Let’s even the playing field…after tax payroll cap

[CTHabsfan]

Not a coincidence that the states with no income tax are consistently icing teams that excel:

Tampa Bay Lightning
Florida Panthers
Las Vegas
Dallas

Also not a coincidence that Canadian teams, with a much higher income tax rate aren’t coming close to winning a Stanley Cup, a 29 year drought.

Time for the NHL to even the rather lopsided playing field and consider after tax income when setting the payroll cap

Dallas lost in the 1st-round of the playoffs this season and last won the Cup in 1999. Las Vegas did not qualify for the playoffs this season and has never won a Cup. Florida won a playoff round this season for the first time since 1996 and has never won a Cup. Tampa has won the last two Cups and is in the Finals again- something must be done!!!!!

 

[Junohockeyfan]

You're talking about a further adjustment, year to year, based off the increase or decrease of taxes and having it directly connected to the salary cap. Teams in heavily taxed areas might have to pay players more in order to sign them currently, but the cap itself doesn't fluctuate because of this.

In this scenario Toronto could spend more money to even out with Florida, so they do. What happens if the tax rate drops in Toronto the following year? Conversely, Florida signs a bunch of players and is at their max. Now Florida institutes a state income tax, so now they can spend more money? Seems like Florida just got the better end of that deal, again.

Am I missing something?

That's before factoring in that players pay income tax in whatever state they play in, so it isn't a flat rate on their entire salary. Are we adjusting based off schedules too? Seems like a nightmare.

This change doesn't impact how much you pay players. It impacts the team's cap ceiling. The ceiling gets adjusted based on a calculation. Funny enough, the cap ceiling itself is re-calculated yearly based on revenues. Why not include tax as a consideration for teams that are disadvantaged?

 

[Hockeyholic]

Dallas did not qualify for the playoffs this season and last won the Cup in 1999. Las Vegas did not qualify for the playoffs this season and has never won a Cup. Florida won a playoff round this season for the first time since 1996 and has never won a Cup. Tampa has won the last two Cups and is in the Finals again- something must be done!!!!!

?

 

[Silky Johnson]

I would say high cost of living, shitty weather and overall quality of life are a bigger issue than taxes. As mentioned above players get taxed on road games.

I mean Montreal, Toronto, Ottawa, Winnipeg, Edmonton are all terrible compared to the majority of US cities in the NHL.

You are mad. Most of the cities in the US are dumps. Montreal & Toronto are better cities to live in then pretty much any city in the US. Ottawa and Edmonton are great places to raise a family and experience outdoor living.

Winnipeg...OK...kind of sucks.

See the below articles that rate these cities very highly.

Best Places to Live in North America

These are the 381 best places to live in North America, costing on average $3,986/month to live with internet speeds up to 220 Mbps and temperatures ranging from 6°C to 43°C. New York City, Dallas and Columbus are the best places to live in North America right now that are affordable, have nice...

nomadlist.com

Best Cities In North America

www.thetoptens.com

Toronto ranked 2nd best city in North America for quality of living | News

Our city has just been recognized as the second-best city in North America for quality of living, according to Mercer's annual ranking.

dailyhive.com

 

[CTHabsfan]

?

I have edited my mistake, I was thinking of the previous season. I didn't mean to rob the Dallas Stars of their "consistent" excellence.

 

[Sundinisagod]

Maybe because they're not all greedy and didn't follow the lead of Captain Pajamas?

Lots of these Tampa players could've priced themselves out (Stamkos specifically) but they probably decided a few million wasn't much to lose when you can have a potential dynasty and still have enough money to pass down to your next five generations. Go ask Matthews and Marner what their priorities are.

I don’t believe they are leaving that much on the table. It’s a combination of culture and tax advantages. I won’t pretend to be able to put a number on it though.

 

[jigglysquishy]

Team culture. Do Florida, Dallas ect. consistently sign their stars for discounts? Did Tampa before they started this run 2015?

I think this is it.

Pennsylvania isn't known for their cheap taxes, but Crosby, Malkin, and Letang all signed for under market value.

Barkov and Bobrovsky both signed for 10 in the same state as Tampa.

 

[fasterthanlight]

This thread again.

IMO, I think 1) this sort of thing isn't an intrinsically bad idea for increasing parity, but its specific implementation is difficult. However, 2) even though it feels unfair, this sort of thing isn't the main contributing factor to why teams win or don't.

 

[PK Cronin]

This change doesn't impact how much you pay players. It impacts the team's cap ceiling. The ceiling gets adjusted based on a calculation. Funny enough, the cap ceiling itself is re-calculated yearly based on revenues. Why not include tax as a consideration for teams that are disadvantaged?

Of course it changes how much you pay players, that's part of why people think teams in no income tax locations have an advantage. The cap is re-calculated across the board based on revenue, not for specific teams based off of the arbitrary rulings of politicians who decide to raise or lower taxes at any given point.

In your scenario a team like Florida could be at the cap max one year, have the state impose a tax, be given more spending room that they use, and then the state could remove that tax and Florida is supposed to do what? Just trade players away for nothing because of something decided that's completely unrelated to them?

"Sorry Panthers fans, we couldn't make any signings this year because of the uncertainty surrounding the state income tax." That seems like a horrible way to operate a sports franchise or league.

 

[Icarium]

Pennsylvania isn't known for their cheap taxes, but Crosby, Malkin, and Letang all signed for under market value.

Barkov and Bobrovsky both signed for 10 in the same state as Tampa.

When the Bruins sign guys for under the market value it's "Because Bergeron". When Tampa does it's suddenly all because of low taxes.

 

[Junohockeyfan]

Of course it changes how much you pay players, that's part of why people think teams in no income tax locations have an advantage. The cap is re-calculated across the board based on revenue, not for specific teams based off of the arbitrary rulings of politicians who decide to raise or lower taxes at any given point.

In your scenario a team like Florida could be at the cap max one year, have the state impose a tax, be given more spending room that they use, and then the state could remove that tax and Florida is supposed to do what? Just trade players away for nothing because of something decided that's completely unrelated to them?

In that very unlikely scenario - Yes the team would have to adjust. The same way all teams adjust to changes in the cap ceiling year to year.

 

[Viqsi]

oh boy here we go again


I hereby propose a revenue sharing rebalance in which those teams that serve areas that previously had NHL hockey teams taken away from them (post-O6, naturally) should get a bigger cut, because after the pain those fans felt, they deserve something nice. Let's reverse things for those poor suffering fans of the original Jets, Whalers, Nordiques, North Stars, Barons, Scouts, Rockies, and Golden Seals.
Secretly I only mean to emphasize the Barons because that means my team benefits.

 

[Ceremony]

Oh look! It's this stupid f***ing thread again.

There really should be a stickied thread about this to stop it being made every other month by someone who thinks they've cracked some great mystery

 

[cowboy82nd]

Well, if we adjust for taxes, why not adjust for players' potential earnings? Meaning, players signed in Toronto and other huge hockey markets, can make more money on endorsement deals. This should factor in also.

 

[9911]

I would say high cost of living, shitty weather and overall quality of life are a bigger issue than taxes. As mentioned above players get taxed on road games.

I mean Montreal, Toronto, Ottawa, Winnipeg, Edmonton are all terrible compared to the majority of US cities in the NHL.

The weather in NY is better than in Vancouver? The weather in Minneapolis is better than in Toronto? I live in Edmonton and the coldest I’ve ever been in my life was in downtown Chicago in January . The vast majority of NHL players grew up in winter climates (duh) and can function just fine in the cold.

 

[Hockey Outsider]

This topic again. To quote myself from an old thread:

After-tax income is much more difficult to quantify than many people think. A partial (but incomplete) list of factors that need to be taken into account:

• Marginal vs average tax rate - All NHL players would face the highest marginal tax rate on their remuneration, but their effective tax rate would always be lower due to the fact their income passes through the lower tax brackets first. So we couldn't calculate a general after-tax salary cap at the team level - it would have to be calculated separately for every player.
• Legal residency - It's possible for a player to live in Canada but be a resident, for tax purposes, of the US (or vice versa). Thus, a player might be employed by an American team, but would be a resident of Canada. Effectively, that player would be paying tax at the Canadian rate, despite playing for a US team.
• Signing bonus - The above point is further complicated by signing bonuses. There are specific provisions in the Canada/US tax treaty that effectively limit signing bonuses, paid by Canadian teams, to be taxed at that individual's US combined federal/state rate. So a Canadian team can pay a huge signing bonus to an American resident without any disadvantage from a tax perspective (Auston Matthews is a good example).
• Deductions - In general, US taxpayers can deduct agent fees, while Canadian players can't. Should this be taken into account? Why or why not? Similarly, Canadian residents can establish and RCA, which can provide significant tax benefits if used properly. Should that be taken into account? Who makes these decisions?
• Jock taxes - Several jurisdictions tax athletes on a pro-rated portion of their income based on when games are played - so you'd need to take the schedule into account, for every player, to get an accurate estimate of their after-tax income.

A comprehensive list of factors that need to be considered would be much longer. But even these points should indicate that calculating an after-tax salary cap would be a convoluted ordeal, and it would have to be constantly updated as facts change. The league would probably have to pay lawyers or accountants several hundred thousand dollars to do this.

From the owners' perspective, the value of this information isn't worth the cost - so taxes remain one of numerous inequalities between cities including cost of living, endorsement opportunities, climate, nightlife, etc.

 

[Suntouchable13]

So why did Stamkos sign for 8.5 after fielding offers of 10 on the open market.

Vasilevsky takes 9.5 after Price gets 10.5.

Pretty sure Kucherov settled for 9.5 after the Matthews and McDavid contracts.

Point took 9.5 after Marner’s 10.9 with less term.

Hedman has a 7.875 cap hit.

Bob signed for 10 in Florida, 500,000 less than Price. It has very little to do with tax rates.

 

[Sundinisagod]

Bob signed for 10 in Florida, 500,000 less than Price. It has very little to do with tax rates.

I can’t remember who the other bidders were, but if there were all offering the same money, advantage Florida.

 

[Suntouchable13]

I can’t remember who the other bidders were, but if there were all offering the same money, advantage Florida.

Ok, but it's not like the tax advantage has helped Florida over the years.

 

[majormajor]

It's long overdue.

This topic again. To quote myself from an old thread:

After-tax income is much more difficult to quantify than many people think. A partial (but incomplete) list of factors that need to be taken into account:

• Marginal vs average tax rate - All NHL players would face the highest marginal tax rate on their remuneration, but their effective tax rate would always be lower due to the fact their income passes through the lower tax brackets first. So we couldn't calculate a general after-tax salary cap at the team level - it would have to be calculated separately for every player.
• Legal residency - It's possible for a player to live in Canada but be a resident, for tax purposes, of the US (or vice versa). Thus, a player might be employed by an American team, but would be a resident of Canada. Effectively, that player would be paying tax at the Canadian rate, despite playing for a US team.
• Signing bonus - The above point is further complicated by signing bonuses. There are specific provisions in the Canada/US tax treaty that effectively limit signing bonuses, paid by Canadian teams, to be taxed at that individual's US combined federal/state rate. So a Canadian team can pay a huge signing bonus to an American resident without any disadvantage from a tax perspective (Auston Matthews is a good example).
• Deductions - In general, US taxpayers can deduct agent fees, while Canadian players can't. Should this be taken into account? Why or why not? Similarly, Canadian residents can establish and RCA, which can provide significant tax benefits if used properly. Should that be taken into account? Who makes these decisions?
• Jock taxes - Several jurisdictions tax athletes on a pro-rated portion of their income based on when games are played - so you'd need to take the schedule into account, for every player, to get an accurate estimate of their after-tax income.

A comprehensive list of factors that need to be considered would be much longer. But even these points should indicate that calculating an after-tax salary cap would be a convoluted ordeal, and it would have to be constantly updated as facts change. The league would probably have to pay lawyers or accountants several hundred thousand dollars to do this.

From the owners' perspective, the value of this information isn't worth the cost - so taxes remain one of numerous inequalities between cities including cost of living, endorsement opportunities, climate, nightlife, etc.

You can still know what the average take home income would be based on the pre tax income, just factor in an average set of deductions for that income level, typical place of residence, etc... You can also factor in jock taxes and all of that in advance.

That will get you to 99% accuracy and that will significantly level the playing field. I don't get the argument that just because post tax income will be off by 1% for some players that therefore we should accept having the cap be off by 10% for whole teams. That is making the perfect be the enemy of the good.

 

[PK Cronin]

In that very unlikely scenario - Yes the team would have to adjust. The same way all teams adjust to changes in the cap ceiling year to year.

The teams adjusts to the cap as a whole year to year, based on the same information given to them by the league, which is based off of revenue. Historically it's very easy to plan around that because it's one set of data and it's based off of something tangible. When you're dealing with 32 different municipalities and varying levels of government/taxes, you're introducing more unpredictable variables into the scenario that could create an impossibly complex scenarios for teams to navigate because of the will of an outside force. I don't see how it can be done without creating more issues, while simultaneously not solving the problem you're trying to solve.

 

[kp61c]

Yes, Florida is a paragon of consistency.

 

[Sun God Nika]

Players are paid in USD, so factor that in too as a pro for players playing in Canadian markets.

Someone making 1mil walks away with 1.28 CAD.

Tax loopholes, charity etc. Thered ways to minimize the discrepancy.

Also, I believe when Tampa plays in OTT, MTL, TOR, they get taxed by the canadian tax code.

There is a slight difference but not as big as people make it out to be. I think weather and media and quality of life play more of a role. The States are just a better place to live if you're rich.

Thats something a lot of hockey players say to cheer up kids getting drafted to Canadian teams. FX rates are already priced in to Canadian goods.

For example 1 USD buys 1.25 CAD. You make 4$ USD. a Big Mac in the states is 4$ a big mac in Canada is 5$. 4$ USD = 5$ Cad. You still have that same good.

Now also factor in the loss the player has to incur for converting their currency they are actually worse off earning dollars that are different than the country they play for. I am sure this isn't too big a factor tho since the NHL likely has a program to minimize FX rates and when these players are converting hundreds of thousands of dollars they also get favourable rates, but it is still a cost they wouldn't have playing in America.

The NHL needs to factor that and tax rates of the province/state in the salary cap 100% if it wants to say every team as an equal opportunity to win.

 

[Tom Polakis]

This topic has been discussed in the past week in the thread on the Stanley Cup board: "Canadian drought reaches 28 seasons... will it end anytime soon?"

Most reasonable people in that thread concluded that taxes are a small player among the reasons that Canadian teams have not won the Cup recently. One of the better explanations is that hockey is under such a microscope among Canadian fans that it's difficult for any of them to commit to a full rebuild, and expect the fans to be patient.

 

[The Devilish Buffoon]

We should also ban players from endorsement agreements, and factor in cost of life differences (adjusted for the top 1%).