Heard Off the Street: Politicos pander to medal winners
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If Olympic medals were awarded for bipartisan pandering, U.S. Sen. Marco Rubio, R-Fla., would be heavily favored to take home the gold and President Barack Obama the silver. U.S. Rep. Aaron Schock, R-Ill., has a leg up on U.S. Rep. Blake Farenthold, R-Texas, to capture the bronze.
Mr. Rubio recently introduced legislation that would exempt U.S. athletes from paying taxes for winning Olympic medals.
"Our tax code is a complicated and burdensome mess that too often punishes success, and the tax imposed on Olympic medal winners is a classic example of this madness," he said in a prepared statement.
Mr. Obama has said he would sign such legislation if Congress approves it. Mr. Schock and Mr. Farenthold have introduced similar legislation in the House, with Mr. Schock's bill attracting 33 co-sponsors to Mr. Farenthold's three.
Thirty-nine House and Senate members have signed on as co-sponsors of Mr. Rubio's Olympic Tax Elimination Act or the two House versions of the Florida Republican's sporting proposal.
Thankfully, none of them are from Pennsylvania.
Evidently, the lawgivers agree with Mr. Rubio's informed judgment that although the enormously complex, loophole-riddled tax code needs a thorough overhaul, "we shouldn't wait any time we have a chance to aggressively fix ridiculous tax laws like this tax on Olympians' medals and prize money."
The proposal also has garnered support from Americans for Tax Reform, whose founder, Grover Norquist, authored the no-new-tax pledge more than 230 House Republicans have signed. The group noted that an Olympic gold medal winner will pay up to $8,986 in taxes -- $8,750 on the $25,000 prize they receive from the U.S. Olympic Committee and $236 based on the $675 estimated value of the gold medal. The estimate assumes the athlete would be in the 35 percent tax bracket.
Based on the same assumption, silver medal winners will pay up to $5,385 on the value of their $15,000 prize while bronze medalists face a tax bill of up to $3,502 for their $10,000 prize and medal.
"We shouldn't be honoring the accomplishments of our Olympic athletes and then turning around and hitting them with heavy taxes on those achievements," reasons U.S. Rep. Shelley Berkley, D-Nev., who is seeking a U.S. Senate seat this November.
According to Ms. Berkley's campaign biography, she worked her way through college and law school as a casino worker. Which makes one wonder how she feels about taxing the successes of gamblers at her state's casinos. Or Powerball winners, for that matter.
While the proposal sounds simple enough, tinkering with the tax code is a dangerous, albeit time-honored, congressional pastime. One innocent loophole begets others. Before you know it, several dozen pages have been added to the tax code and IRS instructions for filing are even more mystifying.
"It turns into a Christmas tree. Everybody's hanging something on to it," says Charles Potter, a tax attorney with Buchanan Ingersoll & Rooney, Downtown.
Mr. Potter notes that the winner of the green jacket awarded to the winner of the Masters golf tournament each year should pay taxes based on the value of the jacket. The same applies to football players who earn Super Bowl rings, he says.
That leads to the inevitable question: Under what circumstances should sports success be taxed? Why should Miami Heat superstar LeBron James be taxed for winning the National Basketball Association championship but not for his Olympian exploits as a member of the U.S. Dream Team, which plays for the gold medal today?
"Do you exclude those, too, or is it just on the Olympics because that's a patriotic thing?" asks tax advisor Daniel Phillips of Schneider Downs, Downtown. "Anytime you add something to the code, you might open up a can of worms as to what else may fit into this category."
Mr. Phillips points out that the tax bills on the Olympic winnings of many U.S. athletes are dwarfed by what they earn from their endorsements and other contracts. For example, each of the 11 NBA players on the U.S. men's basketball team collects an average annual salary of about $14.5 million, according to hoopsworld.com.
Assuming they win the gold medal, "do you want to provide them a tax break for their $25,000?" Mr. Phillips asks.
That's a safer issue for Mr. Rubio and his like-minded panderers to debate than arguing whether dividends, capital gains and carried interest -- the income hedge funds and private equity managers receive for generating profits for clients -- should be taxed at the same rate as burger flippers, steelworkers, teachers or nurses pay on their wages. After all, aren't dividends, capital gains and carried interest all measures of success and therefore merit more favorable tax treatment than wages?
That is just one of many fundamental tax issues Congress faces as the Summer Games of 2012 come to an end. They are being followed by the political games that run on the same four-year cycle. Mr. Rubio's grandstanding notwithstanding, we can only hope politicians have Olympian reserves of strength, team spirit, discipline and determination to avoid winning the gold medal in fiscal cliff jumping.
First Published August 12, 2012 12:00 am