Should states/provinces tax rate affect team's salary cap?

[APVJ]

• Currently, the NHL salary cap is the same for all teams, regardless of where they are based.
• But state and provincial taxes vary a lot.
  
  • For example:
    
    • Florida (Tampa Bay Lightning, Florida Panthers) → No state income tax
    • Texas (Dallas Stars) → No state income tax
    • California (Sharks, Kings, Ducks) → High state income tax (~13%)
    • Quebec (Montreal Canadiens) → Very high provincial taxes
• So, in reality:
  
  • A $5 million contract in Florida is worth more net money to the player than $5 million in California or Quebec.

Seems that places with high tax rates have a great disadvantage when it comes to signing talent.

 

[Sideline]

People in high tax jurisdictions make a choice. They chose more government services at the cost of potentially discouraging high income earners from wanting to live there.

If you don't like the costs of living in a high tax jurisdiction you can leave and live in a place with fewer services

 

[Summer Rose]

I don’t think so, personally.

At the end of the day, the salary cap is primarily about cost control for the owners, and league parity is just an inevitable (but nice) side effect. I’m… actually okay with it being like that.

 

[Mr grumpy]

How about facting in Country taxes as well? Taxes are different across the board. But also, how much tax the 1% pay depends how good their accountants and lawyers are.

 

[CTHabsfan]

Oh good, another "let's alter the salary cap based on team location" thread!!!!

 

[rojac]

Here's one idea on how they could do it. I've talked about this on here before in some thread. But the basic idea is that there athe re two currencies: real US dollars and cap dollars,

Cap dollars are the dollars specified in contracts and used to define the midpoint, cap ceiling, cap floor, salaries and so on.

Real US dollars would be the amount that each team actually pays the player in US dollars. Currently, 1 cap dollar = 1 real US dollar for all teams. That is, all pligayers on all teams are currently paid (ignoring escrow) the numbers shown in their contract.

My system would change that and here's how.

Each team would be given a multiplier (worked out by NHL/NHLPA and adjusted and approved each season) that reflects the tax burden (in general) in the team's region. This would inlcude "jock taxes" paid to other jurisdictions based on th team's schedule. Basically, a team that had an average tax burden compared to all NHL regions would be given a multiplier ofs 1. If a team's tax burden was 10% above average, they would have a multiplier of 1.1. If a team's tax burden was 95% of average, tehy would have a multiplier of .95.

This multiplier is kind of like an exchange rate for each team and determines what cap dollars are worth in real US dollars
for each team.

So, let's assume two teams: Team A with a multiplier of 1.1 and Team B with a multiplier of .95.

Player Joe Blow is signing a three year contract for a total of 12M that is paid out as 5M, 4M, and 3M over three years. His AAV (cap hit) is 4M. These numbers are all in cap dollars.

Let's say, Joe signs with Team A. Team A has a multiplier of 1.1 so Joe is actually paid 5.5M, 4.4M and 3.3M in real US dollars over the contract. His cap hit is still 4M because cap-related items are always meausred in cap dollars. The muliplier only affects the money actually paid to the player.

Similarly, if Joe signs with Team B, he would be paid 4.75M, 3.8M, and 2.85M in real US dollars. But again, his cap hit remains at 4M because cap stuff is always in cap dollars not real US dollars.

Joe is paid more on a team where his tax burden is higher and less on a team where his tax burden is lower, somewhat evening out his take home pay.

If a player traded during a contract, his pay in real US dollars would be adjusted based on his new team's multiplier with the first pay check from his new team.\

The main things that I havedn't worked out are payments that are made to a player (or former player) who is not living in a NHL region and thus has no multiplier. This could include signing bonuses, buyout payments, and deferred salary.

Things like buyout payments to a player who signs with a new team and retained salary in a trade, would be paid out based on the new team's rate. So, if Joe in our example, was traded from Team A to Team B with 1M retained, that 1M be paid from Team A to Joe using Team B's multiplier. Similarly, if Team A bought out Joe and Joe signed with Team B.

Anyway, that's my idea.

 

[dj4aces]

It never did before.

The Panthers went through quite a struggle for well over a decade, until the franchise was sold to someone who gives a shit about that team. Tampa Bay went through a similar problem, although I don't recall it being the center of relocation rumors in the same way.

If I'm looking for work, I'm going to search for a company that isn't in the news because of how badly it's being run, I'm not gonna go to work for a company that's two steps away from declaring bankruptcy. I'm gonna look for a company that's moving in the right direction. If I'm desperate for work, I might look for a company that's undergone some problems, but there's a new person in charge and they're trying to turn things around. I like a challenge, after all. I couldn't care less about whether I'm being taxed based on income or taxed based on what I buy.

All that is to say, players are similar in this way. They desire to be a part of a winning team. Some might like an opportunity to help make that team better, also desiring a challenge, but many look for the amazing teams where they could be seen as that missing piece that can take a team from cup contender to cup winner.

So no, the consumer tax isn't why people want to play for Florida, Tampa Bay, Dallas, and other teams. It's all about the direction of the organization and whether ownership is viewed favorably.

 

[Golden_Jet]

Geez, never seen a thread like this before lol.

 

[qcal1427]

Here's one idea on how they could do it. I've talked about this on here before in some thread. But the basic idea is that there athe re two currencies: real US dollars and cap dollars,

Cap dollars are the dollars specified in contracts and used to define the midpoint, cap ceiling, cap floor, salaries and so on.

Real US dollars would be the amount that each team actually pays the player in US dollars. Currently, 1 cap dollar = 1 real US dollar for all teams. That is, all pligayers on all teams are currently paid (ignoring escrow) the numbers shown in their contract.

My system would change that and here's how.

Each team would be given a multiplier (worked out by NHL/NHLPA and adjusted and approved each season) that reflects the tax burden (in general) in the team's region. This would inlcude "jock taxes" paid to other jurisdictions based on th team's schedule. Basically, a team that had an average tax burden compared to all NHL regions would be given a multiplier ofs 1. If a team's tax burden was 10% above average, they would have a multiplier of 1.1. If a team's tax burden was 95% of average, tehy would have a multiplier of .95.

This multiplier is kind of like an exchange rate for each team and determines what cap dollars are worth in real US dollars
for each team.

So, let's assume two teams: Team A with a multiplier of 1.1 and Team B with a multiplier of .95.

Player Joe Blow is signing a three year contract for a total of 12M that is paid out as 5M, 4M, and 3M over three years. His AAV (cap hit) is 4M. These numbers are all in cap dollars.

Let's say, Joe signs with Team A. Team A has a multiplier of 1.1 so Joe is actually paid 5.5M, 4.4M and 3.3M in real US dollars over the contract. His cap hit is still 4M because cap-related items are always meausred in cap dollars. The muliplier only affects the money actually paid to the player.

Similarly, if Joe signs with Team B, he would be paid 4.75M, 3.8M, and 2.85M in real US dollars. But again, his cap hit remains at 4M because cap stuff is always in cap dollars not real US dollars.

Joe is paid more on a team where his tax burden is higher and less on a team where his tax burden is lower, somewhat evening out his take home pay.

If a player traded during a contract, his pay in real US dollars would be adjusted based on his new team's multiplier with the first pay check from his new team.\

The main things that I havedn't worked out are payments that are made to a player (or former player) who is not living in a NHL region and thus has no multiplier. This could include signing bonuses, buyout payments, and deferred salary.

Things like buyout payments to a player who signs with a new team and retained salary in a trade, would be paid out based on the new team's rate. So, if Joe in our example, was traded from Team A to Team B with 1M retained, that 1M be paid from Team A to Joe using Team B's multiplier. Similarly, if Team A bought out Joe and Joe signed with Team B.

Anyway, that's my idea.

Why would the PA ever agree to something like this

 

[No Fun Shogun]

I always feel like this is a singular fixation obviously meant to try to get an edge to certain markets over the perceived advantages that other markets have, but it ignores the core fact that players choose where they want to play for a variety of reasons.

So sure, a dollar in Florida goes farther than a dollar in Quebec (to just use two examples), and while Florida also had a weather advantage when it comes to winters, Quebec also assuredly affords more outside earnings potential for hockey players through sponsorships and media gigs than one could expect in Florida. And add to fact that Quebec also has a bigger access to players that'd be interested in signing with their home town/state/province team compared to Florida, and I think you'll see a mutifaceted series of considerations that players consider.

Ultimately, taxes are one changing factor, but should cost of living or market excitement or team competitiveness or winter weather or etc., etc. be factored into cap calculations as well? I think trying to slice and dice ways for some teams to get around cap issues while ignoring others doesn't really lead anywhere tangibly better.

 

[ElmegTheWise]

Did you catch the Cavs-Heat game last night?

 

[patnyrnyg]

Do you lower the ceiling for everyone in the lower/no state or provincial tax locales? Good luck getting the NHLPA to agree to that. Do you raise the ceiling for the higher tax teams? Good luck getting the owners to agree to that. Secondly, how does the jock tax come into play? Players pay taxes in every state they play. Players on the Panthers will play NYS tax when they play on the road against the Rangers, Isles, and Buffalo. What about signing bonuses? If it really was as big of a deal as some make it out to be, then why didn't guys like Crosby, Toews, Kane, Malkin, Ovechkin play out their ELC and maybe 2nd contract and sign with one of these low/no tax teams as soon as they could?

 

[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 an 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.

 

[patnyrnyg]

Not to mention different tax laws state to state. NY does not tax contributions to pension funds, 401K/403b accounts. New Jersey does. 401K contributions are not tax deductible against NJ state income tax. Not sure on IRA's. However, nobody is required to contribute to a 401k/403b account.