FRANCOIS XAVIER MARIT/AFP/Getty Images
Picture taken with underwater camera of US swimmer Ryan Lochte competes in the men's 200m individual medley final swimming event at the London 2012 Olympic Games on August 2, 2012 in London. According to the New York Daily News, Lochte's family is facing foreclosure on their Florida home.
Olympic medal winners bring home gold, silver and bronze, but their shiny medal isn’t the only kind of gold they receive for their accomplishments. The U.S. Olympic Committee awards athletes a cash purse for medals as well: $25,000 for gold, $15,000 for silver and $10,000 for bronze medals. Eligible for high taxes, some athletes find their glory weighs more than what’s in their wallets.
Medal winners are liable for taxes on both the prize money and the medals themselves; a tax bill for earning a gold medal can be as high as $1,450 in state taxes alone. Years of training for Olympic sports is a very expensive proposition, and some Olympic athletes and their families get themselves in financial hot water long before they become national icons for their performances. Swimmer Ryan Lochte’s divorced parents reportedly are facing a lawsuit because they stopped making payments in 2011 on a $258,000 mortgage from 2007, and gold medal winning gymnast Gabby Douglas’ mother filed for bankruptcy earlier this year.
Several lawmakers at the federal and state level have been moving on bills that would ease the tax burden on these athletes, but what to do about the larger debt that athletes incur to compete for their country?
Assemblyman Curt Hagman (R-CA), one of the sponsors of the legislation and 60th district representative, said the tax break is a gesture of appreciation to the athletes who “represent the United States as a patriot” in the international arena.
“This is one of those no-brainers. If you get a trophy you should be able to keep it and be proud of it,” Hagman said. “The little bit that [Olympians] get paid for winning gold, silver, or bronze is probably far exceeded by the expenses incurred over the years to prepare.”
On the phones and online, listeners were split on the issue. Many commenters denounced the legislation as “ridiculous,” others, like caller Richard from Van Nuys, said it was reasonable and the taxes from their minimal winnings were “a drop in the bucket.”
Even our guest, financial advisor and columnist, Don McNay called the legislation as merely a “publicity stunt.”
McNay said the real problem lies in managing money and career opportunities after the games end. Despite agents and a network of support, many well-known, gold-winning athletes are left broke and out in the cold, post-Olympic glory.
“There are so many pressures when you’re overnight rich and overnight famous to spend your money. … Not thinking of the fact that most athletic careers are fairly short term,” Mcnay explained. “The average NFL player only plays for four-point-two years and once that’s over, that’s the end of the money.”
McNay pointed to a Sports Illustrated study that found 60 percent of athletes in the NBA, NFL and most major sports, ran through their money within three years or less. The problem most athletes face isn’t going to be with the taxes they pay on winnings, but “friends and family and bad advice.”
“I understand they’re representing their countries … But there are all kinds of people who serve our country who don’t get a free tax break,” McNay said. “As much as I want to support our athletes, I don’t think that’s the solution.”
Are Olympic winnings extra income that should be taxed differently? Are these proposed tax bills designed to help athletes or get some headlines for politicians in an election year?
Don McNay, financial adviser and columnist; founder of McNay Settlement Group, a litigation and financial consulting firm in Richmond, KY; author of “Son of a Son of a Gambler: Winners, Losers and What to Do When You Win the Lottery”
Assemblyman Curt Hagman, R-60th District, California