Proposal: Something has to Change - Net Salary Advantages to select NHL teams, and Disadvantages to others

[AKL]

Canada has some of the worst most restrictive housing policies on the entire planet.

Oops. You think you'd have solved for that in your utopia by now.

 

[majormajor]

Pretty sure the salary cap is the same for everyone, no? All teams are gonna have like 83.5M to spend in 2023-24? Not sure where you're getting the uneven salary cap from.

The pre tax salary cap is the same, the post tax salary cap is uneven.

 

[AKL]

The pre tax salary cap is the same, the post tax salary cap is uneven.

Yeah the trade off is you guys have more equality, less poverty, better healthcare, longer lifespans, etc... right? So taxes shouldn't be a barrier for these guys because you guys have it so much better up there?

Yeah I don't like the uneven salary cap in pro hockey so I'm going to support shifting to US type policies (massive inequality, intergenerational poverty, poor health care, shorter life spans, etc...). Yeah great solution guys.

Obviously you set up policy to support a just and prosperous society and then deal with minor stuff like hockey downstream of that.

 

[usernamezrhardtodo]

This is also true. Playing for a team like Toronto does have a higher tax burden, but you're only taxed based on Toronto rates for half of the season.

I wonder if for example getting paid a huge bonus every July 1st in your home state makes it only taxable there. If Auston Matthews gets $10M every July 1st and he is in Arizona...why would he get taxed at Canadian rates?

 

[Marner4Life]

Preface - I am a Montreal Canadiens and although this topic affects the Habs, it also affects other Canadian teams and also some in the U.S.

It has always bothered me that Bettman has not addressed this subject, as it severely affects Canadian teams and likely to a lesser extent teams in California (Weather makes a difference).

Every time a UFA hits the market for a large contract, there is an immense difference in the Net/Take Home pay that goes into their pocket. As an example, and there are a variety of taxes that come into play (Income/State/City), a player signing in Nashville/Vegas/Florida/Dallas can likely pay up to 15% less taxes than a player signing in Toronto/Montreal/Winnipeg, and even Los Angeles, Anaheim, San Jose. So if I am a player worth 8 x $8 Million for a total contract of $64 Million, that is a total of $9.6 Million more in my pocket if I sign with Nashville over the course of the contract. ALMOST $10 Million DOLLARS! Who in their right mind would give that up to play for their hometown (except maybe John Tavares).

What this creates is an immense disadvantage to the higher taxed teams, and they have to severely overpay for good free agents. They ALSO have to overpay RFAs and gamble that they will be worth the contract (see Cole Caufield, PK Subban, etc.) in later years. In essence, it gives the lower taxed teams the pick of the litter to sign the UFAs, because those UFAs have a 15% advantage over other teams. By overpaying UFAs and RFAs, Canadien teams essentially get a roster that is 15-20% depleted.

It ABSOLUTELY makes sense for each NHL team, based on their Income/State/City tax, to have their own individual Salary Caps. If the Dallas/Nashville/Florida/Vegas Cap is $83 Million, then Toronto/Winnipeg/Toronto should have a cap of $95 Million. Or, make the Salary Cap is based on NET Salary.

With such a tight and minuscule Salary Cap in the NHL, every dollar counts and it boggles my mind that Bettman and company don't see this, or maybe they do because they want to grow the sport in the U.S. Personally, I think this is directly related to the Canadian teams not winning, as players want the warm U.S weather, but even more importantly pocketing an extra $5-$10 Million throughout their career. Thoughts?

So the way around this is with bonuses. If the AAV is $10 million but the contract is say $9mil in bonuses and $1 million salary then I believe they are only taxed on the salary portion. I just read an article about this and that’s what I took away from it!

 

[majormajor]

Yeah the trade off is you guys have more equality, less poverty, better healthcare, longer lifespans, etc... right? So taxes shouldn't be a barrier for these guys because you guys have it so much better up there?

If I was a millionaire I'd rather be in the United States. But if I didn't know what family I'd be born into (Rawlsian veil) I'd definitely choose Canada.

 

[AndreRoy]

The pre tax salary cap is the same, the post tax salary cap is uneven.

There is no post-tax salary cap. You’re complaining about an “inequality” that does not exist except in your mind. Which is par for the course, really.

 

[AKL]

If I was a millionaire I'd rather be in the United States. But if I didn't know what family I'd be born into (Rawlsian veil) I'd definitely choose Canada.

Why would you rather be in the United States if Canada has more equality, less poverty, better healthcare, longer lifespans, etc...? Do you not actually care about those things? Is it not actually true? Something is fishy here.

 

[AndreRoy]

This comes up all the time - and people consistently ignore the fact that you can't just "tax affect" the cap based on the rate for the local municipality. Players are taxed where they play the games - so when the Panthers are playing in NYC they pay New York State and city taxes. The low tax states do have an advantage in that a higher % of their games are played in low tax locations - but the impact is significantly less than the media make it out to be. Just to add more complexity - something like 90% of Austin Matthews salary is paid out in bonuses, which are taxed at 0% because he lives in Arizona when those bonuses are earned (aka - paid). Overall - tax in incredibly complex and can't be boiled down to a simple % that a team should get.

Some posters seem to forget that the salary cap's primary purpose was not to ensure absolute competitive equality between the markets, but rather to provide economic viability to the league in the aggregate. If the goal was competitive equality - teams would have to spend to the mid-point to the cap and there wouldn't be a +/- ~20% for the cap max and cap floor. Likewise - a lot of the other potential benefits would have to be factored in as well (% of salary paid up front as a bonus, $'s spent on coaches, etc.).

Your error was expecting these people to be educated about the things they complain about - something the likes of them have never been and will never be. That’s why they make piss-poor decisions and then blame everybody but themselves for the consequences.

 

[Porter Stoutheart]

Lmao this again? Please point to all the advantages these lower tax rates have given these teams. I mean, as a Florida fan, it should be pretty easy to point to all these players who’ve foregone other franchises in our history to enjoy this mega advantage we have…but, I’m kinda having a hard time.

The tax thing has been debunked so many times by so many knowledgeable experts that you aren't even trying if you bring this up.

 

[Yatzhee]

Follow the law. The NHL has 0 authority to make/alter/negate the tax laws. The NHL is a corporation, NOT a government body.

 

[Crede777]

Why would you rather be in the United States if Canada has more equality, less poverty, better healthcare, longer lifespans, etc...? Do you not actually care about those things? Is it not actually true? Something is fishy here.

Those indicators are taken as an average. Given enough wealth, you can account for those things pretty easily for yourself so your focus turns to other things.

 

[AKL]

You can have a situation that is better overall but not better for those with the highest incomes (can't buy multiple Lamborghinis, etc...). What a concept.

Well then instead of crying about how hockey players won't sign with your team, you can take solace in the fact that you just have a much better society than we do. If you want hockey players to sign there, I guess vote for politicians with policies that are more friendly to those players?

But I'm still not sure why a certain amount of money would make you forsake your beliefs and convictions and settle in a place with more inequality, more poverty, worse healthcare and shorter life expectancies. Still seems a bit wishy-washy to me.

 

[Crede777]

And yet millions of poor people from all over the world aren’t illegally invading Canada’s borders each year. If the People’s Republic of Canada is so much “better” then why does everyone want to come here?

The answer is straightforward geography. Many migrants aren't looking for the best situation, just the nearest not-terrible one.

And that underrates the migration influx that Canada actually is seeing.

 

[AKL]

Those indicators are taken as an average. Given enough wealth, you can account for those things pretty easily for yourself so your focus turns to other things.

So it's not that you guys like the taxes and policies, or really believe that a more equal society is better for everyone?

You just believe in them until you have enough money to say "so long suckers, I have enough money now I don't need you"

 

[Djp]

If I'm not mistaken, taxes are based on where the games are played. So the tax burden is different for every teams based on where their games are actually played.

Also NHL players, if they are smart all have accountants who know how to work the systems in each country to minimize their tax burdens.

Taxes are based where game occurs And where they are.

Guess you could make pro players tax exempt but thrn thr corporations and arenas get taxed more to make up for the losses.

 

[Hockey Outsider]

If I was a millionaire I'd rather be in the United States. But if I didn't know what family I'd be born into (Rawlsian veil) I'd definitely choose Canada.

Wow, that's one concept I didn't expect to read about on a hockey message board. What a thought-provoking essay. (And I agree with your conclusion).

 

[majormajor]

Well then instead of crying about how hockey players won't sign with your team, you can take solace in the fact that you just have a much better society than we do. If you want hockey players to sign there, I guess vote for politicians with policies that are more friendly to those players?

I haven't cried about it. I'm not the OP. I'm just pointing out that you could have a cap on post tax income instead of pre tax income and there would be less of a disparity in terms of attracting talent within the NHL. This isn't a hard problem, there's no hard innate trade off here.

I certainly wouldn't change what sort of society I want or change who i vote for based on something trivial like hockey salaries. That's get a grip time.

But I'm still not sure why a certain amount of money would make you forsake your beliefs and convictions and settle in a place with more inequality, more poverty, worse healthcare and shorter life expectancies. Still seems a bit wishy-washy to me.

Most people far better know their own salary and their own ability to find housing. They're not repositories of facts about outcomes for others. I'm an economist, I know things about inequality and poverty and so on, but most people don't. And they don't move with their feet as some sort of political signaling. That's not a thing people do.

 

[dekelikekocur]

Yeah that's even the case with normal people, your signing bonus is taxed differently than your salary. In the United States, I believe bonuses just have a flat 22% tax rate, which is way less than their tax rate on their salaries.

Bonuses in the US are taxed at the max rate income rate. My annual bonus check is roughly 60% of my actual bonus. It's been like this for every company I've worked for both onsite and remote.

 

[Crede777]

So it's not that you guys like the taxes and policies, or really believe that a more equal society is better for everyone?

You just believe in them until you have enough money to say "so long suckers, I have enough money now I don't need you"

If my goal was simply to maximize my own quality of life, as given in the dichotomy majormajor provided along with the Rawlsian Veil, then yes that would be my stance. And in fact it is a stance people commonly take.

However, my actual views are more nuanced. Basically, I think there are things which benefit society most due to their accessibility - and these things are best managed publicly by taxes - and there are things which benefit society most due to progress and innovation - and the things are best managed privately. An easy example is that I think highways should be managed publicly and maintained by taxes whereas car manufacturers should be managed privately.

 

[Empoleon8771]

Bonuses in the US are taxed at the max rate income rate. My annual bonus check is roughly 60% of my actual bonus. It's been like this for every company I've worked for both onsite and remote.

Holiday Bonus Taxes

Learn more about taxes on bonuses that you may receive at your job, including holiday bonuses, signing bonuses and cash bonuses, with the help of H&R Block.

www.hrblock.com

It's 22% under $1 million and 37% over $1 million. So most NHLers would likely fall in the 37% tax rate.

I'd be interested in seeing if those rates were marginal or just flat tax rates. A bonus of $999,999 would only have a 22% tax rate but a bonus of $1,000,001 would have a tax rate of 37% if it isn't marginal.

 

[AKL]

If my goal was simply to maximize my own quality of life, as given in the dichotomy majormajor provided along with the Rawlsian Veil, then yes that would be my stance. And in fact it is a stance people commonly take.

However, my actual views are more nuanced. Basically, I think there are things which benefit society most due to their accessibility - and these things are best managed publicly by taxes - and there are things which benefit society most due to progress and innovation - and the things are best managed privately. An easy example is that I think highways should be managed publicly and maintained by taxes whereas car manufacturers should be managed privately.

But that's the hangup isn't it. If these things inherently meant a better society, nobody would voluntarily forego them. Yet millions of people do, because these things only improve the quality of life for certain proportions of the population, not society as a whole, certainly not everybody.

You can't get upset at people for not wanting to live in your society when you cater to the bottom third at their expense, and you have no right to demand the NHL does anything to accommodate the political decisions your society has made. That's just how it is. People are always going to look out for themselves first.

 

[Bourne Endeavor]

Never heard a word about this sort of stuff until Radulov chose Dallas over Montreal btw.

What's funny is he didn't. Bergevin kept him waiting forever after initially lowballing him only to offer him the exact same contract Dallas did.

Radulov wanted to stay with the Habs but felt insulted after the idiocy Bergevin pulled. Which, ironically, slams OP's entire premise that players aren't choosing Canadian markets because of taxes. Most Hab fans aren't using taxes as an excuse to be fair. We know our GM and coaches have been incompetent. Who the hell wants to play for Michel friggin' Therrien?

As both a Habs and Canucks fan. While I'm sure taxes are a conversation in the negotiation, I suspect it's a much smaller factor than the pressure of playing in a Canadian market itself and how poorly both franchises have been run that causes some UFAs to reconsider.

Vancouver certainly didn't have issues attracting free agents during the heydays of the Sedin era. It's almost like winning makes good players want to play for you.

 

[T_Cage]

Why not bring in a luxury tax, so the larger markets can pay more for players, like Baseball does. Do something, it's asinine to have such a puny Salary Cap that rewards smaller market teams.

This is the way to go imo. Basketball and Baseball have luxury taxes/soft caps, and are better off for it.
The NFL technically has a hard cap, but there are so many machanations around it and to move money that it might as well be a soft cap

 

[GeeoffBrown]

I think a key factor is allowing players to choose where they can sign. This gives them the freedom to consider things other than gross income when signing with a team, which is really unfair to other teams that wanted to sign them