9 States with No Income Tax - NHL CAP

[Hockey Outsider]

For those of you who are suggesting that we just calculate the after-tax cap hit for each player:

Take Auston Matthews as an example. He plays for the Leafs in the province of Ontario, which currently has a top marginal tax rate of 53.5%. But it appears (based on publicly-available information) that he's structured his remuneration in a way that limits his combined tax rate to his applicable US tax rates (which would be much lower - around 41% assuming his home state of Arizona).

Matthews and Marner are teammates, but Matthews' effective tax rate would be in the low 40's, and Marner's would be in the low 50's. They play for the same team, but their effective tax rates are significantly different. After taxes, Matthews' take-home pay would be roughly $1.9M more than Marner's ($1.2M due to smart tax planning, and $0.7M because of higher pay).

What tax rate would you use? If you want to use their actual tax rate, you'd need to accumulate a lot of personal financial information about each player. That's problematic for two reasons. First, the NHLPA would presumably push back and try to defend their members' privacy (yes their salaries are public, but not their tax planning strategies, deductions claimed, etc). Second, the owners would have to pay an army of accountants and lawyers to process it (spending money to solve a problem that the owners don't seem to care about).

On other other hand, if you want to use an approximation (ie "just treat both of them as facing 53.5%"), then you're intentionally introducing false information into the cap calculation. We're not talking about a rounding error here. In the example above, we're talking about a difference of more than a million dollars (if you simply pretend that Matthews and Marner face the same tax rate by virtue of playing in the same province). That's just one example on one team. If we're going to use an approximation, why not ignore taxes altogether? In principle, I'd rather not quantify something than quantify it in a way that's unfair and misleading; and this would simplify the process as well.

These are a few reasons as to why an after-tax salary cap would be so complex (and would require hundreds of thousands of dollars in professional fees each year to maintain). Wealthy people working across borders have access to all kinds of planning that don't apply to regular people (like you and me), and that makes it so much harder to implement.

 

[Deadly Dogma]

So every player would have to show their tax return to see what taxes they paid.

no the NHL would issue a T-4.
1st off its all under the assumption that professional cross border sports leagues will be looked at as 1 financial entity that only pays taxes to federal governments. The federal Gov will then pay a preset amount to the provinces, then to municipal levels. All provincial, local and state taxes will be covered in the initial payment made by the NHL.
So lets say the cap is 81.5x32=2.608 billion.
Then the NHL would pay whatever the avg tax% works out to be. My guess is about 45% , so that 1.1736B the NHL pays directly to the GOV.
Leaving 1 434 400 for actual salary. That roughly 45 mil per club.
That would give the Leafs an additional 9% on avg and teams like Tampa with a tax rate in the 30's would lose 10-15% of their space.

 

[Deadly Dogma]

For those of you who are suggesting that we just calculate the after-tax cap hit for each player:

Take Auston Matthews as an example. He plays for the Leafs in the province of Ontario, which currently has a top marginal tax rate of 53.5%. But it appears (based on publicly-available information) that he's structured his remuneration in a way that limits his combined tax rate to his applicable US tax rates (which would be much lower - around 41% assuming his home state of Arizona).

Matthews and Marner are teammates, but Matthews' effective tax rate would be in the low 40's, and Marner's would be in the low 50's. They play for the same team, but their effective tax rates are significantly different. After taxes, Matthews' take-home pay would be roughly $1.9M more than Marner's ($1.2M due to smart tax planning, and $0.7M because of higher pay).

What tax rate would you use? If you want to use their actual tax rate, you'd need to accumulate a lot of personal financial information about each player. That's problematic for two reasons. First, the NHLPA would presumably push back and try to defend their members' privacy (yes their salaries are public, but not their tax planning strategies, deductions claimed, etc). Second, the owners would have to pay an army of accountants and lawyers to process it (spending money to solve a problem that the owners don't seem to care about).

On other other hand, if you want to use an approximation (ie "just treat both of them as facing 53.5%"), then you're intentionally introducing false information into the cap calculation. We're not talking about a rounding error here. In the example above, we're talking about a difference of more than a million dollars (if you simply pretend that Matthews and Marner face the same tax rate by virtue of playing in the same province). That's just one example on one team. If we're going to use an approximation, why not ignore taxes altogether? In principle, I'd rather not quantify something than quantify it in a way that's unfair and misleading; and this would simplify the process as well.

These are a few reasons as to why an after-tax salary cap would be so complex (and would require hundreds of thousands of dollars in professional fees each year to maintain). Wealthy people working across borders have access to all kinds of planning that don't apply to regular people (like you and me), and that makes it so much harder to implement.

IMO it makes sense for the NHL to pay all taxes directly. Look at whatever the avg tax rate across all players and have each team pay that % on what ever their payroll is. My best guess would be approx 40-45%.
Tampa would lose up to 15% of 81.5 in cap space and other teams that have had it rough may get an additional 9-10% cap space. However in the end if all players no matter where they play all pay the avg tax rate then thats fair.

 

[glovesave_35]

IMO it makes sense for the NHL to pay all taxes directly. Look at whatever the avg tax rate across all players and have each team pay that % on what ever their payroll is. My best guess would be approx 40-45%.
Tampa would lose up to 15% of 81.5 in cap space and other teams that have had it rough may get an additional 9-10% cap space. However in the end if all players no matter where they play all pay the avg tax rate then thats fair.

Is there a precedent for this in any other job sector?

 

[Spazkat]

IMO it makes sense for the NHL to pay all taxes directly. Look at whatever the avg tax rate across all players and have each team pay that % on what ever their payroll is. My best guess would be approx 40-45%.
Tampa would lose up to 15% of 81.5 in cap space and other teams that have had it rough may get an additional 9-10% cap space. However in the end if all players no matter where they play all pay the avg tax rate then thats fair.

You want players to agree to pay more tax than they actually owe to be "fair"? LMFAO Good luck getting them to agree to that. They dump mountains of money on financial mangers and accountants to minimize what they owe. Do you actually think that they would ever agree to forgo all of that?

And then you want the league to hire an army of accountants to work on disbursing these "estimated, average" taxes to the various federal, state and local/municipalities and you expect the league and the various taxation departments to be ok with that?

In this ridiculous scenario, who pays the difference between these "estimated taxes" that you've collected and the actual taxes? Because no owner in the league is going to agree to do that, and the government entities certainly won't accept it either.

Are you including property taxes in all of this? Because they are typically much higher in areas with low/no income tax.

 

[TheFinalWord]

If the tax advantage is no big deal having all players pay what ever the avg tax rate is seems to make logical sense.

What a terrible take in a thread full of terrible takes.

 

[VivaLasVegas]

How the jock tax is calculated varies state to state. Some base it only on games, while others base it on days spent in the city/state.

True.

 

[tucker3434]

IMO it makes sense for the NHL to pay all taxes directly. Look at whatever the avg tax rate across all players and have each team pay that % on what ever their payroll is. My best guess would be approx 40-45%.
Tampa would lose up to 15% of 81.5 in cap space and other teams that have had it rough may get an additional 9-10% cap space. However in the end if all players no matter where they play all pay the avg tax rate then thats fair.

I don't even know where to start with this one...

 

[T REX]

no the NHL would issue a T-4.
1st off its all under the assumption that professional cross border sports leagues will be looked at as 1 financial entity that only pays taxes to federal governments. The federal Gov will then pay a preset amount to the provinces, then to municipal levels. All provincial, local and state taxes will be covered in the initial payment made by the NHL.
So lets say the cap is 81.5x32=2.608 billion.
Then the NHL would pay whatever the avg tax% works out to be. My guess is about 45% , so that 1.1736B the NHL pays directly to the GOV.
Leaving 1 434 400 for actual salary. That roughly 45 mil per club.
That would give the Leafs an additional 9% on avg and teams like Tampa with a tax rate in the 30's would lose 10-15% of their space.

Don't torture yourself.

This will never ever happen. The sun will burn out first.

What the hell is a salary cap anyhow...weird

 

[Deadly Dogma]

You want players to agree to pay more tax than they actually owe to be "fair"? LMFAO Good luck getting them to agree to that. They dump mountains of money on financial mangers and accountants to minimize what they owe. Do you actually think that they would ever agree to forgo all of that?

And then you want the league to hire an army of accountants to work on disbursing these "estimated, average" taxes to the various federal, state and local/municipalities and you expect the league and the various taxation departments to be ok with that?

In this ridiculous scenario, who pays the difference between these "estimated taxes" that you've collected and the actual taxes? Because no owner in the league is going to agree to do that, and the government entities certainly won't accept it either.

Are you including property taxes in all of this? Because they are typically much higher in areas with low/no income tax.

I was thinking more along the lines of a group of all major professional sports leagues pay the avg tax% to the federal gov, its then on the gov to distribute that revenue.
I really find it funny how in some threads low or no state tax team fans say that there is no real advantage but the same ones act like I insulted their mother when a fair system is mentioned.

 

[Hockey Outsider]

IMO it makes sense for the NHL to pay all taxes directly. Look at whatever the avg tax rate across all players and have each team pay that % on what ever their payroll is. My best guess would be approx 40-45%.
Tampa would lose up to 15% of 81.5 in cap space and other teams that have had it rough may get an additional 9-10% cap space. However in the end if all players no matter where they play all pay the avg tax rate then thats fair.

This approach is impractical and would never get implemented.

In general, tax rates are higher in Canada than the US. Why would the Canadian federal and provincial governments accept lower tax revenue? Using the Leafs/Sens as an example - you're asking the Canadian and Ontario governments to accept 40-45% income tax (combined federal and provincial), rather than the 50%+ rate they're entitled to. What possible reason would the CRA to accept this?

 

[glovesave_35]

I was thinking more along the lines of a group of all major professional sports leagues pay the avg tax% to the federal gov, its then on the gov to distribute that revenue.
I really find it funny how in some threads low or no state tax team fans say that there is no real advantage but the same ones act like I insulted their mother when a fair system is mentioned.

It's not that, it's just that fans in traditional or original 6 markets completely disregard the benefits inherent in their situation. Those that are obvious to all, but can't be easily mathematically accountable. I'm still waiting for the first hometown Dallas kid who wants to play for the Stars.

 

[cowboy82nd]

This approach is impractical and would never get implemented.

In general, tax rates are higher in Canada than the US. Why would the Canadian federal and provincial governments accept lower tax revenue? Using the Leafs/Sens as an example - you're asking the Canadian and Ontario governments to accept 40-45% income tax (combined federal and provincial), rather than the 50%+ rate they're entitled to. What possible reason would the CRA to accept this?

So the Leafs can buy a defender.


(Joking) The poster you quoted is a Leafs fan.

 

[VivaLasVegas]

I was thinking more along the lines of a group of all major professional sports leagues pay the avg tax% to the federal gov, its then on the gov to distribute that revenue.
I really find it funny how in some threads low or no state tax team fans say that there is no real advantage but the same ones act like I insulted their mother when a fair system is mentioned.

Camembert goes great with both red and white whine. Suffice it to say that any tax differential is not why some Canadian teams routinely struggle year after year after year, and their path to recovery doesn't begin at Excuses Square.

 

[dekelikekocur]

IMO it makes sense for the NHL to pay all taxes directly. Look at whatever the avg tax rate across all players and have each team pay that % on what ever their payroll is. My best guess would be approx 40-45%.
Tampa would lose up to 15% of 81.5 in cap space and other teams that have had it rough may get an additional 9-10% cap space. However in the end if all players no matter where they play all pay the avg tax rate then thats fair.

Because players don't file taxes as a collective. The governments of Canada and the US(And lets be real, the rest of the planet) doesn't care about your group, when you file taxes, it's for your family unit(you, potential spouse, and dependent children). No government is going to do this.

The NHLs annual gross isn't enough to run the US government for week, image how much less time the total tax revenue would cover. Tax law isn't going to change over something so insignificant.

 

[QcFlames12]

Canada has nation wide Health Care and not private Health Care. Clearly, the Canadian teams have an advantage over players that have families.

Millionaires don't care about public vs private.

 

[Whalers Fan]

Is there a precedent for this in any other job sector?

What other job sectors, other than pro sports, have a collective bargained salary cap.?

This is a silly discussion anyway. There are numerous region-related differences for the different franchises apart from state / provincial income tax. Real estate, sales tax, property tax, endorsement opportunities, energy costs, etc. Why single out just one item?

 

[triggrman]

What other job sectors, other than pro sports, have a collective bargained salary cap.?

This is a silly discussion anyway. There are numerous region-related differences for the different franchises apart from state / provincial income tax. Real estate, sales tax, property tax, endorsement opportunities, energy costs, etc. Why single out just one item?

Trade Unions

 

[BLONG7]

Us CAD is not relevant due to all contracts in USD unless your talking COL?

Except CDN cities take in, CDN money.....disadvantage to those teams, but no worries, they just jack the ticket prices.
lol
All jokes aside, this is something the agents would be thinking of, probably more than the player.

 

[Whalers Fan]

Trade Unions

Not really the same. There are pay scales for the individual skilled trade laborers, but there is no restriction on how much total money a business spends on the skilled trade labor. The business can bring on as many employees as necessary to meet its needs.

 

[triggrman]

Not really the same. There are pay scales for the individual skilled trade laborers, but there is no restriction on how much total money a business spends on the skilled trade labor. The business can bring on as many employees as necessary to meet its needs.

But the individuals are slotted salaries that have a cap, and are collectively bargained by the members of the union

 

[Whalers Fan]

But the individuals are slotted salaries that have a cap, and are collectively bargained by the members of the union

Correct, but that's very different than a professional sports salary cap.