Update Sept. 22 | The House passed a bill Thursday that would give tax breaks to many Olympic and Paralympic athletes who win medals. The measure does not extend the tax breaks to athletes with incomes over $1 million.
Congress is still cheering about the Olympics but some tax experts aren't enthused.
The House debated a bill Tuesday that would give tax exemptions to Olympic and Paralympic medalists, but postponed a vote until later in the week. The bill, which has garnered bipartisan support in both chambers, would allow Olympic and Paralympic medal winners to exclude from their income the value of their medals and bonus money.
The U.S. Olympic Committee awards athletes $25,000 for gold, $15,000 for silver and $10,000 for bronze.
The bill's sponsor, Republican Rep. Robert J. Dold of Illinois, noted his aversion to taxing Olympians on their winnings during his floor remarks. "These men and women are the embodiment of the Olympic spirit," he said. "This tax on success is a disservice to the great athletes who compete for the United States."
Democratic Sen. Charles E. Schumer of New York called existing tax laws a “victory tax,” that penalizes the athletes for their international success.
Though he supports the notion of the tax break, and the sport-fueled patriotism behind it, Rep. Bill Pascrell Jr. won approval in House committee for an amendment that would limit the tax exemption to only those athletes who make less than $1 million a year. That means the bill would not apply to multimillionaires like swimmer Michael Phelps and basketball player Kevin Durant.
“I felt that this was a very reasonable caveat,” the New Jersey Democrat said in an interview. “I appreciate the spirit of the legislation, but if you make a million bucks or more you don’t need any relief.”
Kyle Pomerleau, director of federal projects at the nonpartisan Tax Foundation, says the exemption is good politics but bad policy. “It’s very easy to cut taxes for people rather than reforming the code overall," Pomerleau said. “This seems very patriotic, the Olympic Games just ended, the United States did well, why would you want to penalize that? It’s easy to do this.”
It’s little exemptions like these that make the tax code more and more difficult to understand and enforce, said Pomerleau, who has advised presidential campaigns on tax policy. “Only a few people realize that they are there, and those are the people who are benefiting from them.”
The bill is being considered under a House procedure requiring two-thirds support for passage. The Senate passed a similar Olympics tax bill in mid-July, though without Pascrell’s millionaire amendment.
There was no apparent opposition to the bill during debate Tuesday. The House action comes as Dold faces a tough re-election fight in Illinois against former Democratic congressman Brad Schneider.