Continuing with a recent theme in this blog - here is an update on federal legislation to not tax winnings of Olympic athletes. That is, the value of the medal and the cash from the U.S. Olympic Committee will be tax free. H.R. 5946 has now passed in the House and Senate, so will soon be off to the White House.
Along the way, a major change was made ... If the Olympic medal winner has modified AGI over $1 million, he has to report the winnings! This amendment addresses the oddity of giving an exclusion to Michael Phelps and the men's basketball team players and other high-income winners.
As noted in my 9/14 post, this bill only results in a revenue loss of about $3 million over ten years. In our trillion dollar budget, this is nothing. But that is no reason to enact this change. [also see 8/17 post] Additional reasons not to enact this legislation:
- It is not needed. The winning athletes will have enough money to pay taxes on the winnings because the bulk of the winnings are in cash.
- Some are likely low income and the bronze or silver prize alone might not be enough to put them into a taxable bracket.
- The fact that they incur a lot of costs to participate is no reason for the tax break as this is true of many people. For example, college students spend a lot of money to attend college.
- The fact that they represent the US in the games is a weak justification for the bill. The benefits the athletes receive will benefit them, and the U.S. a lot less (other than from taxes from winnings!)
- If there is a desire to change the law to help those representing the U.S. why not start with the military?
- Adding unnecessary rules to the tax law (we have over 200 of them already) just makes the tax system more complex, inefficient and inequitable.