Let's Get Rid of the Game Show Tax in 2001
Okay, let's stir the kettle before Christmas. You'll either love this or hate it. However, since we're about to have a major debate on a tax cut, I think it's time once and for all for us to steal an idea from our Canadian friends. It's time for President-elect Bush and Congress to repeal the tax on game show winnings.
Before you jump off the deep end and say he's gone nuts, I can't fathom a single person who's ever been a contestant on a game show or a potential player seriously opposing this. Further, this would have a miniscule effect on the economy which would likely not even be felt. In fact, one could find many reasons why such a tax cut would help the economy.
I asked one of my colleagues at Union University, Dr. Darin White of our School of Business, to run some numbers on this issue. A raw estimate since the premiere of Who Wants to Be a Millionaire, based on published reports on the seven prime time network shows of last year and a sample of the syndicated series, is $65 million in cash and prizes have been given away on television since August 1999.
Based on average tax rates, including the possibilities of shelters, Dr. White estimates a maximum of $20-22 million in federal tax revenues were generated from game show winnings. Number one, that figure is not even one-tenth of the estimated surplus for fiscal year 2000 and would not even scratch the budget of most of the cabinet agencies in Washington.
So with some pundits predicting pending recession, how could eliminating this tax stimulate the economy? Glad you asked that question. Let's take the case studies of a number of well-known game show contestants.
Let's take the case of Joel Reid, who won $250,000 on Millionaire Sunday night. Like a huge number of contestants on the recent big-money shows, Joel is facing the impending onslaught of four years of college expenses for his oldest daughter. Four years at Auburn University are not as expensive as the cost of a private school but if Joel had not won that quarter-million, he would be staring expensive loans in the face. Joel can now afford the cost but he'll only take home about $156,000 of his on-air total after taxes. A nice chunk, to be sure, but consider what he could do investment-wise, or savings-wise, rather than sending it to the federal bureaucracy.
How about Doug Foster, the young man during the first 13 episodes of WWTBAM? The youth minister who, along with his wife, was attempting an expensive process of adoption. He won $32,000 but $10,000 of that went to the government. If he had that extra 10 grand, he could have better spent it on providing for the early years of the child---and some of it would likely have gone to a social or government agency, anyway.
Let's get away from cash: case in point, The Price Is Right. This show has in the last two years had a heavy diet of college students and senior citizens, neither of which are in the high-income bracket. The easy thing is to say these people know what they're getting into when they audition for the show. True. However, every time one of these folks at either end of the age scale (and a lot of those in the middle-age, middle-class group) "comes on down" and wins, the prize costs that contestant money. Look at young Temitope Toriolla Monday. The audience roared when Temitope won a Chevy Cavalier. That same group would groan if they knew Temitope will have to come up with $6,000 to pay her tax bill. That's cheap for a Cavalier. However, Temitope won no cash to help her with the IRS man. Explain to me how the government really benefits from that $6,000 from Temitope when it did not come from active employment.
How about Mike Harvey, the easygoing retired teacher won won $125,000 Sunday night? He wanted to use a portion of his winnings as a contribution to a hospice where his brother was to have spent his final days, had he not died before the transition. Mike will pay the government in the neighborhood of $46,000. I venture to you unflinchingly that hospice would make far better use of that $46,000 than a Washington bureaucrat.
Then, consider Stephanie Threlkeld, one of the first winners on Twenty-One last January. Steph and her family committed a tithe of her winnings to her church in the Memphis area before she ever went in the isolation booth. She also had to pay around $35,000 in taxes on her jackpot. Our churches and synagogues are being asked---and justifiably so---to take on more of the burden of caring for senior citizens, community missions and social responsibilities in our communities. I ask you this: if Stephanie had the option of taking that $35,000 and designating it for community missions through her church, who would have had the greater benefit?
In a 1959 issue of TV Guide, a woman who won more than $70,000 in prizes on the Bill Cullen version of The Price Is Right revealed how she had to sell about 90 per cent of her prizes to pay the tax bill (at a time when earnings of more than $60,000 were taxed at an 80 per cent level). She even had to make a deal with Sealtest to buy the year's supply of milk and dairy products her family won.
Something has always been strange to me about the equation of game winnings=income. I'll never forget when Monty Hall was asked about taxes on an old Phil Donahue show. "It's income," said Monty. "At least, that's what the government says it is. I didn't say I like it or agree with it, but until the U.S. government changes its tax laws, I have no choice as a producer but to hand them a 1099 form when contestants win."
Monty is a native of Canada---where no game show winnings are taxed. One does not hear a hue and cry north of the border to start tapping into TV prize money to fund another government program in Canada.
Go back to Dr. White's estimates. With the surpluses we are experiencing, even if the U.S. does enter a recession---as may well happen in the next year---Washington would never miss that game show money. If and when game shows enter another recession----as they surely will----that money would not be as much of a resource, as it has been the last 16 months.
Furthermore, I will venture to all of you, if you look at the kind of people who have been winning most of the money on these shows in recent months, if they were allowed to keep the money taken from them in taxes, charitable giving from these people would go up exponentially. Most of them are that kind. When college educations and family bills are the prime movers for most of these people, they will be willing to share with those less fortunate if they have the dollars to give.
As I see it, somebody ought to be proposing to Congress to get rid of this ridiculous tax, which rates just below the inheritance tax and the marriage penalty as an oppressive fiscal ritual. If it takes me to be the one to get the ball rolling, so be it. I assure you, I will be in contact with my Congressman John Tanner to make a case for it. It's worked for the Canadians. Eliminating the television game show winnings tax could be one of the most beneficial and least painful tax cuts. Unquestionably, families and charities would be the beneficiaries and I can think of two no greater causes.
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