Sochi Day 14: The Price of a Gold Medal
Success is its own reward, but sometimes it also means punishment. In few instances is this more apparent than with medal winners in Sochi.
Athletes are trying their hardest to stand atop the podium and to do so they have some important motivators on their side. Cheering crowds and the promise of sponsorship riches all push forward athletes to perform well. Unfortunately, for American athletes there is the ever-present threat of taxes ready to punish those athletes who perform a little “too well”.
Along with a gold, silver or bronze medal, winning athletes will also receive a cash prize from the U.S. Olympic Committee for their Sochi performances: $25,000 for gold, $15,000 for silver and $10,000 for bronze. The aim of the cash prizes is to give an added motivator for those athletes in the running.
Any income earned abroad by an American citizen is subject to taxation by the IRS. At one end of the scale, a high income earner paying taxes in the highest bracket of 39.6% would pay Uncle Sam $9,900 for his or her gold medal. Even those finding themselves in the lowest bracket will still pay 10%, or $2,500, for their gold medal.
Luckily some lawmakers see the ridiculousness of penalizing success. One Illinois state senator wants to give tax breaks for the victorious athletes so that they won´t be punished for doing their best.
It´s great that someone recognizes the need to not penalize success, but why not extend it throughout the whole economy? After all, if we´re worried that the American men´s hockey team will be punished by having to pay taxes if they medal, or that the bobsledders won´t give their all for fear of the resultant tax bill, why not apply the same logic to your local butcher, baker and candlestick maker?
In France there is a similar discussion going on to give soccer players a tax break so that they don´t flee to other lower tax European nations to compete. The Winter Olympics may come only once every four years, but that doesn´t mean that we should only use this event to look at the sensibility of taxes only infrequently. It´s not just sports stars who deserve a tax break to help them keep the fruits of their hard work, it´s everyone.
(Originally posted at Mises Canada.)