An idea to remove the cap advantage for no tax states

[Statto]

A lot of talk lately about certain teams without income tax having an unfair advantage with the salary cap as they're able to sign players at a discount. Not much talk about how to fix it but I have one fairly simple idea (in theory). Fans of these teams won't like it but how about no tax teams don't get the cap increase that is going to be taking place over the next few seasons? It's expected to go past $100 million in 3 seasons or so, well how about no tax teams stay at $88 million or at least have a reduced cap increase compared to every other team.

Eventually the league settles on a certain percentage, whether it's 15-25% less than other teams - at least this advantage will be taken away from them. It might be complicated to have two different salary caps but perhaps its worth a try. Thoughts?

If you want to remove the tax variables just make it a net cap. Then each team has to do their own management of cap payments and submit accounts periodically.

Accountants will minimise tax payments for players anyway. Tax is something only regular people strictly pay and can’t avoid.

 

[CanadienShark]

How can we account for quality of life advantages? Should we penalize Vancouver to help Winnipeg, because one is more desirable?

 

[HespelerGreenFlash]

How about no? Yea, tax me to holy hell but please don’t tax my favourite athletes. Sounds ludicrous. I am sorry.

Exactly. Lets tax even our seniors into oblivion and give millionaires a break. SMFH

 

[WhiskeyYerTheDevils]

If you want to remove the tax variables just make it a net cap. Then each team has to do their own management of cap payments and submit accounts periodically.

Accountants will minimise tax payments for players anyway. Tax is something only regular people strictly pay and can’t avoid.

That would be nearly impossible to plan for teams because they have no control over a players tax situation from year to year.

 

[Strangle]

I have a much better idea

Why don’t high income tax states and provinces vote for politicians who will lower their own income taxes?

Who gives a f*** about hockey when we can also put more money in our own pockets?

 

[The Management]

I'm not a CPA, and have only a passing knowledge of tax matters. But I do have experience in negotiations, and generally speaking if you can arrange a financial package in such a manner as to reduce the income tax burden on the recipient, the recipient is more likely to take a slightly smaller package because the difference is being largely absorbed by the tax rule / tax exemption.

Put another way, you can take less money to play in a non-tax market because less of your earnings are being siphoned away. I don't see how this could be construed as anything other than an advantage, particularly in a league where every competitive team tries to stretch their dollars to the very outer boundary of the salary cap.

None of which is to say that this advantage has necessarily translated to success on the ice. Virtually no team in the league has perfectly maximized its cap dollars.

This actually leaves me with a completely unrelated question: has there ever been a case of an agent taking a haircut on their commission to facilitate a contract signing?

 

[SomeDude]

This actually leaves me with a completely unrelated question: has there ever been a case of an agent taking a haircut on their commission to facilitate a contract signing?

If it has happened, the general public wouldn’t know about it. They wouldn’t want that getting out so it’s more expected. I kind of doubt it though.

Real estate agents somewhat regularly forgo some commission in order to get a deal closed because it’s months long process and it isn’t worth it to start over if a deal is going to fall apart over a few thousand or less.

Professional sports agency is a lot different. I can’t really see a scenario where an agent would need to do that unless the agent themselves made a mistake somewhere.

 

[The Management]

If it has happened, the general public wouldn’t know about it. They wouldn’t want that getting out so it’s more expected. I kind of doubt it though.

Real estate agents somewhat regularly forgo some commission in order to get a deal closed because it’s a months long process and it isn’t worth it to start over if a deal is going to fall apart over a few thousand or less.

Professional sports agency is a lot different. I can’t really see a scenario where an agent would need to do that unless the agent themselves made a mistake somewhere.

Yeah, I could only really foresee it happening if the agent's relationship with the player is on the rocks, and they don't want to lose the client entirely over a breakdown in negotiations between player and club. Would probably be a rare scenario, but a neat one to ponder.

 

[JPT]

I have a much better idea

Why don’t high income tax states and provinces vote for politicians who will lower their own income taxes?

Who gives a f*** about hockey when we can also put more money in our own pockets?

Maybe those people don’t like the low-tax options at the polls, or maybe they don’t mind paying taxes because of the services they get, or maybe both. Most people don’t decide on who to vote for based on their tax policy alone. That’s a rich person issue, or an issue for those who desire to become rich.

 

[tarheelhockey]

I'm not a CPA, and have only a passing knowledge of tax matters. But I do have experience in negotiations, and generally speaking if you can arrange a financial package in such a manner as to reduce the income tax burden on the recipient, the recipient is more likely to take a slightly smaller package because the difference is being largely absorbed by the tax rule / tax exemption.

Put another way, you can take less money to play in a non-tax market because less of your earnings are being siphoned away. I don't see how this could be construed as anything other than an advantage, particularly in a league where every competitive team tries to stretch their dollars to the very outer boundary of the salary cap.

You could say the same thing about all the other financial advantages of playing in a particular market.

8 of the top 10 players for endorsements are with Canadian teams. Many of those endorsements, such as Auston Matthews signing to promote the Rogers sportsbook, are unique to Canadian markets. Forbes has Matthews running at around $4M/year on endorsements, and Morgan Reilly is also top-10 on that list. I don't see how this could be construed as anything other than a financial advantage.

We should “adjust” the cap to account for taxes, and then do the same with endorsements by directly deducting any market-specific endorsements (including endorsements specific to a country) from that team’s cap. Then everyone can be happy with the fair system.

 

[tucker3434]

This would be the easiest and most effective way to level the playing field if the NHL was interested in doing so.

Anything is easy when it’s oversimplified. Taxes don’t work that way.

 

[StumpyTown]

There is so much more than just taxes to consider.
- Climate
- Local cost of living
- Local amenities and entertainment
How could one possibly put a dollar value on all the intangibles. There will always be a difference in city attractiveness to a player and every player is going to have their own personal opinion on what's most important to them. There really isn't any way one could realistically level the playing field completely.

 

[John Mandalorian]

Should we also apply cap adjustments to teams who are in markets where more endorsement deals are available? What about adjustments for cost of living? Should we update cap for changes in the currency exchange rate?

The answer is no. Florida was a loser franchise for years, and players had no interest in sacrificing money to go there. Canadian fans complained about the fact that there is a franchise in Florida for two decades. Now that Florida is winning, they want to reduce their ability to compete. Winning is driving Florida’s contracts down, not tax dollars.

Plus, not all places with taxes are the same. And some of the high tax locations (eg NYR) have no trouble signing FAs.

The issue of taxes alone doesn’t necessarily impact desirability of a location. California has taxes but also agreeable weather and possibly other opportunities (incl for spouses) depending on the location.

This really seems to be more about Canadian markets. And the unfortunate reality of that is that it may take some time for players to forget the way the two different countries handled covid - or where it’s no longer a factor.

Scapegoating taxes seems like a convenient way to ignore other issues.

 

[triggrman]

Until I read this thread I thought most people thought Nasvhille overpaid for Marchessault and Stamkos. Now, I'm learning we were only able to sign them because of Nashville being a income tax free state.

 

[JPT]

Until I read this thread I thought most people thought Nasvhille overpaid for Marchessault and Stamkos. Now, I'm learning we were only able to sign them because of Nashville being an income tax free state.

Yeah but having no income tax means Nashville overpaid them by EVEN MORE

 

[triggrman]

Yeah but having no income tax means Nashville overpaid them by EVEN MORE

lol, I guess.

 

[BlueBaron]

Any solutions I can think of are accounting nightmares. Creating a situation that factors in tax means a player could have different cap hits in every state and province. One option would be apply tax to each teams cap in advance but then you have New York and Tampa with different caps. I'm not sure there is a fair way to do it unless you pay income taxes from a pool and impose a league tax across all players to fill the pool and keep all at the same average rate. I'm not sure this is legal.

 

[tarheelhockey]

One thing I do note for the historical record: these scapegoat threads used to be about the crime of revenue sharing, and how Group B should be allowed to die so that Group A could maximize their economic advantages.

Once all 32 teams became financially self sufficient, we have a very sudden and enthusiastic pivot to talking about how Group A should get tax bonuses because the economics aren’t fair. Funny how that worked out.

I'm not sure there is a fair way to do it unless you pay income taxes from a pool and impose a league tax across all players to fill the pool and keep all at the same average rate. I'm not sure this is legal.

It’s not legal. Workers get taxed individually, not as a collective. They can decide to have taxes withheld from their paychecks by the government as a sort of advance payment, but the employer can’t be the one doing the withholding and paying-out of taxes.

 

[Beukeboom Fan]

I'm not a CPA, and have only a passing knowledge of tax matters. But I do have experience in negotiations, and generally speaking if you can arrange a financial package in such a manner as to reduce the income tax burden on the recipient, the recipient is more likely to take a slightly smaller package because the difference is being largely absorbed by the tax rule / tax exemption.

Put another way, you can take less money to play in a non-tax market because less of your earnings are being siphoned away. I don't see how this could be construed as anything other than an advantage, particularly in a league where every competitive team tries to stretch their dollars to the very outer boundary of the salary cap.

None of which is to say that this advantage has necessarily translated to success on the ice. Virtually no team in the league has perfectly maximized its cap dollars.

This actually leaves me with a completely unrelated question: has there ever been a case of an agent taking a haircut on their commission to facilitate a contract signing?

While I agree with you in general - couple of points:
1) It would seem like some GM's are able to negotiate favorable deals which have a lower cap impact for the team to reflect the benefit the player will receive.
2) There are other GM's which essentially give this benefit to the player without getting a lower cap hit. All the Leafs stars have 80-90+% of their contract paid via signing bonus, so they are paid on 7/1 instead of evenly from October - March. There is a significant time value of money benefit (probably ~3-4%). Additionally, Matthews signing bonus is exempt from ONT provincial taxes (which based on Google would generate a ~13% benefit). While looking at those player contracts in relation to their peers, it seems that Dubas/Treliving just "give those player benefit away" instead of trying to negotiate a lower cap hit to reflect the actual benefit ultimately paid to the player.

EDIT: You can make a case that AM/MM/WN's contracts factor those benefits in and they would be even higher if they weren't included. I think that's a tough case to support, when considering how the raw $'s compare to their peers, but YMMV.

 

[JianYang]

Plus, not all places with taxes are the same. And some of the high tax locations have (eg NYR) have no trouble signing FAs.

Also taxes alone don’t necessarily make a place more desirable.

This really seems to be more about Canadian markets. And the unfortunate reality of that is that it may take some time for players to forget the way the two different countries handled covid - or where it’s no longer a factor.

Scapegoating taxes seems like a convenient way to ignore other issues.

Ill refrain getting into a debate about which country handled it better, but the main point is that I don't think covid policies have much to to do with anything other than I'm sure all the players were relieved when all the protocols were lifted.

It hit every player hard having to be away from their families, but particularly those that had major ties to both countries since the border was closed.

If there were significant residual effects, we would see a noticeable exodus of many American players from Canadian markets (assuming that you were implying that Canada handled covid poorly), but off the top of my head, I'm thinking of the canucks who have had more Americans playing there than canadians this year, including miller who had the option to leave but decided to sign on. Same with hellebyuck in winnipeg of all places. Blake Coleman signed in Calgary under his own free will with no restrictions. Matthews as well in toronto. Caufield signed maximum term in Montreal. That's just off the top of my head.

 

[Strangle]

There is so much more than just taxes to consider.
- Climate
- Local cost of living
- Local amenities and entertainment
How could one possibly put a dollar value on all the intangibles. There will always be a difference in city attractiveness to a player and every player is going to have their own personal opinion on what's most important to them. There really isn't any way one could realistically level the playing field completely.

You could at least start by giving teams more control over their personnel

The pendulum has swung too far in the direction of the players, imo

I understand that is an unpopular opinion, but that’s my opinion

 

[Bust]

You could say the same thing about all the other financial advantages of playing in a particular market.

8 of the top 10 players for endorsements are with Canadian teams. Many of those endorsements, such as Auston Matthews signing to promote the Rogers sportsbook, are unique to Canadian markets. Forbes has Matthews running at around $4M/year on endorsements, and Morgan Reilly is also top-10 on that list. I don't see how this could be construed as anything other than a financial advantage.

We should “adjust” the cap to account for taxes, and then do the same with endorsements by directly deducting any market-specific endorsements (including endorsements specific to a country) from that team’s cap. Then everyone can be happy with the fair system.

Oh no. The Canadian teams that generate a ton of revenue who's teams are in the worst weather locations, have higher taxes, higher cost of living and overall worse government than the USA are offering UFA’s side jobs to make up the difference.

Endorsement deals don’t just materialize from nothing. These guys actually have to earn this money by doing commercials/radio/ads. This isn’t free money being handed out.

Seems like the consensus here is that only small market teams are allowed cap advantages.

This whole thread is fans arguing from their teams best interests’ perspective and shaming other fans from doing the same.

Odd behaviour overall.

I understand that is an unpopular opinion, but that’s my opinion

I don’t think it’s unpopular at all. I think we’re in a time where some fans are more invested in the players than the teams overall.

I’ve always been a logo guy, but times are changing - it’s all about the nameplate on the back of the jersey now.

 

[WhiskeyYerTheDevils]

Oh no. The Canadian teams that generate a ton of revenue who's teams are in the worst weather locations, have higher taxes, higher cost of living and overall worse government than the USA are offering UFA’s side jobs to make up the difference.

Endorsement deals don’t just materialize from nothing. These guys actually have to earn this money by doing commercials/radio/ads. This isn’t free money being handed out.

Seems like the consensus here is that only small market teams are allowed cap advantages.

This whole thread is fans arguing from their teams best interests’ perspective and shaming other fans from doing the same.

Odd behaviour overall.



I don’t think it’s unpopular at all. I think we’re in a time where some fans are more invested in the players than the teams overall.

I’ve always been a logo guy, but times are changing - it’s all about the nameplate on the back of the jersey now.

If it's such an advantage, why haven't low tax teams dominated the league in the cap era?

 

[Bust]

If it's such an advantage, why haven't low tax teams dominated the league in the cap era?

The cap era is almost a 20 year period. A lot has changed in the last 10 years, never mind the whole era.

The teams still need to win the games at the end of the day. But there are certain teams that overall have better footing and can position themselves a bit better than others.

 

[WhiskeyYerTheDevils]

The cap era is almost a 20 year period. A lot has changed in the last 10 years, never mind the whole era.

The teams still need to win the games at the end of the day. But there are certain teams that overall have better footing and can position themselves a bit better than others.

The tax advantage has had no measurable impact on outcomes in this league.