An idea to remove the cap advantage for no tax states

[Beezeral]

Why jump to whataboutisms? This is obviously a nuanced conversation. But if you haven't seen enough undermarket contracts to star players in tax-free states to think it needs to be looked to see if all teams are operating on an equal playing field then I don't think you've been paying attention to contracts the last few seasons.

Because players have been taking discounts to go to a preferred destination since the beginning of time. More often than not, it’s because they want to play for a well run organization that gives them a chance to win the cup. Lately those organizations just happen to be in non-traditional markets that have no state income tax.

That little fact has the Canadian media and people like you all up in arms for the wrong reasons.

You weren’t making threads when Panarin took less to play in NY because he wanted to live in a big city.

You weren’t making threads when Tavares took less to play for the Leafs because he slept in Leafs bed sheets.

For the first time in the league’s history, the best run teams in the NHL are teams like the lightning, golden knights, and panthers. Teams with shrewd GMs that make tough roster decisions which sacrifice feelings for putting the best roster on the ice.

Look at zito with the panthers. Just won the cup and made the tough decision to let a bunch of players walk to bloated contracts. Who did he keep? The two players who were willing to play ball and take less to keep a good thing going. Those who wanted their payday were wished well. Barring injury, there isn’t a single contract on that roster you worry about 3-4 years down the road.

 

[LTIR Trickery]

So that is your response? I'm goint off the top of my head. Besides, Kuch had 128 points in 18-19. Kane and Toews already signed 10.5 M deals 4 seasons earlier. Seemed at the time that he left money on the table. My bigger point was to do a comprehensive study on this. I said it "feels" that tax-free states get an advantage with under-market contract with star players. Maybe it isn't that big of an advantage.


I did say it "feels" like the tax-free state teams are getting an advantage and a study needs to done. I'd be surprised if it was proven to not be an advantage for those teams.

Yes, my response was to explain that it was about market rate at the time and iirc, it was the year prior that he actually signed the extension. He came off a great season, and yeah the comparison to Kane and Toews - different though, at that point he hadn't won anything like those two had. That said, all of this has been talked to death, especially by tax types, agents, and accountants and because they're playing in so many different locations which are taxed differently, it really doesn't make a significant enough dent. Whats more these days, with the current state of real estate in Florida, especially property taxes and homeowners insurance on the size of houses that athletes purchase, generally in areas very near the water down here, I highly doubt they're saving a lot of money. I have a very average house and i'm getting my f***ing face ripped off on homeowners insurance.

 

[AnCatDubh]

As a CPA I always get a kick out of these threads.

IMHO this issue is more applicable to recent years than it is to the entire cap era - and more so to Canadian teams than US teams. The reasoning is the change in personal tax rates.

If I am not mistaken, in 2018 the highest federal marginal tax rate in the US declined by 2.6% (I practice in Canada so this is from google - correct me if I am wrong).

At the same time, following the change in government in Canada, the marginal tax rate has increased by 4% (depending on the province).

While I do think it is an issue, I also accept the fact that it is what it is and its not going to change.

 

[JianYang]

As a CPA I always get a kick out of these threads.

IMHO this issue is more applicable to recent years than it is to the entire cap era - and more so to Canadian teams than US teams. The reasoning is the change in personal tax rates.

If I am not mistaken, in 2018 the highest federal marginal tax rate in the US declined by 2.6% (I practice in Canada so this is from google - correct me if I am wrong).

At the same time, following the change in government in Canada, the marginal tax rate has increased by 4% (depending on the province).

While I do think it is an issue, I also accept the fact that it is what it is and its not going to change.

I think even most CPAs would have a hard time understanding the exact complexities and the true implications unless it is specifically a tax practitioner specializing in cross border tax.

 

[WTFMAN99]

Canadian
Leafs / Blackhawk fan

I think if you wanted to try something new you look at the other major sports in North America. NBA and MLB have luxury taxes, this seems like the most logical thing to add to the NHL, but maybe 5-10M on top of the cap ceiling.

The NFL has a hard cap but no guaranteed contracts so the NHL can't really emulate this.

That's really it, luxury tax.

If the Leafs/NYR want to spend $10M over the cap ceiling, it should cost them $20M

$10M salaries
$10M to be split between either the lowest 10 revenue teams or league wide

I think anything more than 5-10M over the ceiling and you really start to see lose the parity which to me is important. I know the owners wanted cost certainty but I do feel like other markets like DAL/NSH/VGK/FLA/TBL have some advantages with lower taxes, 5-10M extra would help teams like NYR/TOR etc handle the extra 1-2M they gotta put out to offset the tax advantages.

Do I think anything will actually happen? No, at least not with Bettman in charge.

 

[BigBadBruins7708]

taxes aren't why the Leafs fail every year. last time I checked they didnt win a thing in the post O6 no cap era either

 

[DistantThunderRep]

As a CPA I always get a kick out of these threads.

IMHO this issue is more applicable to recent years than it is to the entire cap era - and more so to Canadian teams than US teams. The reasoning is the change in personal tax rates.

If I am not mistaken, in 2018 the highest federal marginal tax rate in the US declined by 2.6% (I practice in Canada so this is from google - correct me if I am wrong).

At the same time, following the change in government in Canada, the marginal tax rate has increased by 4% (depending on the province).

While I do think it is an issue, I also accept the fact that it is what it is and its not going to change.

Its something that is completely out of the control of any single corporation or business. Its completely asinine that some people think that any business or corporation will invest money, time, and effort in to regulating the personal liabilities of their employees. Its even more asinine that people think that taxes (especially at the level of millionaires) is something simple that can be "easily fixed" all because they use turbo tax to do their taxes on their $65,000 salary or use H&R Block.

 

[tarheelhockey]

Canadian
Leafs / Blackhawk fan

I think if you wanted to try something new you look at the other major sports in North America. NBA and MLB have luxury taxes, this seems like the most logical thing to add to the NHL, but maybe 5-10M on top of the cap ceiling.

The NFL has a hard cap but no guaranteed contracts so the NHL can't really emulate this.

That's really it, luxury tax.

If the Leafs/NYR want to spend $10M over the cap ceiling, it should cost them $20M

$10M salaries
$10M to be split between either the lowest 10 revenue teams or league wide

I think anything more than 5-10M over the ceiling and you really start to see lose the parity which to me is important. I know the owners wanted cost certainty but I do feel like other markets like DAL/NSH/VGK/FLA/TBL have some advantages with lower taxes, 5-10M extra would help teams like NYR/TOR etc handle the extra 1-2M they gotta put out to offset the tax advantages.

Do I think anything will actually happen? No, at least not with Bettman in charge.

But what is the purpose of the luxury tax in an NHL context? The small markets are no longer bleeding money. All 32 franchises are doing fine. They would rather be competitive, grow their value, and get millions in ticket/TV/playoff revenue than be second-class citizens and have their financial bleeding stopped by luxury tax revenue.

For all this squealing about taxes, it’s an extremely marginal issue — which is more than offset by situations like Adam Fox forcing his way to the Rangers, Tavares trying to load up a super-team in Toronto, Edmonton getting every 1OA of the 2010s, Hossa doing his Cup-chasing tour, and so on and on and on. O6 teams have never had a single problem signing free talent… if anything, they’re the ones scooping the best talent most of the time.

All of this talk about “solutions” feels like a way to shove the sunbelt teams back into the basement. Decades of complaints about their being non-competitive, and as soon as they finally get on their feet we get creative “solutions” for why the richest and most powerful teams in the league need more advantages than they already have?

 

[DistantThunderRep]

Canadian
Leafs / Blackhawk fan

I think if you wanted to try something new you look at the other major sports in North America. NBA and MLB have luxury taxes, this seems like the most logical thing to add to the NHL, but maybe 5-10M on top of the cap ceiling.

The NFL has a hard cap but no guaranteed contracts so the NHL can't really emulate this.

That's really it, luxury tax.

If the Leafs/NYR want to spend $10M over the cap ceiling, it should cost them $20M

$10M salaries
$10M to be split between either the lowest 10 revenue teams or league wide

I think anything more than 5-10M over the ceiling and you really start to see lose the parity which to me is important. I know the owners wanted cost certainty but I do feel like other markets like DAL/NSH/VGK/FLA/TBL have some advantages with lower taxes, 5-10M extra would help teams like NYR/TOR etc handle the extra 1-2M they gotta put out to offset the tax advantages.

Do I think anything will actually happen? No, at least not with Bettman in charge.

If people are complaining about a less <8% on average difference after liabilities and deductions, I wonder how people would receive an ability to have a >12% advantage? The only way the league as a whole collectively agrees to a luxury tax is if the penalty for being over the cap, is asinine. Like you want to spend $10M over, you are paying $50M in taxes. The collective league would not care to give the money to the lowest 10 teams. Every owner would want the cut.

 

[Golden_Jet]

As a CPA I always get a kick out of these threads.

IMHO this issue is more applicable to recent years than it is to the entire cap era - and more so to Canadian teams than US teams. The reasoning is the change in personal tax rates.

If I am not mistaken, in 2018 the highest federal marginal tax rate in the US declined by 2.6% (I practice in Canada so this is from google - correct me if I am wrong).

At the same time, following the change in government in Canada, the marginal tax rate has increased by 4% (depending on the province).

While I do think it is an issue, I also accept the fact that it is what it is and it’s not going to change.

the federal rate is 4% higher in the US, for top earners.
The difference is in states vs provinces.

 

[WTFMAN99]

But what is the purpose of the luxury tax in an NHL context? The small markets are no longer bleeding money. All 32 franchises are doing fine. They would rather be competitive, grow their value, and get millions in ticket/TV/playoff revenue than be second-class citizens and have their financial bleeding stopped by luxury tax revenue.

For all this squealing about taxes, it’s an extremely marginal issue — which is more than offset by situations like Adam Fox forcing his way to the Rangers, Tavares trying to load up a super-team in Toronto, Edmonton getting every 1OA of the 2010s, Hossa doing his Cup-chasing tour, and so on and on and on. O6 teams have never had a single problem signing free talent… if anything, they’re the ones scooping the best talent most of the time.

All of this talk about “solutions” feels like a way to shove the sunbelt teams back into the basement. Decades of complaints about their being non-competitive, and as soon as they finally get on their feet we get creative “solutions” for why the richest and most powerful teams in the league need more advantages than they already have?

Why does the NBA have a luxury tax? League is pretty healthy financially right?

If people are complaining about a less <8% on average difference after liabilities and deductions, I wonder how people would receive an ability to have a >12% advantage? The only way the league as a whole collectively agrees to a luxury tax is if the penalty for being over the cap, is asinine. Like you want to spend $10M over, you are paying $50M in taxes. The collective league would not care to give the money to the lowest 10 teams. Every owner would want the cut.

10M and 50M taxes is even more insane than the NBA ratio

 

[DistantThunderRep]

Why does the NBA have a luxury tax? League is pretty healthy financially right?

The NBA's bottom teams in comparison to the top teams have a massive discrepancy. Like its a huge difference. Also the Celtics Owner is selling the team.

10M and 50M taxes is even more insane than the NBA ratio

The overall health of the League is better now than its ever been. Now that Meruelo is gone and Arizona's gong show is done, there really isn't too many teams in the dumps. The NHL has probably the best competitive balance in professional sports, barring maybe the NFL. To implement a luxury tax that could off set that balance so drastically will require the vast majority of Owners to make a good cut from it. There is a reason the most competitive leagues in North America all implement a Hard Cap with no Luxury Tax.

 

[Zetterberg4Captain]

Simple

Let the Cdn markets and NY/California teams no longer have to pay in to revenue sharing, or, have no cap ..

You can't have your cake and eat it to.

Let revenue generation offset low taxes and/or climate

 

[WTFMAN99]

The NBA's bottom teams in comparison to the top teams have a massive discrepancy. Like its a huge difference. Also the Celtics Owner is selling the team.



The overall health of the League is better now than its ever been. Now that Meruelo is gone and Arizona's gong show is done, there really isn't too many teams in the dumps. The NHL has probably the best competitive balance in professional sports, barring maybe the NFL. To implement a luxury tax that could off set that balance so drastically will require the vast majority of Owners to make a good cut from it. There is a reason the most competitive leagues in North America all implement a Hard Cap with no Luxury Tax.

Only the NFL has a hard cap besides the NHL but their contracts aren't guaranteed, so even the NHL is tighter than any of the other major sports.

How are the worst teams in the NBA doing compared to maybe the average NHL team? Leafs / NYR and the Habs are likely the exception for success.

 

[DistantThunderRep]

Only the NFL has a hard cap besides the NHL but their contracts aren't guaranteed, so even the NHL is tighter than any of the other major sports.

How are the worst teams in the NBA doing compared to maybe the average NHL team? Leafs / NYR and the Habs are likely the exception for success.

For example:

NBA as of 2023:

#1 - Golden State, $7.7B Valuation, $765M in Revenue
#2 - New York Knicks: $6.6B Valuation, $504M in Revenue
#3 - LA Lakers: $6.4B Valuation, $516M in Revenue
#4 - Boston Celtics: $4.7B Valuation, $433M in Revenue
#5 - LA Clippers: $4.65B Valuation, $425M in Revenue

#15 - Denver Nuggets: $3.85M Valuation, $348M in Revenue

#25 - Charlotte Hornets: $3B in Valuation, $269M in Revenue
#26 - Orlando Magic: $2.95B in Valuation, $261M in Revenue
#27 - Indiana Pacers: $2.9B in Valuation, $263M in Revenue
#28 - NO Pelicans: $2.55B in Valuation, $262M in Revenue
#29 - Minny T-Wolves: $2.5B in Valuation, $259M in Revenue
#30 - Memphis Grizzlies: $2.4B in Valuation, $258M in Revenue


So basically for the bottom teams in the league, they are making about 33% lower than the mid point of the NBA. Those bottom teams are generating a good chunk of their revenue from TV deals. The top of the NBA and the Bottom of the NBA has difference of between 80% - 150% in revenue. Its kind of nuts. The Luxury Tax in the NBA is quite literally keeping some teams above the water. In the NHL while there are teams at the bottom that struggling, the variance is nowhere near the level of the NBA where they have no hope of competing because Big Markets just spend whatever and deal with the Luxury Tax. Their only singular avenue is to Tank, Draft High, get as much as they can from that player before the inevitably run off to the Lakers, the Celtics, etc...

 

[Mogo]

 

[Golden_Jet]

Good points

 

[WTFMAN99]

For example:

NBA as of 2023:

#1 - Golden State, $7.7B Valuation, $765M in Revenue
#2 - New York Knicks: $6.6B Valuation, $504M in Revenue
#3 - LA Lakers: $6.4B Valuation, $516M in Revenue
#4 - Boston Celtics: $4.7B Valuation, $433M in Revenue
#5 - LA Clippers: $4.65B Valuation, $425M in Revenue

#15 - Denver Nuggets: $3.85M Valuation, $348M in Revenue

#25 - Charlotte Hornets: $3B in Valuation, $269M in Revenue
#26 - Orlando Magic: $2.95B in Valuation, $261M in Revenue
#27 - Indiana Pacers: $2.9B in Valuation, $263M in Revenue
#28 - NO Pelicans: $2.55B in Valuation, $262M in Revenue
#29 - Minny T-Wolves: $2.5B in Valuation, $259M in Revenue
#30 - Memphis Grizzlies: $2.4B in Valuation, $258M in Revenue


So basically for the bottom teams in the league, they are making about 33% lower than the mid point of the NBA. Those bottom teams are generating a good chunk of their revenue from TV deals. The top of the NBA and the Bottom of the NBA has difference of between 80% - 150% in revenue. Its kind of nuts. The Luxury Tax in the NBA is quite literally keeping some teams above the water. In the NHL while there are teams at the bottom that struggling, the variance is nowhere near the level of the NBA where they have no hope of competing because Big Markets just spend whatever and deal with the Luxury Tax. Their only singular avenue is to Tank, Draft High, get as much as they can from that player before the inevitably run off to the Lakers, the Celtics, etc...

The TV deal they just signed is nuts which definitely helps.

Keeping in mind though, I think the NBA has done fairly well in not having the top teams always dominate.

Toronto Raptors won
Lebron won Cleveland a title (Probably similar to a McDavid effort)
Bucks won a title

Not a big basketball guy either but before Currie came in, was Golden State a big hot spot?

I think we've just seen McDavid move mountains for Edmonton but come up short.

End of the day, I think 5-10M luxury tax for teams like NYR/TOR/MTL etc (if they chose to spend it) and generating an additional 10M to split amongst lower revenue teams is probably as good of a compromise as you can find.

I don't think it's a coincidence one of these no state income taxes finds itself in a final every year.

 

[Golden_Jet]

The TV deal they just signed is nuts which definitely helps.

Keeping in mind though, I think the NBA has done fairly well in not having the top teams always dominate.

Toronto Raptors won
Lebron won Cleveland a title (Probably similar to a McDavid effort)
Bucks won a title

Not a big basketball guy either but before Currie came in, was Golden State a big hot spot?

I think we've just seen McDavid move mountains for Edmonton but come up short.

End of the day, I think 5-10M luxury tax for teams like NYR/TOR/MTL etc (if they chose to spend it) and generating an additional 10M to split amongst lower revenue teams is probably as good of a compromise as you can find.

I don't think it's a coincidence one of these no state income taxes finds itself in a final every year.

If you add 5-10 million in luxury tax, than that team needs to put in an extra 5-10 million in tax to the league, to balance out the 50/50 split.

Otherwise the 5-10 million just becomes escrow.

 

[Beukeboom Fan]

Simple

Let the Cdn markets and NY/California teams no longer have to pay in to revenue sharing, or, have no cap ..

You can't have your cake and eat it to.

Let revenue generation offset low taxes and/or climate

So your solution are:

1) Can you explain how the revenue share fixes ANY sort of competitive imbalance from a state tax difference?

or:

2) Exclude 1/3 of the teams from the salary cap. The NHL sacrificed over 1.5 years of play to get the 50% hard salary cap in place, but they're going to exclude 1/3 of the teams from the cap because state taxes?

 

[WTFMAN99]

If you add 5-10 million in luxury tax, than that team needs to put in an extra 5-10 million in tax to the league, to balance out the 50/50 split.

Otherwise the 5-10 million just becomes escrow.

Initial post basically put forward the 1 for 1 dollar.

$10M spent in player salary
$10M in tax paid to the other teams (lowest revenue?)

So 10M is costing 20M

 

[MacMacandBarbie]

It seems like certain Canadian teams get a lot of players who want to come home.

It seems like big market, high desirable cities attract lots of free agents.

It seems like original 6 teams come with a certain nostalgia that makes players want to go there.

It seems like life isn't fair.

 

[tarheelhockey]

Why does the NBA have a luxury tax? League is pretty healthy financially right?

It was already addressed above, but just to provide a response — orgs like the Hornets and Pelicans exist because people in those cities go to see the Lakers and Celtics a few times a year. They make money because of the NBA’s television setup, but if you forced them to rely on ticket sales they would go bankrupt overnight.

The NBA has fully bought into the idea that only about ten markets really matter, and those should be stacked with all the best players for a national audience. Imagine what that would look like in an NHL context where they play on ESPN8, and the biggest “stars” in major markets are relative nobodies like Pastrnak and Shesterkin, and the most profitable fifth of the league isn’t even on US television.

It would be the worst of both worlds — a league full of farm teams for the handful of biggest markets which are stacked with players that most people have never heard of, rendering 60% of the games unwatchable and another 30% unmarketable. A league that doesn’t grow its value on tickets OR television.

 

[John Mandalorian]

Alternatively, what if NMC/NTCs were restricted to only the elite players. Lets say that's the top 5%, for example, as of the time the contract signed?

This way theres more fluidity in trading players. Player movement is less dependant on the appeal of the market.

It would need to be negotiated into the next CBA but that seems more realistic than making players employees of the league (not the teams) or some ham fisted one size fits all attempt to address complexities related to taxes.

 

[Golden_Jet]

Initial post basically put forward the 1 for 1 dollar.

$10M spent in player salary
$10M in tax paid to the other teams (lowest revenue?)

So 10M is costing 20M

There already is a revenue sharing model in the CBA.
~ 1/3 of playoff revenue goes to revenue sharing , unless your talking about giving them more. The rest coming from high revenue teams.

I think the “tax” would be split amongst all the teams not using the luxury tax.