While the Olympics have injected much excitement into the dwindling days of our summers, many media outlets have given significant coverage to what some might see as the most unexciting aspect of these international games: taxes.
Politicians from both parties, including President Obama and Mitt Romney, leveled critiques at the United States’ complicated “worldwide” tax system (which taxes money regardless of where an American earns it) because it will diminish the value of the prizes won by American Olympians.
The U.S. is one among a handful of nations that has this system; most other countries use a territorial system, meaning that income is taxed only one time, in the country where it is earned. Given that Britain agreed to exempt athletes who compete in the 2012 London games from paying taxes on their winnings, the majority of Olympic winners will take home their winnings tax-free.
In an attempt to eliminate this “competitive disadvantage,” representatives in the House and Senate have introduced the Olympic Tax Elimination Bill, which would exempt Olympians from paying taxes on their awards.
Many arguments have been advanced as to why American medal winners should or should not be made to pay taxes on these awards. Proponents of the limited tax exemption have argued that these athletes are representing our nation, and as ambassadors of our country competing at the highest level of athletics, they shouldn’t be made to pay for their national service. Those who advocate for taxing the Olympians have pointed out that many of these competitors are established professional athletes with lucrative careers at home who stand to gain even more from endorsement deals. As Howard Gleckman of Forbes put it: “Does BronBron [LeBron James] really need an $8,700 tax cut? Seriously?”
Both of these arguments miss the point. While Gleckman’s approach suggests that the super-rich don’t deserve a tax break (but suggests that the story might be different for amateur athletes), the former approach distorts and undermines the meaning of “service” to one’s country, perhaps in an effort to advance a certain tax agenda.
There are many Americans who represent this country and are taxed on their earnings, and indeed, on their prize money. Nobel Prize winners, the president and soldiers all represent America and honor our nation with their achievements, and yet, their earnings are all subject to federal income tax (with the exception of soldiers deployed in combat).
If we are going to exempt Olympic medal winners from taxation, shouldn’t we exempt Nobel Prize winners, civil servants and all soldiers, too?
The move to exempt American Olympians from taxes provides evidence of the erosion of national service, which should embrace the concept of men and women who serve the interests of America without special rewards or preferential exemptions. Despite the outstanding nature of their gifts and their sacrifices for the honor of this country, these individuals should be treated equally, like every other citizen, before our laws. Their service—though it doesn’t earn the right to preferential treatment—is recognized and praised, which is its own reward.
If this understanding of national service seems unfair, it is because we have lost sight of the importance of caring for our country, which we have replaced with the notion of having an America that “cares for” us. In a 2011 article for Newsweek, General Stanley McChrystal wrote the following about the dangers of Americans’ diminished concept of national service:
The concept of national service is not new, nor is it outdated. When America needs it, national service is the personal obligation of every American. And she needs it now.
All of us bear an obligation to serve—an obligation that goes beyond paying taxes, voting, or adhering to the law. America is falling short in endeavors that occur far away from any battlefield: education, science, politics, the environment, and cultivating leadership, among others.
…as important as those inalienable rights are, there are also inalienable responsibilities that we must accept and fulfill. Those responsibilities are wider than are often perceived or accepted. Just as we have allowed the term “service member” to apply solely to the military, we have allowed the obligations of citizenship to narrow.
Even the most basic responsibilities of being an American are considered optional by many. In the seeming anonymity of modern life, the concept of community responsibility has weakened, yet is needed more than ever.
A commitment to serve this country without looking for a benefit in exchange is essential to the well-being of America. Charles Murray recently discussed this idea of community engagement, personal responsibility and national service in an AEI lecture.
Though I’m certain that many athletes in London are too preoccupied at the moment to join the debate, any medal winner who recognized that his or her service as a representative of America didn’t have to be rewarded with special tax treatment would earn even more respect from many of their fellow Americans—which is something far more valuable than a tax break.