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

[Crede777]

State income tax is only one of many factors which may- or may not - influence player decisions on signing and staying with certain teams. And even to the extent that it may, obviously it only applies to a certain percentage of the games they play since income tax is calculated where you physically are working/playing each night.

What about teams that are located in bigger markets that guys really want to play in?

What about contenders that have guys chasing a Cup and taking discounts?

What about teams located in nice climates or places with lower cost of living?

I propose the following: When a player is about to be a UFA, there is a 3 month window where teams may submit offers to him but before he can accept. Once the 3 months is up, he can accept a contract offer but only if it is within x% of the highest AAV that one team has offered to him. Teams which submitted offers that fall below that % for the AAV may re-submit with offers that qualify.

This allows teams to keep players but essentially ensures that the player will be operating on a contract which reflects his actual market value and does not allow for much in the way of a team discount.

To the extent that this move would remove "choice" from the players, it rewards them with more money.

 

[Hockey Outsider]

It's long overdue.



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.

But we're not talking about 1% differences. For example, based on publicly available information, it's reasonable to conclude that Auston Matthews is (effectively) paying tax at Arizona's rate, rather than Ontario's, by taking advantage of a certain provision in the Canada-US tax treaty. I can go into the mechanics of this if anyone is interested.

Matthews's effective tax rate is around 10% less than his teammate Mitch Marner, despite them playing for the same team and earning close to the same amount. But the difference between Matthews and Marner's earnings, after tax, is about $1M, due to how Matthews' contract is structured. (It's not just Matthews - Tavares very likely is in a similar situation). So, the assumption that all Toronto (and Ottawa) players are being taxed at a marginal rate of 53.53% is false.

If the differences were 1%, I'd agree - a reasonable estimate would be good enough. But Matthews and Tavares are a couple of examples of how their tax planning has allowed them to save at least a million dollars each, per year. (These are just a couple of examples, they're hardly the only players doing complex tax planning). Surely a couple of million of dollars per year is large enough that it should be factored into any type of after-tax salary cap calculation. And that highlights why it'll never happen - the owners aren't going to pay an army of lawyers and accountants several hundred thousand dollars a year to analyze this.

The same is true for both financial and non-financial attributes that vary from one city to another - endorsement opportunities, cost of living, crime rates, quality of schools, climate, nightlife, etc. Not every difference from team to team, whether they're financial or not, can be quantified through the mechanism of the salary cap, in a way that's both accurate and cost-effective.

 

[Yackiberg8]

LA won two Cups this past decade and California has basically the highest taxes in the States. And higher taxes than Alberta (maybe other provinces too).

Low income tax isn't why Tampa could draft Kucherov and Vasilevsky "late" and have them turn into superstars.

It is 100% why Tampa has signed them and others to very team friendly deals.

 

[Junohockeyfan]

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.

Make it simple. Base it only on Federal/Provincial/State tax rates. The same rates that are static for approximately 4 years at a time.

 

[lettuceAA]

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.

I'm not mad at all, just stating the obvious. Those articles are great, I live in Calgary and love it. But it's not that same for millionaire professional athletes.

 

[Yackiberg8]

Toronto has no state income tax.

There aren’t states in Canada. Provinces and territories.

 

[lettuceAA]

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.

Who said they can't function? Think of it this way. How many players from the US play for a Canadian team and decide to retire there? How many Canadian players retire in US cities they pay in, a lot more.

 

[Yackiberg8]

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

Where the state income tax comes into play is when teams do a great job of accumulating talent like Tampa did they are able to reduce AAV when re-signing these players and the players buy in because of the chance to win and reduced taxes.

 

[majormajor]

But we're not talking about 1% differences. For example, based on publicly available information, it's reasonable to conclude that Auston Matthews is (effectively) paying tax at Arizona's rate, rather than Ontario's, by taking advantage of a certain provision in the Canada-US tax treaty. I can go into the mechanics of this if anyone is interested.

Matthews's effective tax rate is around 10% less than his teammate Mitch Marner, despite them playing for the same team and earning close to the same amount. But the difference between Matthews and Marner's earnings, after tax, is about $1M, due to how Matthews' contract is structured. (It's not just Matthews - Tavares very likely is in a similar situation). So, the assumption that all Toronto (and Ottawa) players are being taxed at a marginal rate of 53.53% is false.

If the differences were 1%, I'd agree - a reasonable estimate would be good enough. But Matthews and Tavares are a couple of examples of how their tax planning has allowed them to save at least a million dollars each, per year. (These are just a couple of examples, they're hardly the only players doing complex tax planning). Surely a couple of million of dollars per year is large enough that it should be factored into any type of after-tax salary cap calculation. And that highlights why it'll never happen - the owners aren't going to pay an army of lawyers and accountants several hundred thousand dollars a year to analyze this.

The same is true for both financial and non-financial attributes that vary from one city to another - endorsement opportunities, cost of living, crime rates, quality of schools, climate, nightlife, etc. Not every difference from team to team, whether they're financial or not, can be quantified through the mechanism of the salary cap, in a way that's both accurate and cost-effective.

What's a more accurate reflection of post-tax income, the system I mentioned or not factoring in taxes at all like we do currently?

 

[Junohockeyfan]

Here is an estimate of the estimated tax rate per team. Tampa has a 12.5% advantage over Montreal. To me, that is significant, n'est-ce pas?

 

[dekelikekocur]

What's a more accurate reflection of post-tax income, the system I mentioned or not factoring in taxes at all like we do currently?

The point dude was making is that every single player on every single team will have a different tax situation.
Also, it's none of the teams responsibility or right to know what their players make post tax. In the US that is protected information and isn't publicly available. The only thing the teams know is how much tax was withheld throughout the year, they aren't privy to end of year tax statements/adjustments etc.
Charitable contributions, multiple different kinds of possible deductions, retirement and investment strategies all come into play that the teams aren't aware of nor the league.

 

[CupsOverCash]

Yearly thread if I had a nickel

 

[chirrrs]

Roope Hintz would have a far greater opportunity to make more money from endorsements if he played in Canada, or the New England or Great Lakes regions as opposed to Dallas. He would be far better known with any of those teams and would be marketed completely differently. Are we going to adjust team salary caps for that? If not, then forget about this! Every team has its own unique advantages and disadvantages. Focusing on just one advantage that your team doesn't have while ignoring the ones that your team does have is ridiculous and makes for a weak argument.

 

[Bixby Snyder]

boo hoo

 

[majormajor]

The point dude was making is that every single player on every single team will have a different tax situation.
Also, it's none of the teams responsibility or right to know what their players make post tax. In the US that is protected information and isn't publicly available. The only thing the teams know is how much tax was withheld throughout the year, they aren't privy to end of year tax statements/adjustments etc.
Charitable contributions, multiple different kinds of possible deductions, retirement and investment strategies all come into play that the teams aren't aware of nor the league.

You didn't answer my question.

I understood the point dude was making, I'm just refusing to let the perfect be the enemy of the good.

My approach is to use an estimate of average post tax income for players in that city and income group. It isn't supposed to perfectly reflect every player's use of deductions and residences.

You don't need to know anything about Nathan Mackinnon's finances, other than that he makes $6.3m a year and lives in Colorado.

 

[WarriorofTime]

"after tax" is not so simple and one size fits all. Every player's personal tax situation is going to be unique depending on their life circumstances. There is a reason accountants get paid to file tax returns.

 

[WarriorofTime]

Roope Hintz would have a far greater opportunity to make more money from endorsements if he played in Canada, or the New England or Great Lakes regions as opposed to Dallas. He would be far better known with any of those teams and would be marketed completely differently. Are we going to adjust team salary caps for that? If not, then forget about this! Every team has its own unique advantages and disadvantages. Focusing on just one advantage that your team doesn't have while ignoring the ones that your team does have is ridiculous and makes for a weak argument.

Exactly.. should Toronto also get their cap discounted because those guys will get way better endorsement opportunities on average? It's just silly.

 

[BigRedWings]

I honestly don't get you people. Why don't you just stop watching hockey if all you're gonna do is whine about how "rigged" it is?

Besides, if the San Antonio Spurs can build a dynasty in a town most athletes wouldn't give a shit about outside of grade school lessons about the Alamo, then what's the excuse for Canadian teams? The Bucks, Packers, and others have managed, despite appearing disadvantaged off the court/field. What did they do differently? They cultivated an excellent team culture.

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.

Exactly. It's all about team culture. Tavares stabbed the team he failed to be a captain of in the back, fled to Toronto, soaked up a shitload of their cap....and it shows.

Meanwhile, Stamkos and company are making history.

On what planet?

Not so much a planet as it is a group of self-loathing Canadians who can't help themselves from coping and seething at every opportunity. Like I said, I honestly don't get why they even still bother watching if all they're gonna do is whine.

 

[shortfuze]

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

What about the rich owners that can pay players out in signing bonuses. There’s perks everywhere.

 

[AuraSphere]

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.

As an accountant - I just want to say this couldn't be more wrong.

Either you are considered a resident or a non-resident. There are 2 primary indicators of residency

1) Permanent ties (Where do you own property, where does your spouse/kids reside, etc.)
2) Sojurning Rule - where do you spend at least 183 days

 

[TaLoN]

"after tax" is not so simple and one size fits all. Every player's personal tax situation is going to be unique depending on their life circumstances. There is a reason accountants get paid to file tax returns.

Never mind the nightmare of figuring out game by game taxes for every player in the league considering the taxes are paid based on game location etc... then factoring in each player's claimed location of residence... often times NOT the location of the team that they play for.

It's a complete asinine idea that would cost the league millions to figure out each season with little to no benefit at all... other than to give some fans a warm fuzzy.

 

[sting101]

sounds good where do we sign

 

[Sabresruletheschool]

Wait a second. So you want to punish states that don't steal from thier citizens? This is ironic because a lot of Canadians love paying thier taxes to get thier "free stuff", but it's "unfair" if some states don't? Here's an idea for people that love thier tax paid for "free" stuff. Vote for someone who will lower taxes, but don't be a hypocrite and claim it's not fair that other places aren't as socialist as where you're from therefore unfair that people that have a choice don't want to be there.

 

[dekelikekocur]

You didn't answer my question.

I understood the point dude was making, I'm just refusing to let the perfect be the enemy of the good.

My approach is to use an estimate of average post tax income for players in that city and income group. It isn't supposed to perfectly reflect every player's use of deductions and residences.

You don't need to know anything about Nathan Mackinnon's finances, other than that he makes $6.3m a year and lives in Colorado.

I did answer your question, you're just don't want to hear the answer.

You do need to know his tax situation as that is what determines his after tax annual income. Not even getting into the point that your taxes are done annually only counting part of each season year. So any time there's an increase to contract or change to contract directly alters your taxable income.
How do you resolve players who played For LA in the 2019-2020 season that then signed a new contract for 2 million more with TBL for the 2020-2021 season but then were traded to MTL in January.
It's a computational nightmare that just simply doesn't have the impact people want to give it.

It's like there are plenty of reasons your team sucks, you're just blaming taxes because either you fail to see how piss poor the management is or how shoddy the on ice production is.

The plain and simple fact is, if the tax situation were really as meaningful as some want to try to make it, the states without state income tax would consistently be doing better and consistently signing players for far less. The reality of it is though, with taxes being paid based on where the games are played combined with jock taxes and tax situations, it's not nearly as big of a deal as people try to dog whistle about and ultimately, isn't worth the cost of trying to implement.

This isn't is perfect being the enemy of good, it's something meaningless that people are trying to claim is good.

Unless you want endorsements counted as part of the salary cap too. Hell, I'd say endorsements have a greater impact than taxes.

 

[BlueBaron]

its not a bad idea. If your Cap is pretax and you just agree teams pay the tax whatever it is. I guess you would lower the Cap a bit to adjust it but it could work.

Different teams have different advantages so I don't sweat this stuff but I see where the Op is coming from.