Friday, August 3, 2012

Please Don't Tax American Prize Winners The Same As Gamblers

I've said before that the Founding Fathers of America didn't include everything in the Constitution, haven't I? Of course, that's just common sense. Has to be.

And one new problem has entered the news sphere again as if it's fresh and shiny. It's not. It's been around a long time, but it's as ripe as a peach in midsummer and worth another look....Senator Rubio has introduced a bill that would help Olympic athletes, and I think it should be extended to academic prize winners as well.

When the American Olympic winners win medals, when academics living in America win rare monetary prizes, and when American gamblers make winnings at casinos, they're all lumped together for tax purposes, stirred around, and taxed the exact same way.

In most other countries, of course, prize winnings from the Olympics and prizes to reward higher education such as the Nobel Prizes aren't taxed the same way as general gambling, lottery, and sweepstakes prizes. It's thought unfair in most countries to tax rare unsolicited prizes winnings. It's an anti-competitive stance. Simple as that.

I can't remember how the Nobel and gambling got mixed together in the tax code as if they were the same. Did the Founding Fathers genuinely want that?

So if the Obama administration wants to help winners, it could do something about it, and pass this legislation. I just wish the legislation could go further, and separate gamblers from academic prize winners and just tax the gamblers, as far as I'm concerned. 

A tremendous new physics prize has just been announced in the past few days. The winners are expected to receive $3 million American dollars flowing from the unexpected generosity of Yuri Milner, an internet billionaire. By doing so, he's promoting the discipline of physics by footing the bill of his prizes to the tune of $27 million per year to nine physicists around the world.

The problem is, winning physicists have to fork over half of that $3 million to the United States government if they live here, while the foreign ones won't be equally punished. Surely these prizewinners are contributing members to society, and one-time prizes should not punish them, and be cut in half as if the money is regular income, the way it is now. I wonder if the Framers of the Constitution would have handled it better.

This odd section of the tax code hit my family when my husband won mathematical prizes, and we learned ourselves the hard way about the tax inefficiency. Should be fixed, no doubt about it. For one, I'm glad the Olympic athletes are complaining about it.

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