An idea to remove the cap advantage for no tax states

[tucker3434]

It is true that a post tax income can't be known exactly ahead of time. Circumstances will change year to year.

But you can use an estimate of post tax income at the time of signing that will on average get it right.

I think we've got a case of lawyer-brain here where the inexactness is used as an excuse to do nothing. I have economist-brain and I think a good estimate coming from a consistent formula would solve almost the entire problem, so we should just do that.

The lawyers are the ones that will kill it.

 

[Shaman464]

Players who choose to take lower cap hits to live in prestigious cities should have higher cap hits. Players who don’t have families should have a higher cap hit. Players who don’t need to pay taxes to their home counties should have a higher cap hit.

There are a ton of reasons why a city or a player gets more or less benefit from their cap hit than others. Should Canadian teams have their caps adjusted because they are potentially more attractive to Canadian players? I think they should lose half their cap space because of that.

 

[JPT]

Ok...so the solution is...let the competitive tax advantage go unchecked, because you know state/province policies, and we also want your money to help keep us afloat?

Can you prove there is an advantage?

It is true that a post tax income can't be known exactly ahead of time. Circumstances will change year to year.

But you can use an estimate of post tax income at the time of signing that will on average get it right.

I think we've got a case of lawyer-brain here where the inexactness is used as an excuse to do nothing. I have economist-brain and I think a good estimate coming from a consistent formula would solve almost the entire problem, so we should just do that.

Oh yeah?

 

[WhiskeyYerTheDevils]

It is true that a post tax income can't be known exactly ahead of time. Circumstances will change year to year.

But you can use an estimate of post tax income at the time of signing that will on average get it right.

I think we've got a case of lawyer-brain here where the inexactness is used as an excuse to do nothing. I have economist-brain and I think a good estimate coming from a consistent formula would solve almost the entire problem, so we should just do that.

What problem? The only problem is the perception of unfairness. There's no measurable relationship between effective tax rate and team success.

 

[majormajor]

What problem? The only problem is the perception of unfairness. There's no measurable relationship between effective tax rate and team success.

Let's say you and I are working at the same company and are both starting families at the same time. The company randomly gives me double the pay, despite the fact that we do the same job. Twenty years later our kids turn out to be equally prosperous. Was the situation unfair or was it only perceived as unfair?

The degree to which the tax/cap issue is important is a matter of perception, and it is often overstated. But it is unfairness in itself, an obvious unequal playing field whether the team success in our little sample has a relationship or not.

Players who choose to take lower cap hits to live in prestigious cities should have higher cap hits. Players who don’t have families should have a higher cap hit. Players who don’t need to pay taxes to their home counties should have a higher cap hit.

There are a ton of reasons why a city or a player gets more or less benefit from their cap hit than others. Should Canadian teams have their caps adjusted because they are potentially more attractive to Canadian players? I think they should lose half their cap space because of that.

To continue the analogy above, people might say "Why bother with equal pay for equal work? Oh you're concerned about the effects of that on the next generation? Are you going to insist that every child be equally beautiful? Be equally well spoken and intelligent? We have so many inequalities, why bother with this one?"

My point of course is that establishing an equal playing field in one aspect does not require establishing that absolutely everything be equal.

Oh yeah?

I'm not sure what you're asking me. I am an economist. I'm not saying it's some great thing, we have our own ridiculous biases just like lawyers do.

 

[me2]

For 100000th time, its not that simple. Net pay is dependent on actions taken by the individual player. Also if you do that, now you have 32 different salary caps across the league. Trades and FA signings would be a nightmare and teams and players and the league as a whole would incur ridiculous costs across the board to constantly keep on top of it. Also you wouldn't be able to project Salary Caps YoY, you would have to project 18 months to 24 months in advance because you would have to wait for each country + province + state to submit their plan and then wait for it to pass and then apply your calculations across 32 teams.

How does any of that seem simple?

The cap would be based off the post tax amount and that amount wouldn't change between teams. Every team would have the same cap. Players get the same after tax income wherever they go, that's good for them.

Lets say a player today in a high tax market (50% tax rate) makes $10m pre-tax. His team pays $5m+$5m for taxes. His new permanent cap hit would be $5m. If gets traded to a 0% state his cap hit is still $5m, his new team just pays $5m + 0% taxes. In a 40% tax state he gets $5m + $3.3m tax.

It's a simple system. Lower tax state get cheaper teams though because they have less tax to pay. Overall every team gets the same value of players for the cap hit. Fine tuning a player's tax return is the players job.


Do I think it's worth doing? Nope. But it isn't hard.

 

[Zetterberg4Captain]

Can you prove there is an advantage?


Oh yeah?

Can I prove that paying less taxes is an incentive?

 

[tucker3434]

The cap would be based off the post tax amount and that amount wouldn't change between teams. Every team would have the same cap. Players get the same after tax income wherever they go, that's good for them.

Lets say a player today in a high tax market (50% tax rate) makes $10m pre-tax. His team pays $5m+$5m for taxes. His new permanent cap hit would be $5m. If gets traded to a 0% state his cap hit is still $5m, his new team just pays $5m + 0% taxes. In a 40% tax state he gets $5m + $3.3m tax.

It's a simple system. Lower tax state get cheaper teams though because they have less tax to pay. Overall every team gets the same value of players for the cap hit. Fine tuning a player's tax return is the players job.


Do I think it's worth doing? Nope. But it isn't hard.

Players won’t be finalizing their 2024 taxes (covering the back half of the 23-24 season) until October of 2025.

 

[Mrfenn92]

So many hurt feelings in here

 

[drktmplr12]

The pretzel logic to justify butthurt is real. Winners will take pay cuts to win. Whiners will demand they get paid more than everyone. It's not complicated.

 

[Beukeboom Fan]

Ok...so the solution is...let the competitive tax advantage go unchecked, because you know state/province policies, and we also want your money to help keep us afloat?

No offense meant, but your solution for a sprained ankle was to chop the patients legs off.

If the difference for no state taxes is 3~6% for most other organizations, and that is only on UFA contracts, is it a big enough problem to make things more complicated? Especially when some not tax-free teams are already getting the benefit (TML with the SB on the Matthew's deal)? Players take a lot of factors into account when deciding where to play, and IMO $ are rarely the only factor.

 

[T REX]

Teams in heavier taxed areas will never win a cup again.

Ever. Better to just accept it and move on. You all had a good run though.

 

[Shaman464]

Let's say you and I are working at the same company and are both starting families at the same time. The company randomly gives me double the pay, despite the fact that we do the same job. Twenty years later our kids turn out to be equally prosperous. Was the situation unfair or was it only perceived as unfair?

The degree to which the tax/cap issue is important is a matter of perception, and it is often overstated. But it is unfairness in itself, an obvious unequal playing field whether the team success in our little sample has a relationship or not.



To continue the analogy above, people might say "Why bother with equal pay for equal work? Oh you're concerned about the effects of that on the next generation? Are you going to insist that every child be equally beautiful? Be equally well spoken and intelligent? We have so many inequalities, why bother with this one?"

My point of course is that establishing an equal playing field in one aspect does not require establishing that absolutely everything be equal.



I'm not sure what you're asking me. I am an economist. I'm not saying it's some great thing, we have our own ridiculous biases just like lawyers do.

So if you work for a Walmart in Florida you should have to pay the same state tax as someone who works at a Walmart in Massachusetts?

 

[JPT]

Can I prove that paying less taxes is an incentive?

Can you prove that it has had any measurable impact on outcomes that would indicate its an unfair advantage?

 

[UConn126]

This tax debate is such a non-factor. There's generally a reason why taxes are higher the places they are. Better schools, better public transit, etc. Things that make places more desirable to live to most, though when you're a multimillionaire athletes these are things that matter less.

Still, Massachusetts has one of the highest income tax rates in the US and they just had a new millionaire tax go into effect furthering the burden on high earners. Yet they still landed two of the highest profile UFAs. The Rangers have never had issues bringing in top UFAs. I feel like this is only a debate because Dubas signed his core to ridiculous contracts that handcuffed the team when he should've negotiated harder when they were RFAs.

People will go where they want to go. I don't care there's no tax, you couldn't pay me enough to live in Dallas. And having lived in NYC before and knowing how awesome it is, I'd happily pay more in taxes to live there. I'm sure the bulk of the league thinks the same way. High taxes or low taxes they're still taking home a butt load of money to play a game for a living.

 

[lawrence]

The cap is based on the players actual earnings.

So let’s say a Canuck is making 3 million.

After taxes he’s actually only making 1.5.

Than his cap his 1.5 million.

Easy peazy

 

[TheFinalWord]

This tax debate is such a non-factor. There's generally a reason why taxes are higher the places they are. Better schools, better public transit, etc. Things that make places more desirable to live to most, though when you're a multimillionaire athletes these are things that matter less.

Still, Massachusetts has one of the highest income tax rates in the US and they just had a new millionaire tax go into effect furthering the burden on high earners. Yet they still landed two of the highest profile UFAs. The Rangers have never had issues bringing in top UFAs. I feel like this is only a debate because Dubas signed his core to ridiculous contracts that handcuffed the team when he should've negotiated harder when they were RFAs.

People will go where they want to go. I don't care there's no tax, you couldn't pay me enough to live in Dallas. And having lived in NYC before and knowing how awesome it is, I'd happily pay more in taxes to live there. I'm sure the bulk of the league thinks the same way. High taxes or low taxes they're still taking home a butt load of money to play a game for a living.

I know it's cool to blame the Leafs and Canadian media for all that ails the NHL, but it is not Leaf fans arguing...it is primarily fans of US based teams. He definitely handcuffed the Leafs and set a bad precedent, and the Leafs would gain an advantage if there was some type of tax consideration, but this is not about the Leafs fans.

 

[Dread Clawz]

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.

Yup, taxes have little to do with it. Players go to Florida to win, or to boost their stats/rehab their image so they can cash in on their next contract.

 

[catnip]

We don't complain when a homegrown talent takes a discount and signs under perceived market value. In fact, we kind of expect/demand it. We don't call that unfair to all the other teams that could've signed said talent for more money, we call that loyalty and wanting to win. That's how I know this is not a real problem.

 

[barkovcanfinnish]

At what point do people look at their own teams and blame their own front offices for their incompetencies instead of spinning the wheel of excuses?

We finally have a great front office and a world class organization for the first time ever. Maybe that’s the reason some players want to play here?

 

[account deactivated]

Another week, another "tAxEs" thread.

 

[Harvey Birdman]

I know this sounds radical and borderline going into Politics territory, but all taxes should be abolished.

All of them.

Our funds have been misused far too much for far too long. Literally theft at this point.

Practically what I wish would happen. Is pass it into law that the income tax and capital gains taxes have to be 1:1. Raise income taxes… So do capital gains. Capital gains get lowered… so do income taxes. Then everyone that isn’t rich benefits in a piggy back ride of having rich investor class’s lawyers trying to keep both as low as they can make them in proxy. But I won’t hold my breath I will just retire to one of these loathsome low tax states when I’m done with my current occupational obligations for my first pension and move onto career 2 or self employment.

 

[JPT]

The cap is based on the players actual earnings.

So let’s say a Canuck is making 3 million.

After taxes he’s actually only making 1.5.

Than his cap his 1.5 million.

Easy peazy

Just use net!

 

[LOFIN]

The cap is based on the players actual earnings.

So let’s say a Canuck is making 3 million.

After taxes he’s actually only making 1.5.

Than his cap his 1.5 million.

Easy peazy

So essentially, some owners would be forced to pay more for an existing contract of a player? Yeah, good f***ing luck with that.

 

[Golden_Jet]

It is true that a post tax income can't be known exactly ahead of time. Circumstances will change year to year.

But you can use an estimate of post tax income at the time of signing that will on average get it right.

I think we've got a case of lawyer-brain here where the inexactness is used as an excuse to do nothing. I have economist-brain and I think a good estimate coming from a consistent formula would solve almost the entire problem, so we should just do that.

your paying taxes in 20+ different states/provinces.
Some have signing bonuses (less tax) on those for some, not for others.
Players get called up, sent down, traded.
Player X qualifies for different deductions than Player Y.
Is the 50/50 split affected