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Bill to make Olympic prizes tax-free draws criticism

A bipartisan bill to exempt Olympic medals and prize money from taxes is "bad policy," an analyst at the free-market Tax Foundation said Thursday.

"It makes sense for the IRS to tax this prize money," Kyle Pomerleau, the Tax Foundation's director of federal projects, said in a blog post. "Olympic athletes, just as most athletes, earn part of their income competing in events and earning prize money."

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The Senate last month approved a bill from Sens. John ThuneJohn Randolph ThuneOn The Money: Democrats make full-court press on expanded child tax credit | White House confident Congress will raise debt ceiling Psaki: Biden 'believes' Congress will lift debt limit despite spending battle Congress barrels toward debt cliff MORE (R-S.D.) and Charles SchumerChuck SchumerHeatwaves don't lie: Telling the truth about climate change Schumer backing plan to add dental, vision and hearing coverage to Medicare Centrists gain foothold in infrastructure talks; cyber attacks at center of Biden-Putin meeting MORE (D-N.Y.) that would prevent the IRS from taxing the value of Olympic medals and prize money from the U.S. Olympic Committee. On Tuesday, Schumer urged the House to pass the bill, saying athletes should be "worried about breaking world records, not breaking the bank."

The U.S. Olympic Committee gives athletes prizes of $25,000 for a gold medal, $15,000 for a silver medal and $10,000 for a bronze medal. 

Pomerleau, whose group supports tax policy that "promotes economic growth by focusing on raising revenue in the least distortive manner possible," said that bill is "good politics."

However, athletes' prize money "is income just as a teacher’s salary is income and is taxed as such," he said.

"It does not make sense to exempt a specific source of income earned by a specific profession from the income tax, but tax all the income earned by everyone else," he said.

While exempting Olympic prize money from taxes would not cost the federal government much revenue, the tax base should be broad and lawmakers often want to eliminate special tax exemptions, Pomerleau said. As a result, "it would simply be counterproductive to poke even more holes in the tax base," he said.

The liberal Citizens for Tax Justice (CTJ) also criticized the bill.

"There is no moral or economic case for exempting the earnings of Olympic athletes over other categories of workers," CTJ intern Kelsey Kober wrote in a blog post

She added that "lawmakers would do better to pursue principled tax reforms that would raise revenue, decrease income inequality and close down pervasive corporate tax loopholes. If they did this, they would be truly deserving of a gold medal."

updated at 5:20 p.m.