What is the bill?
The Senate passed legislation just before the beginning of the 2016 Summer Olympics to make any winnings tax free. The House has recently approved a similar bill to block the victory tax which will now go back to the Senate.
The US Olympic Committee (USOC) awards cash prizes to medalists at the Olympics. $25,000 is awarded for Gold, $15,000 is awarded for silver, and $10,000 is awarded for Bronze. The IRS considers this prize money to be a taxable income, and requires athletes to pay a significant tax on their medals. Currently, the IRS can tax up to a maximum of 39.6% on cash bonuses from medals. This adds up to about $9,900 per Gold, $5,940 per Silver and $3,960 per Bronze.
The House bill seeks to block the victory tax which is currently imposed on both Olympic and Paralympic athletes. Senator Chuck Schumer, a sponsor of the bill stated “Our Olympian and Paralympic athletes should be worried about breaking world records, not breaking the bank, when they earn a medal,” according to USA Today (See full article here).
Two Sides to the Story
Though the victory tax is high, it is important to remember that athletes are still United States citizens and as such have to pay US taxes. A cash bonus is added income, and income in the US is taxed. It’s not just Olympians whose bonuses are taxed. Every Nobel Prize winner, lottery winner and even those who receive a yearly cash bonus from their employers must pay a tax on their added earnings.
On the other hand, most Olympians don’t make as much money as coaches and administrators of the sports that they compete in. The sponsors of the bill want to combat this, and help the athletes to make more money. Not every athlete signs an endorsement that pays them to compete. Athletes that make a significant, livable income from their sport are hard to come by, and those that don’t make an income from it want to keep what they earn.
Will it pass?
This bill is thought likely to pass. The amount of money lost from national coffers will be very small. Since the Olympics happen only every four years, this tax is only imposed every four years. It will also most likely be a popular move among voters, which gives it an extra boost to pass in Congress.