Northwestern U. student athletes initiated the lawsuit and their financial situation provides a good example of what these athletes have to face in the near future. Should the student athletes at NU become employees, they will face the prospect of having to pay taxes on their incomes. Currently they enjoy a unique and privileged tax status: while their free college tuition is technically income they do not pay income taxes on it. They are not only receiving a free ride on tuition but a free ride on the taxes.
Should they have to pay taxes here’s a thumbnail sketch of how their finances will change. At NU the tuition is about $65,000 per year. If the student athletes receive this as pay, then they will have to pay Federal income tax, state income tax, local income taxes, and payroll taxes; which include social security and Medicare. These are taxes paid by other residents of Evanston, Illinois where Northwestern U. is located.
These amounts are not trivial and will add up to approximately one third of the value of the scholarship, roughly $22,000 per year. Then they will also no longer receive free health care. Currently most universities with big football programs also have medical schools and it is economical for them to provide free health care to their student athletes. In the near future NU athletes may have to pay for their own ObamaCare health premiums. But given that President Obama is fond of college basketball their union may receive an exemption from participating in ObamaCare.
And since they are members of a union they will have to pay union dues. This will bring the cost of being an employee to roughly $26K to $28K a year.
Saturday, March 29, 2014
Amusing: Unionized Northwestern U. student athletes could have to pay taxes on their “full rides.”
should be taxable as income.