, this is the perfect anecdote in how truly unpatriotic our tax code is for all Americans. Our tax code is littered with 2.4 million words that most of us don’t understand. It’s a tax code that demands 8.9 billion hours of our time to comply; and costs the economy $409 billion annually. So, when our Olympians win this year for America, just remember, we all lose to our government. (For more from the author of “US Olympians to Pay Insane Penalties for Winning” please click HERE)