Olympic Medalists and the Taxman. Make 'em Pay?

What is the cost of winning a Gold medal on the world's biggest stage? Years of dedication to a single sport or event. Incredible sacrifice to become one of the world's best. Persevering through exhaustion and perhaps injury to one day stand on the podium to hear The Star Spangled Banner played in your honor.

Oh, and about $10,000.

Yes, our Olympic heroes must pay income tax on both the value of the metal in the medal and on the cash bonus that the Unites States Olympic Committee doles out for each medal won.

We've been rewarding our athletes with cash bonuses since the 2002 Winter Olympics. The current reward is $25,000 for Gold, $15,000 for Silver, and $10,000 for bronze. The value of the medal adds about another $600, $300, and $5 to taxable income, respectively.

A college student winning a Bronze medal, as University of Akron speedsterClayton Murphydid in the 800 meter run, may not owe much, if anything, on that $10,000 without other significant earned income.

On the other hand,Michael Phelps, winner of five golds and one silver medal in Rio 2016, will collect $140,000 in cash bonuses. His outside income, largely from endorsements, most certainly put him in the highest marginal tax bracket. Federal income tax on Phelps' Olympic take will be right around $56,000. He may very well owe additional state income tax, depending on which state he calls home

"Federal income tax on Phelps' Olympic take will be right around $56,000."

Sure, Michael Phelps can afford it. He's worth at least$50 million. So can members of the Men's Basketball team, some of whom earn nearly $50 million a year. But many of our Olympians arestruggling to make ends meet.

Some live at or below thepoverty line. This year, 140 Olympic athletes startedGofundme pages to help them train and realize their Rio dreams or help their families afford to join them.

Olympic speedskater Emily Scott wasfeatured in USA Today after she applied for food stamps in 2014. The exposure helped; her gofundme was overfunded.

Help May be on the Way.

The tax burden on our medal-winning athletes might just go away. A bipartisan bill sponsored by Sen. John Thune (R-S.D.) and cosponsored by Sen. Chuck Schumer (D-N.Y.) would make the bonuses awarded Olympians and Paralympians tax-free. The bill (S. 2650) haspassed the Senateand is expected to be considered by the House this fall. President Obama expressed support for a similar bill brought forth by Senator Marco Rubio in 2012.

future Olympians?

I have read estimates that roughly $5 million is expected to be paid to our Olympians in medal bonuses this summer. If you assume that most of our athletes have incomes that land them in the 15% and 25% tax brackets, the cost of this bill can be guesstimated to be in the neighborhood of one million dollars or less.

While a million dollars is a lot of money to an individual like you or me, it is about one H2O molecule in the drop of the bucket in terms of our federal budget. I'm sure we could find a way to trim a million dollars somewhere else in order to allow our Olympic Medalists to keep the full bonus that is earned in Olympic glory.

Is There a Better Way?

I'm not the first person to write about the plight of the amateur athletes, but I might be among the first to suggest thatrepealing the tax on them might not be the best wayto reward our Olympic heroes.

What kind of flag-burning#Mericahating person would suggest such a thing? Surely, I am in favor of repealing this tax, yes?

Not necessarily. There might be a better way to help the "little guy" who, despite being little, could totally kick my butt or at least outrun me, jump over me, or jab me super hard with a sharp, pointy object.

First, understand that repealing the tax would represent a very regressive tax cut. It would saveMichael Phelpsa six-figure sum, but might not save track star Clayton Murphy six hundred dollars, or even six dollars.

Those who have the highest outside earnings would benefit the most. The ones we most empathize with, the fencers, rowers, and wrestlers without much income simply won't benefit from a tax cut. Many of them are going to be among the47% of Americans who don't pay federal income tax. A "tax cut" would means nothing when you owe no taxes.

Who would benefit the most? The NBA and WNBA stars. The women and men on the Wheaties box. The heavily endorsed and the highly compensated. The 1% among Olympic athletes.

The Physician on FIRE Proposal

A more progressive solution, one whichwould actually helpthe people we sympathizers would like to help, would be to increase the dollars per medal awarded by the USOC.

Other countries give substantially more to their medal winners, although none of them have as many winners as we do. #winning. Take that, world!

TheMotley Fool states, "the biggest gold medal payouts are in Azerbaijan ($510,000), Thailand ($314,000), Kazakhstan ($250,000), Kyrgyzstan ($200,000), and Latvia ($190,000), according to numbers published byGood Housekeeping. Italy comes in close behind that group at $189,000, with Uzbekistan, Belarus, and Ukraine all at $150,000, while Australia, France, Russia, and China follow them, still paying more the the US does for gold-medal winners."

I'm not suggesting six-figure payouts (because we do have so, so many winners, just way, way more than other countries), but increasing the payouts by $5,000 apiece to $30,000, $20,000, and $15,000 would put more money in the pockets of the athletes we're talking about, and it wouldn't take an act of congress or complicate the complicated tax codeany further.

I think the USOC could afford the roughly 20% bump in award money. Payouts for the Rio Olympics would be about $6 million instead of $5 Million in their roughly$800 million dollar budget.

NBC pays nearly $8 Billion to the IOCto bring us The Games. If an additional tiny fraction of that trickled down to the athletes whose performances make the programming worth watching, we wouldn't be debating arbitrary tax cuts, and we couldactually improvethe financial situation of the athletes we want to support.