An idea to remove the cap advantage for no tax states

[Bust]

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

Of course it has. Players are signing for less money in certain areas.

Alan Pogroszewski (Who has been quoted in this thread already) made mention regarding Reinhardt new deal: Reinhart’s salary @ $8.625 million annually, he owes $3.15 million in taxes in Florida. He would pay $1.1 million more in California, $1.5 million more in New York and $1.4 million more in Toronto. It saves him over 12mil over the duration of the deal.

Theres another example from a couple of years ago, obviously if it was true then and nothing has changed (in terms of taxation rules) :

https://x.com/i/web/status/879725028715229185

Methot made over 1.4mil more playing for Dallas than the same deal would have paid him in Ottawa.

That kind of cost saving in a hard cap league cannot be argued as anything other than an advantage for teams in lower tax areas.

 

[Fig]

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

What about considering differences like Pastrnak vs Hyman's upbringing?

One dude's dad bought ownership of teams in the leagues his son was playing in.

Seriously though, it's basically a fools errand to try and do a calculation for these "advantages".

 

[DustyDangler]

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?

This is the solution. It is not merely a professional athlete disadvantage, it is an all people disadvantage. You don't like that your state or province steals too much in income tax? Apply pressure to get 'em to stop.

 

[WhiskeyYerTheDevils]

Of course it has. Players are signing for less money in certain areas.

Alan Pogroszewski (Who has been quoted in this thread already) made mention regarding Reinhardt new deal: Reinhart’s salary @ $8.625 million annually, he owes $3.15 million in taxes in Florida. He would pay $1.1 million more in California, $1.5 million more in New York and $1.4 million more in Toronto. It saves him over 12mil over the duration of the deal.

Theres another example from a couple of years ago, obviously if it was true then and nothing has changed (in terms of taxation rules) :

https://x.com/i/web/status/879725028715229185

Methot made over 1.4mil more playing for Dallas than the same deal would have paid him in Ottawa.

That kind of cost saving in a hard cap league cannot be argued as anything other than an advantage for teams in lower tax areas.

Players don't play all 82 games in their home state AND there are massive deductions these players are able to make.

It's amazing that media is still being published with such incorrect information.

But like I said, at the end of the day none of the really matters. Even in the last 10 years there is zero correlation between effective income tax rates and team success.

 

[Bust]

Players don't play all 82 games in their home state AND there are massive deductions these players are able to make.

It's amazing that media is still being published with such incorrect information.

But like I said, at the end of the day none of the really matters. Even in the last 10 years there is zero correlation between effective income tax rates and team success.

I understand that. So do experts like Pogroszewski who is constantly re-establishing the position that there are advantages. Why is this so difficult to admit?

It does matter. Some teams have more buying power than others. Full stop.

Competent management will be able to maximize this advantage - this is what we’re seeing in Vegas, florida, Dallas and tampa.

 

[Hockey Outsider]

Just because you're being intentionally annoying & obtuse about this, I did the work for you.

Here is regular season P% during the cap era vs the effective income tax rate in a given city/state/province at a $4M salary assuming no deductions (US rate calculator, Canadian rate calculator):
View attachment 893479
In case you didn't know, an R^2 of 0.019 is incredibly low, meaning there is no relationship between regular season success and effective income tax

I did the same thing for playoff success in the cap era:
View attachment 893481
R^2 of 0.003 (wins) and 0.045 (win %) means there is also no relationship between playoff success and effective income tax.

The 7 Canadian teams have averaged only 38.9 playoff wins per team in the last 20 years, while American teams have averaged 57.0. But what really kills your hypothesis is that the top 7 highest taxed teams in the US have averaged 62.0 playoff wins per team in that span, which is a fair amount higher than the rest of the US teams (57.8 excluding Seattle).

So it's not the tax system keeping Canadian teams down (and it's certainly not the entry drafts, Canadian teams have picked 1st overall in 30% of the drafts in the cap era despite accounting for only 20-22% of the league). I would hypothesize that the culprit is poor/desperate management, driven by pressure from owners & media. I think there are also a fair amount of American players who no longer want to risk playing in Canada after what happened with COVID, which has hurt Canadian franchises more recently.

Regardless, I hope you can accept that the data in no way supports your claim that the tax advantage is driving results in this league.

Thanks for spending the time to put this together. This should be stickied in every subsequent "tax advantages" thread.

 

[Beukeboom Fan]

Of course it has. Players are signing for less money in certain areas.

Alan Pogroszewski (Who has been quoted in this thread already) made mention regarding Reinhardt new deal: Reinhart’s salary @ $8.625 million annually, he owes $3.15 million in taxes in Florida. He would pay $1.1 million more in California, $1.5 million more in New York and $1.4 million more in Toronto. It saves him over 12mil over the duration of the deal.

Theres another example from a couple of years ago, obviously if it was true then and nothing has changed (in terms of taxation rules) :

https://x.com/i/web/status/879725028715229185

Methot made over 1.4mil more playing for Dallas than the same deal would have paid him in Ottawa.

That kind of cost saving in a hard cap league cannot be argued as anything other than an advantage for teams in lower tax areas.

That savings looks like they assume that the player doesn't pay ANY state taxes, which we 100% know is not true because the player pays state taxes on their road games. That calculation would essentially double the impact of the state income taxes.

 

[DistantThunderRep]

Of course it has. Players are signing for less money in certain areas.

Alan Pogroszewski (Who has been quoted in this thread already) made mention regarding Reinhardt new deal: Reinhart’s salary @ $8.625 million annually, he owes $3.15 million in taxes in Florida. He would pay $1.1 million more in California, $1.5 million more in New York and $1.4 million more in Toronto. It saves him over 12mil over the duration of the deal.

Theres another example from a couple of years ago, obviously if it was true then and nothing has changed (in terms of taxation rules) :

https://x.com/i/web/status/879725028715229185

Methot made over 1.4mil more playing for Dallas than the same deal would have paid him in Ottawa.

That kind of cost saving in a hard cap league cannot be argued as anything other than an advantage for teams in lower tax areas.

Again, its not so straight forward as idiots believe. There are so many avenues to lower tax rates. Defer, residency, RCA's, donations, investing, etc... RCA's were banned from the NBA because they deemed them too advantageous for the Raptors (by extension the Grizzlies) to signing Free Agents. Guess what the NHL hasn't done?

 

[The Management]

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.

Yes for sure, and to be clear, I’m not suggesting I have the answers. Tax is not an area one can comfortably dabble in. You make a fair point, and perhaps endorsement deals are something that needs to be examined as well because they can be quite lucrative. I’ll leave it to brighter minds to determine whether a fix is needed, and what that fix would ultimately look like.

I do think there might be a bit of a distinction, though, between tax status and endorsement money. Taxes are imposed at the state level and have a far more immediate impact on the contractual relationship between the player and their employer (the team).

With endorsements, the player is presumably being compensated by a third party under a separate contract for services, that involves the team more or less tangentially. Different players on the same hockey club may disproportionately benefit from the availability of endorsement opportunities. Others might turn down endorsement deals that take too much of their time or offer too little, or they might not want to endorse products on the side for personal reasons. It just strikes me as a somewhat more nuanced area to regulate, much like other factors baked into a particular destination or market (housing, cost of living, healthcare, education, etc). Maybe I'm wrong. I've never actually seen an endorsement contract, how they structured, and so forth.

Different markets offer different advantages, and I suppose the more fundamental question is whether the NHL should attempt to regulate those advantages in the interest of parity, and if they do, where they should draw the line (how granular do they want to get).

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.

Yes, no disagreement with you there. Kyle Dubas handed out some handsome contracts to his core, and could have undoubtedly pressed his advantage at a more opportune time and in a more effective manner. Even if Toronto had the putative benefit of a non-tax market team, it would not guarantee their success. There is no replacement for competent management.

 

[DistantThunderRep]

I understand that. So do experts like Pogroszewski who is constantly re-establishing the position that there are advantages. Why is this so difficult to admit?

It does matter. Some teams have more buying power than others. Full stop.

Competent management will be able to maximize this advantage - this is what we’re seeing in Vegas, florida, Dallas and tampa.

And Toronto uses local endorsements to sell the city. They brought the CEO of Canadian Tire to Stamkos negotiations and the freaking Mayor of the City. Every single city in the NHL has their advantages, except Winnipeg. No one wants to be in Winnipeg.

 

[Bust]

That savings looks like they assume that the player doesn't pay ANY state taxes, which we 100% know is not true because the player pays state taxes on their road games. That calculation would essentially double the impact of the state income taxes.

These are Alan Pogroszewski‘s numbers.

Alan Pogroszewski is the founder and CEO of AFP Consulting LLC. AFP Consulting LLC specializes in the tax preparation and consulting for professional athletes.

I’m going to lean towards the idea that he’s got a much deeper understanding of these numbers than anyone posting on these forums.

 

[WhiskeyYerTheDevils]

I understand that. So do experts like Pogroszewski who is constantly re-establishing the position that there are advantages. Why is this so difficult to admit?

It does matter. Some teams have more buying power than others. Full stop.

Competent management will be able to maximize this advantage - this is what we’re seeing in Vegas, florida, Dallas and tampa.

If it "mattered" more than any of various other factors that give certain teams advantages, we'd be able to measure the impact on performance in some meaningful way.

But there is none.

 

[Beukeboom Fan]

These are Alan Pogroszewski‘s numbers.

Alan Pogroszewski is the founder and CEO of AFP Consulting LLC. AFP Consulting LLC specializes in the tax preparation and consulting for professional athletes.

I’m going to lean towards the idea that he’s got a much deeper understanding of these numbers than anyone posting on these forums.

The $700K is from the CapFriendly's calculation showing a 0% state income tax rate (screenshot in that Tweet). Did Alan P. work with CapFriendly? Or is just a coincidence that the CapFriendly number based on no state taxes works out to the same $700K?

EDIT: And I 100% agree that there is a financial advantage to the player who plays for an organization located in a no state income tax area. I just think that it is significantly overstated based on a bunch of folks in the media who don't understand taxes and have a reason to present a certain narrative. (That narrative is "We're getting screwed, and it's because Bettman's hates Canada and loves the sun-belt teams!")

 

[WhiskeyYerTheDevils]

Go figure, no follow up yet from poster.

All that big talk from @TheNumber4 about me having the burden to disprove his asinine claims and he can't even be bothered to acknowledge he was wrong lol.

 

[DistantThunderRep]

Blame the CRA for the Tax problem in Canada.

 

[TheNumber4]

All that big talk from @TheNumber4 about me having the burden to disprove his asinine claims and he can't even be bothered to acknowledge he was wrong lol.

No I’m on the road and wanted to give your theory a look over when I had time to sit down. A cursory glance at it, I’m already seeing holes.

 

[JPT]

These are Alan Pogroszewski‘s numbers.

Alan Pogroszewski is the founder and CEO of AFP Consulting LLC. AFP Consulting LLC specializes in the tax preparation and consulting for professional athletes.

I’m going to lean towards the idea that he’s got a much deeper understanding of these numbers than anyone posting on these forums.

If there's anyone I trust to not being trying to sell an idea, it's a consultant

 

[Bust]

If it "mattered" more than any of various other factors that give certain teams advantages, we'd be able to measure the impact on performance in some meaningful way.

But there is none.

I disagree. I think it matters in a hard cap world if there are (even slight) variances that can effect player cap.

A soft cap where a teams ownership would be responsible to cover any overages (up to a certain number) would balance the, even slight, disparities and would allow everyone to compete.

If there's anyone I trust to not being trying to sell an idea, it's a consultant

Lol fair

The $700K is from the CapFriendly's calculation showing a 0% state income tax rate (screenshot in that Tweet). Did Alan P. work with CapFriendly? Or is just a coincidence that the CapFriendly number based on no state taxes works out to the same $700K?

EDIT: And I 100% agree that there is a financial advantage to the player who plays for an organization located in a no state income tax area. I just think that it is significantly overstated based on a bunch of folks in the media who don't understand taxes and have a reason to present a certain narrative. (That narrative is "We're getting screwed, and it's because Bettman's hates Canada and loves the sun-belt teams!")

That’s all I’m saying brother. There’s variances and I think it’s important that, with a hard cap, teams are playing by the same rules.

 

[WhiskeyYerTheDevils]

I disagree. I think it matters in a hard cap world if there are (even slight) variances that can effect player cap.

A soft cap where a teams ownership would be responsible to cover any overages (up to a certain number) would balance the, even slight, disparities and would allow everyone to compete.

If it "matters", why doesn't it have a measurable impact on outcomes?

 

[Bust]

If it "matters", why doesn't it have a measurable impact on outcomes?

Because at the end of the day we’re talking about a sport. A sport with so many variables that we can’t look at 1 simple thing and determine an outcome.

That doesn’t take away the fact that there’s teams with more buying power than others. Even if it’s slight.

 

[WhiskeyYerTheDevils]

No I’m on the road and wanted to give your theory a look over when I had time to sit down. A cursory glance at it, I’m already seeing holes.

It's not a "theory", it's just basic statistics based on the raw data we both agreed would be a better indicator of team success. Looking forward to hearing what "holes" you've found in basic descriptive statistics.

 

[David Suzuki]

No, it isn’t. Life isn’t a zero sum game. Someone else making more money or less money doesn’t impact me. And I’m not going to generate a negative opinion or feeling about someone because they make some arbitrary amount of money.

We call this head in the sandism

 

[TheNumber4]

It's not a "theory", it's just basic statistics based on the raw data we both agreed would be a better indicator of team success. Looking forward to hearing what "holes" you've found in basic descriptive statistics.

What time line did you choose?

 

[triggrman]

Of course it has. Players are signing for less money in certain areas.

Alan Pogroszewski (Who has been quoted in this thread already) made mention regarding Reinhardt new deal: Reinhart’s salary @ $8.625 million annually, he owes $3.15 million in taxes in Florida. He would pay $1.1 million more in California, $1.5 million more in New York and $1.4 million more in Toronto. It saves him over 12mil over the duration of the deal.

Theres another example from a couple of years ago, obviously if it was true then and nothing has changed (in terms of taxation rules) :

https://x.com/i/web/status/879725028715229185

Methot made over 1.4mil more playing for Dallas than the same deal would have paid him in Ottawa.

That kind of cost saving in a hard cap league cannot be argued as anything other than an advantage for teams in lower tax areas.

So now it's the entire base of US teams getting the advantage?

 

[Bust]

It's not a "theory", it's just basic statistics based on the raw data we both agreed would be a better indicator of team success. Looking forward to hearing what "holes" you've found in basic descriptive statistics.

Not that I care to get in the sand on your numbers, but how would those numbers look with an adjusted sample?

Post cap we had PIT, CHI, VAN, LAK, DET with their tables set with superstars. I think, to really debunk the tax debate, it would make sense to look at the most recent 10 year sample, as the cap had been in place for a number of years at that point.