The topic of giving America's Olympic athletes a tax break on their winnings has been
- Decried as a grandstanding political stunt designed to take advantage of interest in the London 2012 games.
- Applauded as a patriotic way to reward the men and women who bring our terribly divided country together for at least a couple of weeks.
- Denounced as patently unfair since all other types of winnings are not tax exempt.
All three assessments are correct.
The Olympic Tax Elimination Act was introduced last week by Sen. Marco Rubio (R-Fla.) and Rep. Aaron Schock (R-Ill.). It would end the current tax on Olympic medals, which is based on the value of the precious metal (gold, silver or bronze) used to make the award, as well as the accompanying prize money ($25,000 for gold, $15,000 for silver and $10,000 for bronze).
I can't disagree with the first argument since killing the tax was the brainchild of the anti-tax group Americans for Tax Reform. Grover Norquist and his no-tax-pledge staff are nothing if not media savvy.
But as I said in my Bankrate Taxes Blog, I support Uncle Sam rewarding our country's Olympic winners a bit more by giving them a tax break on their hard-fought victories. Their wins are something every American can celebrate together (tape-delayed or live via Twitter cheers) despite our many other differences.
Olympian 1 percent perk: Some folks, however, have an issue with rich athletes getting a tax break. They cite the marketing money that swimmer Michael Phelps, who now has more Olympic medals than any other U.S. Olympian, and America's new gymnast sweetheart Gabrielle Douglas will pocket.
Why, they ask, as the country is locked in a tax-fairness battle should millionaire athletes get what amounts to a negligible tax break while other such laudable awards and honorariums (such as the Nobel Prizes) remain taxable?
That's true. Phelps and Douglas will parlay their athletic prowess into sizable bank accounts. Good for them. And they can well afford to pay the around $9,000 in taxes for each gold they won.
But that pair is not the norm.
Take Vincent Hancock, the Army sergeant who won back-to-back gold medals in skeet shooting at the Beijing and London games.
Vincent Hancock at the 2008 Beijing Olympics via Wikimedia Commons.
Hancock's shooting achievements, however, have garnered him very little beyond momentary Olympic glory.
"Great, earsplitting ka-ching moments elude the overwhelming majority of Olympians," writes David Segal in the New York Times story "They Win Gold, but a Pot of It Rarely Follows."
And let's be honest, how many of you knew of Hancock's golds before reading this? That's why Segal advises:
"Mamas, don't let your babies grow up to be skeet shooters. Or slalom canoers. Or judo fighters. Or, to be quite blunt about it, any sport that has an international audience only when the Olympics roll around. Not if you would like your babies to take long, post-glory media tours and pocket wads of cash.
The reality is that even competitors in popular sports are likely to find that life after gold is not very lucrative."
Now I know nothing about Hancock's finances, but given that he's in the U.S. military, it's quite possible that the $25,000 for his masterful aim could push him into a higher tax bracket.
Yes, for good or ill that's the way the tax code works.
And yes, life isn't always fair. Essentially, Hancock and his peers are the 99 percent Olympian counterpart to the 1 percent occupied by Phelps and Douglas.
But I don't have a problem with being treated a little unfairly if it means Hancock and other less-lauded Olympians get some due via tax savings.
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