OK, so Derek Jeter got his 3,000th hit the other day, with a sweet home run that just made it all the better.
A fan caught the ball and donated it back to Jeter, though many people speculated it could have been auctioned for as much as a quarter-million dollars. In return, the Yankees gave the fan gifts like regular-season and playoff seats for the rest of the year, and other stuff, which in themselves were valued at $30 – 40,000. (!!!!!) And so today, there’s an article on NBC’s Website pointing out that, like anyone who receives in-kind merchandise of value (like game-show contestants, or Oprah fans, for instance), the IRS treats such goods as income, and the fan will owe taxes on their market value – possibly more than $10,000.
The fan has been extremely cool about all of this. He said in an interview that he wasn’t interested in profiting off the ball, and he was grateful for the gifts from the club; he said today that he would pay the taxes rather than refuse the gifts, because he preferred it that way. He also commented that “the IRS has a job to do, so I’m not going to hold it against them, but it would be cool if they helped me out a little on this”, which is more than reasonable – and far more reasonable than anyone else seems to have been.
The comment thread on the NBC site is as stupidly rabid as even the most obnoxious anti-government Tea-Party wingnut: “Our country is so messed up.” “vote for Ron Paul if you don’t like our bloated govt” “The tax system is not a system for revenue it is a system for punishing. The sooner we destroy our present system the better” “flat 10% tax rate…the only idea that makes sense” “What happened to our country ? .. liberal commies and commie RINO’s/establishment republicans .. professional politicians .. that’s what happened” “The IRS and Federal Reserve is for the slaves not the Slave Owners.” And of course there’s a lot of just ill-informed “expert opinion” that is so dumb it hardly means anything: “If the ball would have been worth $250,000, and he didn’t collect that much, shouldn’t he get a tax *break* for *not* selling the ball?” “he should have to pay gift tax on the value of the ball then pay income tax on the value of the merchandise received. Just wait until he gets his bill for over 100k in gift taxes. He will like that.” “Looks to me like he made a 250,000 dollar charity donation to the baseball hall of fame. He should start with that as a credit to his income and then figure his tax bill overall.”
Starting in reverse order, let me help out all you H&R Block professionals reading NBC: even assuming this could be structured as a tax-deductible gift (rather a stretch), all you get for that is a deduction of the value of the gift – since he’d have to claim he had received something worth $250K in order to deduct $250K from his income, he would only be cancelling out the taxes on the value of the ball itself, setting his net income, and net taxes, right back to whatever they were originally; he would only have to pay gift tax on the ball if catching a home run ball is really a gift – since it wasn’t intended for him and he only picked it up and returned it almost immediately to the club, it’s hard to say he really received it as a gift, and the IRS has never treated returning property as a form of income; you don’t get a “tax break” for income you didn’t earn – or rather, you do in the sense that you don’t have to pay taxes on not getting that income – there’s no such thing as a “tax break” for your actual income on the basis of other income you could have had but didn’t, or almost everyone in the country would get a $10 million “tax break” for not being a hedge fund manager.
But it’s the anti-tax griping that really slays me. I understand the intuitive reaction to taxes on non-cash acquisitions like prizes or found property. But there are obvious reasons why those should be treated as income. First, for many people, they are income. There are people who receive a considerable amount of their annual livelihood in the form of in-kind merchandise, including professional game contestants and people who participate in barter communities. There is no reason those people should be allowed out of tax obligations just because they avoid dealing in cash. And even for the ones who are not seeking to avoid taxes in general, but happen to score a one-time windfall, in financial terms that is no different from getting a bonus from your employer or winning money at a casino. (Oddly, the same right-wingers who are hysterical about cutting funding for public-health services from Planned Parenthood because it also provides abortions with other money can’t seem to see that gift income actually does offset taxable cash income for gift recipients. Planned Parenthood can’t fund abortions with Medicaid money, but the wingnuts have been rabid about cutting its Medicaid money anyway; Oprah fans who found a car under their butts really do get to use the rest of their non-car money for other things because of her generosity, but the wingers are certain the car has nothing to do with their income.) Second, if you were allowed to simply sequester all “gifts” from taxation, there is absolutely no question what the immediate result would be: all income would be declared to be a “gift”. (“I love my employer so much, I work for free! And my employer loves me so much they give me a house, car, medical insurance, clothes, education expenses, consumer electronics, and occasional pocketfuls of cash for free! Because we’re both just generous like that!”) So forget it – that’s a non-starter.
It’s simple: you have to pay taxes on merchandise because merchandise is a form of income. Do these people even know what money is? It’s a medium of exchange . . . remember? The whole point to money is that you use it to buy . . . merchandise. Getting the merchandise directly doesn’t mean you don’t have any income, it just means you didn’t need to go through the business of exchange. Using that as a tax avoidance strategy is about as clever as closing your eyes to make yourself invisible.
I have to say, I’d be somewhat sympathetic to finding a way to protect authentic gifts from taxation. But the details are almost impossible to work out, especially for the second reason above. Everybody sympathizes with the guy who gets nailed with ten grand in taxes after returning a valuable game ball to a rich sports star (and then receives tens of thousands of dollars’ worth of box seats and memorabilia in return), or the Oprah fan who can’t accept a free car because they can’t pay the tax bill on it (unlike every other fan who never got to make that choice, or who could have sold the car to pay for something they needed more). But if we created loopholes for them, you know with certainty that all the cheats and greedheads and financial scammers would immediately find a way to shove their trust funds and multi-million-dollar bonuses through it, and then pay even less of their share of taxes than they do now.
In fact, there are a number of tax breaks for gifts already: all gifts are currently free of tax up to $13,000 per person per year; certain types of gifts are tax-free entirely; there are many ways to structure large gifts, like trust funds or land, to avoid most tax consequences; the upper class has already demanded, and gotten, tax-free inheritances of up to $2 million, and the Republican party is hell-bent on creating a permanently entitled old-money class with no tax obligations at all. Expanding tax protections for true gifts of lower dollar amounts, in a reasonable way, might not be a bad thing, but it’s hardly a natural right for the rich or the lucky to get things without obligation.
The idea that it’s just wrong to be asked to pay your taxes is simply pernicious whining. The idea that it’s somehow a travesty to tax the receipt of a baseball valued in six figures, or baseball tickets and trinkets with a value roughly equal to the average American’s total annual income, is nonsensical. The uninformed, unthought, and uncivilized reactionism of the right wing to any suggestion that those who receive bounty should contribute to the society that made it possible is one of the ugliest things about them. That they somehow manage to focus their antagonism to civilization on this otherwise amusing, utterly minor incident, is just an example of how weirdly, mindlessly angry they are.