Should the NHL salary cap adjust for local income tax?

[Gnashville]

Still waiting for the list of big time free agents that’s signed with Nashville for Tax Relief
I have been waiting a long time

 

[Bank Shot]

After they balance the taxes, cold cities should also get additional cap space.

An extra million dollars for every degree under zero on average in January.

 

[Steve]

It would be foolish for any of the non-elite 2-3 players on TB/FLA/DAL/LV to ever factor in taxes when negotiating their contracts.

In TB, it's fine for Stamkos/Hedman to do it, and if they acquire Karlsson, him as well.
In DAL, it would be fine for Benn/Seguin (when he extends). These are the corner stones of the franchise, so they stay for the long haul. Plus, they are likely to have NMC/full NTC along with big signing bonuses. That's also a cost to the team. The team is locked into the player so that player has to perform and the owner has to have the cash to pay the front loaded contract and signing bonuses before any revenue comes in.

But, look at TB's current situation of players who are the most likely to be traded if they can acquire Karlsson.

Callahan/Coburn have M-NTC, so they are the easiest to move. Callahan so far has been paid $2.2 million more in salary than his cap hit.
Then, the full NTC guys are Killorn/Palat/Johnson/Girardi.

If any of them factored in taxes, they will lose out on those tax benefits should TB trade them. That's why, if I was Johnson/Killorn, I wouldn't waive my NTC if the contract I signed factored in taxes, especially if that was part of the negotiations/conversations that the team and I discussed when hammering out the agreement. So, if the team uses taxes during negotiations, I personally fell that they should not expect a player to waive a NTC 3 years into a 5 year agreement.

Take Johnson, he extended while still a RFA, so he could have been dealt back in June without restriction. If that happened and his $5 million cap hit was very team friendly, he loses the tax benefit and his take home pay is going to drop from $3.1 million in TB down to anywhere from $2.4 million (in California/Ontario) to $2.8 million elsewhere. Over the life of his 6 year contract, that could be $3 million plus take home money.

This is a really good argument, I never considered the trading part of the contract and impact on the taxes.

Just to touch on your comment re: big names and the big contracts, it’s arguable that it’s even important for the guys not making $10M/yr. ie league Min is drastically different in Toronto vs Tbay. Where as $10M even at 50% is still a fortune.

 

[Deegee]

No. Just create a luxury cap/tax so teams with lots of money can be unrestrained by the cap, with a gradual penalty for overspending.

No. Absolutely not. Look at how well that works in Baseball.

Don’t Be Fooled By Baseball’s Small-Budget Success Stories

With that out of the way, if you're going to make adjustments for taxation, you better be prepared to make adjustments for potential endorsement deals. Thus, the cap should be reduced for Toronto compared to Florida because an NHL player has more lucrative endorsement opportunities in Toronto than they do in Florida. Just too many variables honestly, and the owners just wanted cost certainty from the cap. They want to make money.

 

[T REX]

Is this still going on?

Wow.

 

[WTFMAN99]

Big deal.

What if your player lives in Sweden, Florida or Quebec in the off-season? Do we adjust for that too?

Some players make tax-free off-shore investments. Others invest in businesses that have deductable short-term losses in expectation for long-term gains. Some dont follow any tax-planning advice and pay through the nose no matter what NHL franchise employs them.

There are so many individual differences in the tax profile of high-income athletes that it is impossible to "level the playing field" on a tax basis -- even for players on the very same team!

I have a master's degree in tax law and, frankly, this is just a stupid, simplistic idea.

Don't care.

State where they are employed and pay taxes in on earnings matters and where the team is located. More can be done.

 

[Oddbob]

We could go well beyond taxes.
We use economics to actually gain parity.

I mean I make video games for a living, and in all competitive video games, we balance the crap out of the systems using analytical data and feedback, getting the most mathematically accurate balancing based on all the data we have.

Are there under-served markets incapable of attracting UFAs?
How can the NHL leverage economics to get teams stuck in the basement faster?

What about tweaking things like, adding lottery balls to teams who have not been in the playoffs, or giving them extra cap space to play with?


I know some of you will think this is silly as hell, but we could put AI, in charge of the micro-tweaking based on all statistical data, or create algorithms for everything to ensure perfectly balanced playing field between teams.

Any big name games?

 

[StreetHawk]

This is a really good argument, I never considered the trading part of the contract and impact on the taxes.

Just to touch on your comment re: big names and the big contracts, it’s arguable that it’s even important for the guys not making $10M/yr. ie league Min is drastically different in Toronto vs Tbay. Where as $10M even at 50% is still a fortune.

If karlsson signs for about $8.5 million he nets the same as doughty at $11 million because of taxes. But if karlsson gets dealt 4 years into his deal and then ends up say in SJ, his take home pay drops from $5.4 million down to like $4.2 million on average.

That’s why if you do factor taxes into your contract you better get more money front loaded in the early years and get as much of that in signing bonuses if your ntc drops to a mntc later on in your contract.

That’s why it won’t be as easy to just ask Johnson and palat to waive their ntc if tax benefits were part of the negotiations from TBs side. They need to be in fla to get the tax savings. Then you only waive to get to Vegas/Dallas/panthers to maintain th same tax benefits.

In the end only a couple of guys on the team should factor taxes in as they won’t be moved. But for tHe other 20 guys don’t do it, cause you’re likely to be moved before your contract expires.

 

[HokieDude17]

How is it fair to draw a line in the sand there and say certain markets have advantages or disadvantages but the Leafs cannot use the power of being the most profitable franchise in the league?

It's not fair, and neither is life. How is this such a difficult thing for people to grasp?

 

[TOGuy14]

It's not fair, and neither is life. How is this such a difficult thing for people to grasp?

Ok so why not let Leafs spend as much as they want?

 

[glovesave_35]

Definitely needs to be a gross net system to balance things out. Very uneven playing field for a team like Tampa, Nashville or Dallas vs a NY, Cali, or Canadian team

Yeah, who would ever want to play in California (beautiful weather), NY (one of the world's great cities) or Canada (many players' home and hockey crazed).

 

[WSS11]

Yeah, who would ever want to play in California (beautiful weather), NY (one of the world's great cities) or Canada (many players' home and hockey crazed).

You don’t think players would want to live in FL? Nashville is fantastic too. Has nothing to do with quality of life, but the cost of living. With factoring in tax, teams like ones I mentioned are at a disadvantage monetarily and there should be a gross/net adjustment to the cap.

 

[Gnashville]

Still waiting for the big free agent signings in low tax Nashville it’s been 2 decades already

 

[Ciao]

You don’t think players would want to live in FL? Nashville is fantastic too. Has nothing to do with quality of life, but the cost of living. With factoring in tax, teams like ones I mentioned are at a disadvantage monetarily and there should be a gross/net adjustment to the cap.

How would your "gross/net adjustment" work, in the simplest sense, as between just two cities like Montreal and New York?

Would you look at the differences in the definitions of "income" under Quebec, Canadian, US, New York State and New York City tax laws as well as the various tax rates? If not, how would you compare similarly situated taxpayers if the amounts upon which they are taxed is not similar?

Are you thinking of accounting for differences in tax deductions, such as the US mortgage-interest deduction that is not available in Canada?

How about differences in the treatment of deferred income such as registered pensions, 401k's, RRSPs and other forms of retirement savings?

Let alone all the other differences in tax laws, what about just the tax rates? What is your benchmark? Do you base the Rangers on US federal and New York State tax rates alone, or do you also include the New York City income tax that applies to everyone who lives in NYC? If so does that also apply to the Islanders? What about the Ranger and Islander players that live outside NYC? Do you take into account the tax rate where they live, if that happens to be New York, New Jersey or Connecticut?

Consumption taxes are a big part of the actual tax load. Do you adjust for sales taxes, fuel taxes, road levies, property taxes, local improvement rates and the like; or the cost of health care, as to whether that is privately or publicly funded?

If what you're really looking for is "leveling the playing field", as it were, then you've got a lot of work to do. A simple adjustment to some arbitrary tax rate is incredibly simple-minded and won't in any way accomplish that, even in the unlikely event that effective adjustments to tax rates could be made across multiple jurisdictions.

Best of luck.

 

[Anton Babchuk]

Those "tax calculators" are total nonsense. I can't believe actually pays attention to them.

Anyways, does anyone remember when the Leafs literally brought the CEO of Canadian Tire to their meeting with Stamkos? There was lots of speculation that there was a huge endorsement deal being offered to him if he signed with the Leafs. Most markets can't compete with something like that. If he were to sign in Carolina, what sort of endorsements would he get? A few thousand dollars from Kinetico Water Systems, or Gonza's Tacos? lmao. Should endorsements count towards the cap, too?

And what about coaching/management? Shouldn't Mike Babcock's record-breaking salary count against the cap? How much money have the Leafs spent off the ice compared to other teams?

 

[zetajerk]

Do you really want a bunch of rich guys, who are already making more money than you ever will, to be able to circumvent their income tax on top of it? Would you expect your employers to consider such a thing for you? In today's economic climate, where normal people are so aware of the ways rich people get around the rules and the average person gets taken to the cleaners, why would you want to give the 1% another advantage that you don't have? You people have way to much of your own ego and self worth tied to the success of your hockey teams. Let pro athletes pay income tax like everyone else. They shouldn't be exempt of it "because I want a stanley cup gosh darn it!!!!" Ridiculous.

 

[ziggyjoe212]

This is literally not an issue and never was.

If you factor for tax difference do you also factor in the endorsement opportunities, weather, team success, livability, etc?

A high tax team like NYR will always have a major UFA advantage over low tax like Dallas n Nashville because there are other factors.

 

[joe dirte]

The salary cap is about exactly one thing. Everything else is noise from the league to try and get fans on their sides for the lockout that comes once every half dozen years or so.

The league never stated that as a purpose anyway.

"Cost certainty" was always what they said.

 

[joe dirte]

Ok so why not let Leafs spend as much as they want?

Because the owners as a group got together and pushed a CBA that would allow for them to make more profit.

 

[tsujimoto74]

This is a non-issue. (1) You deduct all your state and local taxes on federal taxes --- boom, even playing field. Though worth noting that won't be true starting in 2018, the deduction limit is $10,000. (2) It doesn't appear to be affecting players' decisions at all. (3) Besides that, any NHL player with 2 brain cells to rub together should have lawyers and CPAs helping him manage his wealth. Once you introduce clever tax planning into the mix, I doubt there's much difference.

 

[KPower]

Florida tax break strikes again with the Kucherov signing.

We(leafs) will get this fixed in the next lockout.

It's the hill we'll die on.

 

[WillNy29]

Florida tax break strikes again with the Kucherov signing.

We(leafs) will get this fixed in the next lockout.

It's the hill we'll die on.

Can we please stop with this nonsense? Can you give me the tangible tax difference between athlete income in Florida and Toronto?

Hint: its immaterial when you have tax planners involved it literally amounts to zilch

Players playing for the Rangers might make their residence in Conneticut then what do you do?

This net cap idea is actually so dumb it needs to vanish. People have spent eternities coming up with equitable and flat tax formulas, you think the NHL will be able to invest in something like that and come up with some kind of "fair cap"? Lolllllllllllllllllllll

 

[WillNy29]

How would your "gross/net adjustment" work, in the simplest sense, as between just two cities like Montreal and New York?

Would you look at the differences in the definitions of "income" under Quebec, Canadian, US, New York State and New York City tax laws as well as the various tax rates? If not, how would you compare similarly situated taxpayers if the amounts upon which they are taxed is not similar?

Are you thinking of accounting for differences in tax deductions, such as the US mortgage-interest deduction that is not available in Canada?

How about differences in the treatment of deferred income such as registered pensions, 401k's, RRSPs and other forms of retirement savings?

Let alone all the other differences in tax laws, what about just the tax rates? What is your benchmark? Do you base the Rangers on US federal and New York State tax rates alone, or do you also include the New York City income tax that applies to everyone who lives in NYC? If so does that also apply to the Islanders? What about the Ranger and Islander players that live outside NYC? Do you take into account the tax rate where they live, if that happens to be New York, New Jersey or Connecticut?

Consumption taxes are a big part of the actual tax load. Do you adjust for sales taxes, fuel taxes, road levies, property taxes, local improvement rates and the like; or the cost of health care, as to whether that is privately or publicly funded?

If what you're really looking for is "leveling the playing field", as it were, then you've got a lot of work to do. A simple adjustment to some arbitrary tax rate is incredibly simple-minded and won't in any way accomplish that, even in the unlikely event that effective adjustments to tax rates could be made across multiple jurisdictions.

Best of luck.

Mortgage interest is deductible in Canada (though I think its only on rental properties)

 

[Eat The Rich]

Honestly, I think the income tax thing is overblown.

Especially when dealing with Canadian teams. If the Canadian dollar keeps tanking, these guys will end up getting paid more to play in Ontario than they would to play in Florida, once you factor in exchange rate. Even more so in lower tax provinces like Alberta. All salaries are paid in USD.

 

[rojac]

Ok so why not let Leafs spend as much as they want?

I highly suspect the amount of money that the Leafs spend on payroll plus revenue sharing is less than what they would probably be spending on payroll alone if there was no salary cap.