Why Obama Wants to Give Michael Phelps a Tax Break

Last week, Senator Marco Rubio launched an ill-considered proposal to exempt the cash prizes that come with Olympic medals from tax. On Monday, Press Secretary Jay Carney said President Barack Obama would sign Rubio’s bill if it passed the Senate:

The president believes that we should support efforts, like I think the bill you're referencing, to ensure that we are doing everything we can to honor and support our Olympic athletes who have volunteered to represent our nation at the Olympic Games. So, he supports that bill. If it were to get to his desk, he would support it.

We don’t generally “honor and support” people with income tax exemptions because they are especially morally worthy. Firefighters run into burning buildings to save other people’s lives, and they pay income tax. Even Nobel prizes are taxable income. Yet President Obama has apparently bought into Rubio’s formulation that we “punish” Olympic athletes by taxing their income in the same way we tax everybody else’s income.

The idea that a broad-based tax is punishment is misguided in general. But it’s especially problematic for a liberal like Obama, since his model for what the federal government should do requires more tax revenue than Rubio’s would. Obama should be defending the principle that taxes aren’t punishment and that we don’t hand out “get out of tax free” cards.

But Obama’s acquiescence isn’t surprising when you look at his broader take on tax policy. The president likes to talk about raising taxes on the wealthy so that they pay their “fair share.” But he irresponsibly promises that he won’t raise taxes on families making under $250,000 a year -- 98 percent of the population -- in spite of an $11 trillion budget gap over ten years. The president’s whole tax policy agenda is built around moral desert, not revenue sufficiency.

If the tax code is just a tool we use to reward and punish, then why not give Olympic athletes a tax break just because we think they’re awesome? We could even give them a refundable tax credit so their tax bills are negative -- that would really honor and support their activities. Or perhaps instead of another round of quantitative easing, the Fed could just print off a few billion dollars and hand it to Ryan Lochte.

In the first round of Olympics-related faux outrage this year -- when Senator Harry Reid declared that the Chinese-made U.S. Olympic uniforms should be burned -- President Obama (admirably) begged off. “This isn’t a government decision,” said a White House spokesman.

Liberals could plausibly be irritated that Obama was more eager to get on board with a conservative fake outrage than a liberal fake outrage. But they should really be irritated that Obama isn’t willing to defend the principle that taxes aren’t punishment -- whether for Olympic athletes or the middle class as a whole.

(Josh Barro is lead writer for the Ticker. E-mail him and follow him on Twitter.)

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