Republican Sen. Richard Burr proposes taxing scholarships of student athletes who 'cash in'

Key Points
  • Sen. Richard Burr is proposing taxing some college scholarships like income, puzzling higher education experts and anti-tax advocates
  • The proposal followed the NCAA's announcement earlier in the day that it is starting the process of allowing some student-athletes to profit from their names and images.
  • "Scholarships are already taxed like income," one expert says.
Sen. Richard Burr (R-NC), chairman of the Senate Intelligence Committee
Al Drago | Getty Images

An influential Republican senator proposed on Tuesday taxing some scholarships like income following the NCAA's announcement earlier in the day that it is starting the process of allowing some student-athletes to profit from their names and images.

"If college athletes are going to make money off their likenesses while in school, their scholarships should be treated like income," Sen. Richard Burr, R-N.C., wrote in a post on Twitter. "I'll be introducing legislation that subjects scholarships given to athletes who choose to 'cash in' to income taxes."

Details of the senator's proposal were not immediately available, and a representative from Burr's office did not respond to a request for comment.

Burr tweet

The announcement came as a surprise to anti-tax advocates and experts on college financing, and prompted criticism from those on the left who noted that Burr has generally favored lowering taxes on the wealthy.

One higher education expert, Mark Kantrowitz, pointed out one especially puzzling detail: "Scholarships are already taxed like income."

A college scholarship is nontaxable only if it's used on tuition and textbooks. If it's applied to room, board or transportation — which make up half of college costs — it can be taxed as much as 37%. "The taxes on scholarships prevent students from making full use of their scholarships," Kantrowitz said.

According to his calculations, less than 1.5% of undergraduate students receive athletic scholarships, and the average scholarship is $10,631.

Mark Mazur, director of the nonpartisan Tax Policy Center, said the proposal would unfairly target college athletes.

"Senator Burr is essentially saying let's break scholarship recipients into different classes — a deserving class, and a less deserving class."

Taxes on scholarships generated $866 million for the government in 2016, according to the IRS. The government collected about $1.7 trillion in income tax revenue that year.

Anti-tax advocate Grover Norquist, informed of Burr's tweet, was also skeptical, calling the proposal "a gray area and a new area in tax policy."

"Certainly if you are creating a new tax, taxing something that existed before but was not taxed, it seems to me that there would have to be an offsetting tax cut so there was no net tax increase," Norquist said.

But Norquist said he was not sure the tax was new.

Burr is among the signatories of Norquist's "Taxpayer Protection Pledge," which commits lawmakers to oppose net tax increases.

The proposal from Burr also prompted criticism from academics and those on the left.

"Exciting to see GOP senator demand new taxes on high-earning Americans. Okay, weird (racist?) that @SenatorBurr singles out @NCAA football and basketball players," tweeted Eric Klinenberg, director of the Institute for Public Knowledge at New York University.

The organizers of the Tax March, an organization which has criticized Republican tax cuts for favoring the wealthy, also criticized the move.

"If Richard Burr were actually concerned with taxing people, he wouldn't have voted for the 2017 tax scam. Instead, Burr pushed hard for the wealthy to get massive tax cuts!" the group wrote on Twitter.

Burr's interest in college sports dates back decades.

Now chairman of the Senate Intelligence Committee, he has spoken fondly of his time as a defensive back at Wake Forest University and has criticized efforts to label student-athletes as university employees.

During a 2014 Senate address on the topic, Burr cited an estimate from the College Board that found that a college degree added a boost to lifetime earnings of about $1 million to those who earned one.

"The idea that student athletes do not get anything in return for their playing a sport is financially wrong," Burr said, according to transcripts of his remarks available on the NCAA website.

NCAA divisions to begin work amending bylaws
NCAA divisions to begin work amending bylaws

-- CNBC's Jordan McDonald contributed to this report.