An idea to remove the cap advantage for no tax states

[WhiskeyYerTheDevils]

Each game not being worth the same salary means injuries and call ups will affect total pay.

Good luck getting the NHLPA to agree to that.

I addressed that issue? If there is an imbalance, you reconcile for overages at end of the season as a bonus, and use an escrow system to work out any overages. But for full time higher salaried NHL players on 1 way contracts, they are almost always going to get paid for their full 82 games unless they are bought out.

You could also only have this on 1 way contracts and ELCs, so it wouldn't have much of an impact on callups / rookies.

NHL players who have an agent worth their salary will have accountants available that can completely minimalize the tax differences.

The issue is overblown because fans on the internet wants something to beat the dead horse with.

No argument there, totally agreed. I don't think any solution is required, but in terms of actual feasibility, I think it would be easier to restructure the contracts to be more agnostic to local tax laws.

 

[Maitz]

Could they just do a variable salary cap, like for higher states/provinces taxes they would raises the cap in consequences

 

[JAK]

I addressed that issue? If there is an imbalance, you reconcile for overages at end of the season as a bonus, and use an escrow system to work out any overages. But for full time higher salaried NHL players on 1 way contracts, they are almost always going to get paid for their full 82 games unless they are bought out.

You could also only have this on 1 way contracts and ELCs, so it wouldn't have much of an impact on callups / rookies.

There are many more complicated factors. For one, insurance.

It just isn't worth it to overcomplicate the issue with a complicated salary system. Spend those man hours on better marketing the league and the revenue growth would increase the pie.

 

[norrisnick]

There are many more complicated factors. For one, insurance.

It just isn't worth it to overcomplicate the issue with a complicated salary system. Spend those man hours on better marketing the league and the revenue growth would increase the pie.

But a bigger pie doesn't change anything with regards to the perceived lack of uniformity with the pieces...

 

[WhiskeyYerTheDevils]

It just isn't worth it to overcomplicate the issue with a complicated salary system. Spend those man hours on better marketing the league and the revenue growth would increase the pie.

100% agreed, I should preface all of this by saying that I would much prefer the do-nothing scenario. But if it's a choice between trying to implement some sort of "net" Salary Cap and a tax agnostic contracting model, I think I would prefer the latter.

There are many more complicated factors. For one, insurance.

What type of insurance are you referring to? None of the required insurances referenced in Article 23 of the CBA seemed to be contingent on payment rates (they are all flat rate based on age/tenure or disability type):

The only insurance I could find that is dependent on pay is the group accidental death policy, but it is based on the annual base salary, not individual payment amounts:

I appreciate your feedback, am genuinely curious. The only reason I feel this is relatively doable is because my team has used similar (though not as extreme) payment models with some of our 1099s and commissioned employees (I am a COO of a mid-size company).

But you are right to call out the fact that there are complications with this (many of which I think could be avoided by only applying this model to 1 way, non-ELC contracts, maybe with some minimum AAV).

The two biggest issues I see are
(1) trades & buyouts
(2) signing bonuses

Month to month player earnings might be a bit lumpy, but since this would be for guys who are all but guaranteed to play 82 games, it shouldn't be of consequence.

• For (1) you could further improve this by setting a portion (say 10%) of the road bonuses aside as an escrow to handle any scenarios where the player isn't rostered on an NHL team for an equal proportion of his team's home and away games. Or simply cap the player at $10M of annual earnings.
• If a player is traded and owed money by the original team, that team pays a one time reconciliation to the player at the time of trade to make them whole.
• If the player is traded while they have over-earned vs expected, the acquiring team will make the initial team whole, and then cap payments to the player if they exceed their annual targeted earnings.
• If by the end of the end of the season the player is owed money (i.e. traded from a team with a home heavy schedule to a team with a home heavy remaining schedule), the acquiring team will make the player whole with an end of season bonus.

For (2) I think signing bonuses would need to be modified in a way that indicates the bonus is for the upcoming season's team road games. So a $8M signing bonus with a $2M salary ($10M AAV) would look something like:

• $1,000 per day base salary = $190k
• $44,146 per road game = $1.81M
• Pre-payment of $8M for services to be rendered:
  • TeamRoadGm1 +$195,122 for team road game in Seattle on Oct 11th
  • TeamRoadGm2 +$195,122 for team road game in Las Vegas on Oct 13th
  • TeamRoadGm3 +$195,122 for team road game in Anaheim on Oct 14th
  • ....
  • TeamRoadGm41 +$195,122 for team road game in Buffalo on April 17th

This might cause some issues with calendar year accounting (they may have to apportion the bonus over current FY road games only) and there would be some wrinkles if a player is traded. It would probably just be best to leave the signing bonus piece alone.

At the end of the day, it's much easier just to keep the status quo, but I believe what I have outlined could be easily polished to be a much better alternative than attempts to estimate a net cap or otherwise punish teams in low tax regions / reward teams in high tax regions.

 

[JPT]

Arguably the worst idea I've heard yet.

You must not have seen any of the "just use net income" ideas

 

[JPT]

Here's an idea:

Have all teams structure their contract payments as such:

If the parties agree to a $10M annual salary, structure per the following rate table:
- $100 per home game (41) = $4,100
- $243,802 per road game (41) = $9,995,900

Something to that effect, with individual checks paid out for each game. Reconcile any potential imbalances at the end of the season in the form of end of season bonuses, using escrow where necessary.

If all teams adopted such a model, the local jurisdiction shouldn't have any qualms, as they get the extra taxes from their road games.

And we can finally stop all the whining.

Nice try, but you know as well as I do that the whining would shift from the no state income tax teams to the teams in the same division as the no state income tax teams.

Could they just do a variable salary cap, like for higher states/provinces taxes they would raises the cap in consequences

What do they do with teams who have high paid players who don't pay state income tax due to where they maintain their residence? Toronto and Matthews, for example.

 

[rojac]

I will confess that I have only read parts of this thread. I popped in and out of it and assuming that the tax differences are something that the league and the PA Want to fix, I think this is an idea that might work.

My idea is obviously introduction of something I call the Location Adjustment Factor (LAF). Each team would be assigned an LAF based on taxes in the region and possibly other factors. Essentially an LAF is a positive or negative modifier that affects the actual money paid to a player. LAFs would be reviewed each year by the NHL and the NHLPA to see if any modifications are needed and announced when the cap is announced. For our examples, we're going to assume that Toronto has a LAF of +5% and Tampa Bay has a LAF of -5%. These are likely nowhere near what the real numbers would be, but they'll work for demonstration purposes.

Next, we need to talk about contract dollars and real dollars. Contract dollars are the amounts in a players contract. These are the values used to determine cap hits and so forth. Real dollars are are the amounts that a team actually pays to the player. Currently contract dollars and real dollars are exactly the same thing. My LAF idea change that.

Contract would still be negotiated and registered using contract dollars, but with the full knowledge that the real dollars paid out would be modified by LAFs. For example, a players signs a new 4 year deal with Toronto that pays them an AAV of $10M a year ($12M, $11M, $9M, $8M) with no signing bonuses, that would be a cap hit of $10M and nothing changes in regards to how the cap plays out.

However in terms of the real dollars paid to the, the LAF would modify that. Instead of the $12M first season salary listed in the contract, he would receive actually be paid $12.6M because of Toronto's +5% LFA. If the player had signed the same deal in Tampa Bay, they would only be paid $11.4M due to TB's LAF of -5%.

Now, taxes for signing bonuses are based on where they live not where they play, so they might be a little trickier. My thought right now s the NHL and PA would need LFAs for all the areas outside NHL markets that NHLers live. Any player with a signing bonus n their contract would receive a payment in real dollars based on the LFA of where they live.

So, let's assume that our sample player is contracted to receive $10M of his first year $12M salary as a signing bonus. If he lived in Toronto, he would actually be paid $10.5M in real dollars; if he lived in area with an LAF of -3%, he would get $9.7M. In either case. He would be paid $2.1M the house in real dollars for the $2M in contract dollars he is set to earn for the rest of the season based on Toronto's LAF.

 

[JPT]

I will confess that I have only read parts of this thread. I popped in and out of it and assuming that the tax differences are something that the league and the PA Want to fix, I think this is an idea that might work.

My idea is obviously introduction of something I call the Location Adjustment Factor (LAF). Each team would be assigned an LAF based on taxes in the region and possibly other factors. Essentially an LAF is a positive or negative modifier that affects the actual money paid to a player. LAFs would be reviewed each year by the NHL and the NHLPA to see if any modifications are needed and announced when the cap is announced. For our examples, we're going to assume that Toronto has a LAF of +5% and Tampa Bay has a LAF of -5%. These are likely nowhere near what the real numbers would be, but they'll work for demonstration purposes.

Next, we need to talk about contract dollars and real dollars. Contract dollars are the amounts in a players contract. These are the values used to determine cap hits and so forth. Real dollars are are the amounts that a team actually pays to the player. Currently contract dollars and real dollars are exactly the same thing. My LAF idea change that.

Contract would still be negotiated and registered using contract dollars, but with the full knowledge that the real dollars paid out would be modified by LAFs. For example, a players signs a new 4 year deal with Toronto that pays them an AAV of $10M a year ($12M, $11M, $9M, $8M) with no signing bonuses, that would be a cap hit of $10M and nothing changes in regards to how the cap plays out.

However in terms of the real dollars paid to the, the LAF would modify that. Instead of the $12M first season salary listed in the contract, he would receive actually be paid $12.6M because of Toronto's +5% LFA. If the player had signed the same deal in Tampa Bay, they would only be paid $11.4M due to TB's LAF of -5%.

Now, taxes for signing bonuses are based on where they live not where they play, so they might be a little trickier. My thought right now s the NHL and PA would need LFAs for all the areas outside NHL markets that NHLers live. Any player with a signing bonus n their contract would receive a payment in real dollars based on the LFA of where they live.

So, let's assume that our sample player is contracted to receive $10M of his first year $12M salary as a signing bonus. If he lived in Toronto, he would actually be paid $10.5M in real dollars; if he lived in area with an LAF of -3%, he would get $9.7M. In either case. He would be paid $2.1M the house in real dollars for the $2M in contract dollars he is set to earn for the rest of the season based on Toronto's LAF.

We should graph this out. It could be called the LAFer curve.

 

[Golden_Jet]

I will confess that I have only read parts of this thread. I popped in and out of it and assuming that the tax differences are something that the league and the PA Want to fix, I think this is an idea that might work.

My idea is obviously introduction of something I call the Location Adjustment Factor (LAF). Each team would be assigned an LAF based on taxes in the region and possibly other factors. Essentially an LAF is a positive or negative modifier that affects the actual money paid to a player. LAFs would be reviewed each year by the NHL and the NHLPA to see if any modifications are needed and announced when the cap is announced. For our examples, we're going to assume that Toronto has a LAF of +5% and Tampa Bay has a LAF of -5%. These are likely nowhere near what the real numbers would be, but they'll work for demonstration purposes.

Next, we need to talk about contract dollars and real dollars. Contract dollars are the amounts in a players contract. These are the values used to determine cap hits and so forth. Real dollars are are the amounts that a team actually pays to the player. Currently contract dollars and real dollars are exactly the same thing. My LAF idea change that.

Contract would still be negotiated and registered using contract dollars, but with the full knowledge that the real dollars paid out would be modified by LAFs. For example, a players signs a new 4 year deal with Toronto that pays them an AAV of $10M a year ($12M, $11M, $9M, $8M) with no signing bonuses, that would be a cap hit of $10M and nothing changes in regards to how the cap plays out.

However in terms of the real dollars paid to the, the LAF would modify that. Instead of the $12M first season salary listed in the contract, he would receive actually be paid $12.6M because of Toronto's +5% LFA. If the player had signed the same deal in Tampa Bay, they would only be paid $11.4M due to TB's LAF of -5%.

Now, taxes for signing bonuses are based on where they live not where they play, so they might be a little trickier. My thought right now s the NHL and PA would need LFAs for all the areas outside NHL markets that NHLers live. Any player with a signing bonus n their contract would receive a payment in real dollars based on the LFA of where they live.

So, let's assume that our sample player is contracted to receive $10M of his first year $12M salary as a signing bonus. If he lived in Toronto, he would actually be paid $10.5M in real dollars; if he lived in area with an LAF of -3%, he would get $9.7M. In either case. He would be paid $2.1M the house in real dollars for the $2M in contract dollars he is set to earn for the rest of the season based on Toronto's LAF.

Players file taxes in 20+ different states and provinces, how are you calculating LAF,
players on the same team can have different deductions.

 

[admiralcadillac]

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.

GM’s have been pretty open about the tax situation having an impact.

 

[Figgy44]

I will confess that I have only read parts of this thread. I popped in and out of it and assuming that the tax differences are something that the league and the PA Want to fix, I think this is an idea that might work.

My idea is obviously introduction of something I call the Location Adjustment Factor (LAF). Each team would be assigned an LAF based on taxes in the region and possibly other factors. Essentially an LAF is a positive or negative modifier that affects the actual money paid to a player. LAFs would be reviewed each year by the NHL and the NHLPA to see if any modifications are needed and announced when the cap is announced. For our examples, we're going to assume that Toronto has a LAF of +5% and Tampa Bay has a LAF of -5%. These are likely nowhere near what the real numbers would be, but they'll work for demonstration purposes.

Next, we need to talk about contract dollars and real dollars. Contract dollars are the amounts in a players contract. These are the values used to determine cap hits and so forth. Real dollars are are the amounts that a team actually pays to the player. Currently contract dollars and real dollars are exactly the same thing. My LAF idea change that.

Contract would still be negotiated and registered using contract dollars, but with the full knowledge that the real dollars paid out would be modified by LAFs. For example, a players signs a new 4 year deal with Toronto that pays them an AAV of $10M a year ($12M, $11M, $9M, $8M) with no signing bonuses, that would be a cap hit of $10M and nothing changes in regards to how the cap plays out.

However in terms of the real dollars paid to the, the LAF would modify that. Instead of the $12M first season salary listed in the contract, he would receive actually be paid $12.6M because of Toronto's +5% LFA. If the player had signed the same deal in Tampa Bay, they would only be paid $11.4M due to TB's LAF of -5%.

Now, taxes for signing bonuses are based on where they live not where they play, so they might be a little trickier. My thought right now s the NHL and PA would need LFAs for all the areas outside NHL markets that NHLers live. Any player with a signing bonus n their contract would receive a payment in real dollars based on the LFA of where they live.

So, let's assume that our sample player is contracted to receive $10M of his first year $12M salary as a signing bonus. If he lived in Toronto, he would actually be paid $10.5M in real dollars; if he lived in area with an LAF of -3%, he would get $9.7M. In either case. He would be paid $2.1M the house in real dollars for the $2M in contract dollars he is set to earn for the rest of the season based on Toronto's LAF.

Please spend time understanding how to file tax returns with expense deductions before attempting any further form of this idea.

There's absolutely no way you can get LAF to work on hundreds of NHL players unless you controlled every aspect of their entire life a Tamagotchi. There's no way that anyone would agree to this. Maybe you could do this in the lower leagues at best, but even then, I think many may just refuse the idea. It's insanely invasive of someone's privacy.

That's not including the fact you've now introduced a far more complex bit of chaos when it comes to taxation. You'll need to understand stuff like taxable benefits, allowances, deductions, federal, state and provincial tax credits that not all players qualify for. It's a moving target every time you introduce a new factor.

Any basic idea attempting to address a "tax difference" is going to be ridiculously difficult to design to be fair and meet the intended solution, let alone implement.

 

[JPT]

GM’s have been pretty open about the tax situation having an impact.

The point isn't whether or not it has an impact. The point is that myriad things have an impact on a player's decision where to sign, and this thing isn't such an advantage that it needs the ultra-complex solution required to "fix" it.

 

[admiralcadillac]

The point isn't whether or not it has an impact. The point is that myriad things have an impact on a player's decision where to sign, and this thing isn't such an advantage that it needs the ultra-complex solution required to "fix" it.

If it has an impact, that clearly means it affects decisions players make. That is the essence of the point.

 

[JPT]

If it has an impact, that clearly means it affects decisions players make. That is the essence of the point.

Ok so how are we going to level other advantages markets have in terms of influencing the decisions players make? Hell, how are we going to solve the supposed tax advantage? Again, the solution is far too complex for the supposed issue. Not a single person has shown taxes correlate with team success, much less a workable solution to the "problem."

The problem isn't that these markets are draining the free agency market and leaving no talent for the rest of the league. It isn't even that these teams are perennial winners because of their lack of state income tax. The problem is that these teams have been well-managed, they're starting to win and become more desirable locations for talent, and now fans of teams in higher taxed areas are feeling like this particular area of unfairness needs to be addressed. It's an invented problem based on one advantage among many.

 

[norrisnick]

If it has an impact, that clearly means it affects decisions players make. That is the essence of the point.

The impact has more to do with education than an actual financial (this changes my life in a fundamental way) impact. You've got sports bros talking about state income taxes and guys that barely graduated high school latching on to it as if single digit percentage points in any meaningful way makes you less of a multi-millionaire.

State and Local Tax Burdens, Calendar Year 2022

Tax burdens rose across the country as pandemic-era economic changes caused taxable income, activities, and property values to rise faster than net national product. Tax burdens in 2020, 2021, and 2022 are all higher than in any other year since 1978.

taxfoundation.org

 

[Captain97]

Honestly just implement a soft cap with a luxury tax and call it square. Most of the teams in high tax jurisdictions are very profitable teams anyways.

If the Habs have to spend 10% more to field the same team as florida so what they make more than 10% more profits.

 

[BigBadBruins7708]

If it has an impact, that clearly means it affects decisions players make. That is the essence of the point.

And so do a number of other things that the "tax crusaders" never acknowledge.

Some teams are appealing for their local income tax rate
Some teams are appealing for their prestige and historical significance
Some teams are appealing because they are a perennial contender and a chance to win a Cup
Some teams are appealing because they are in a large city with a lot of lucrative sponsorship opportunities
Some teams are appealing because of the weather

Why is it only one of these situations has to be fixed? It couldn't possibly be because the Leafs cant win in the playoffs and have spent themselves into a bad cap situation could it?

 

[North Cole]

Players already hate escrow. Adding a soft cap just increases escrow, it's not even real money to the players. Teams final salary is tied to HRR, so if you pay them 50M more than HRR they have to pay it back. If you pay 150M more they have to pay it back.

It doesn't do anything.

 

[LOFIN]

GM’s have been pretty open about the tax situation having an impact.

Yes, they have an impact. Just like the f***ing weather does.

 

[Golden_Jet]

Honestly just implement a soft cap with a luxury tax and call it square. Most of the teams in high tax jurisdictions are very profitable teams anyways.

If the Habs have to spend 10% more to field the same team as florida so what they make more than 10% more profits.

It’s a 50/50 split, so just creates escrow without at least 100% tax on the luxury tax overage.
More than a 100% tax could make a dent on the current escrow players pay.

 

[tucker3434]

I will confess that I have only read parts of this thread. I popped in and out of it and assuming that the tax differences are something that the league and the PA Want to fix, I think this is an idea that might work.

My idea is obviously introduction of something I call the Location Adjustment Factor (LAF). Each team would be assigned an LAF based on taxes in the region and possibly other factors. Essentially an LAF is a positive or negative modifier that affects the actual money paid to a player. LAFs would be reviewed each year by the NHL and the NHLPA to see if any modifications are needed and announced when the cap is announced. For our examples, we're going to assume that Toronto has a LAF of +5% and Tampa Bay has a LAF of -5%. These are likely nowhere near what the real numbers would be, but they'll work for demonstration purposes.

Next, we need to talk about contract dollars and real dollars. Contract dollars are the amounts in a players contract. These are the values used to determine cap hits and so forth. Real dollars are are the amounts that a team actually pays to the player. Currently contract dollars and real dollars are exactly the same thing. My LAF idea change that.

Contract would still be negotiated and registered using contract dollars, but with the full knowledge that the real dollars paid out would be modified by LAFs. For example, a players signs a new 4 year deal with Toronto that pays them an AAV of $10M a year ($12M, $11M, $9M, $8M) with no signing bonuses, that would be a cap hit of $10M and nothing changes in regards to how the cap plays out.

However in terms of the real dollars paid to the, the LAF would modify that. Instead of the $12M first season salary listed in the contract, he would receive actually be paid $12.6M because of Toronto's +5% LFA. If the player had signed the same deal in Tampa Bay, they would only be paid $11.4M due to TB's LAF of -5%.

Now, taxes for signing bonuses are based on where they live not where they play, so they might be a little trickier. My thought right now s the NHL and PA would need LFAs for all the areas outside NHL markets that NHLers live. Any player with a signing bonus n their contract would receive a payment in real dollars based on the LFA of where they live.

So, let's assume that our sample player is contracted to receive $10M of his first year $12M salary as a signing bonus. If he lived in Toronto, he would actually be paid $10.5M in real dollars; if he lived in area with an LAF of -3%, he would get $9.7M. In either case. He would be paid $2.1M the house in real dollars for the $2M in contract dollars he is set to earn for the rest of the season based on Toronto's LAF.

It’s the least bad idea, because giving the richest teams additional hard cap space is a non-starter for what should be obvious reasons. Throwing a post-cap multiplier in there based on a cost of living schedule produced by the league annually, buries it deep enough where nobody would notice.

I don’t think you’d ever get the 32 teams to agree on what would be included in the annual adjustments nor do I think the added cap space would be worth the $$$ cost. In the end, I think you’d keep more money in the NHL (and not sending to lawyers and accountants) if you just did a soft cap.

 

[norrisnick]

Players already hate escrow. Adding a soft cap just increases escrow, it's not even real money to the players. Teams final salary is tied to HRR, so if you pay them 50M more than HRR they have to pay it back. If you pay 150M more they have to pay it back.

It doesn't do anything.

The funny thing with escrow is that if the league has a great year, they actually get more money back than was withheld. The whole thing is wrapped up in emotions and knee-jerk reactions rather than measured responses to what's actually going on.

 

[PenguinSuitedUp]

GM’s have been pretty open about the tax situation having an impact.

Are these the same GMs who instate rules, make trades, and send out communications just to save their jobs? The ones that say they couldn’t make a trade in the offseason because ‘it was too hard’?

 

[Classic Devil]

Just pass laws at the state/provincial level that says athletes are exempt from state income taxes.

Would take three minutes before stock brokers counted as "athletes."