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

[Hodge]

Incredible that we’re almost 20 years into the salary cap era and some fans still don’t understand the cap has nothing to do with fairness or creating a level playing field between teams. It’s a mechanism to ensure owners get 50% of hockey related revenue, full stop. This is why the LTIR “loophole” will never be closed (players aren’t paid during the playoffs so it doesn’t matter to the league) and why these proposals of a tax neutral cap are attempts to solve a problem that doesn’t actually exist.

 

[StewieP19]

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?

Any NHL players got a financial guy
They can move their money by example
took a 4M US per year contract
ESCROW - 1M US
Still 3 M USD
If he's not in canada 174 days and he got a principal house in USD He not pay CAD tax
If yes and decide to stay in Montréal for the summer all expense is in CAD $
His 3 M USD grow to 4.2M CAD.
There always a way to don't pay tax

 

[Space umpire]

Um no....that would be in the U.S, where there are many loopholes for the wealthy to not pay taxes. Unfortunately not in Canada. Look at that Brian Burke video, like him or not he has the experience of a GM and is a lawyer. Allan Walsh is an absolute clown, I think we all know that.

So the guy who agrees with you is great and the other guy is a clown?
What did the clown say that’s untrue?

Can I ask what you pay for homeowners insurance? I live in a house valued at about 450k and pay $11,000 a year to insure it in Florida.
Can I ask what you pay for medical coverage? Players living in Canada pay for a supplement policy (low cost) to cover what isn’t covered by taxes. Family coverage in the US can cost $24,000 a year.
Let’s do property taxes next.
Auto insurance, …
Many costs are held in check by some services being provided with the tax revenue collected. In no tax states those costs are out of pocket and usually not tax deductible.

 

[Craig Ludwig]

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.).

Very good post Beukeboom fan, thanks for the insight. But I have to argue the Mathews lives in Arizona and 90% of his salary is not taxed. If that were the case, wouldn't every NHL player have a residence in Arizona?

 

[Empoleon8771]

Agreed to some extent, but I think the MAJOR reason is because they're leaving $10 Million on the table, which is the point of this post.

Why don't you call your representatives to get them to push through tax cuts then?

 

[Leafshater67]

But aren’t they paid USD, even in Canada where USD is worth 30% more?

 

[Empoleon8771]

Very good post Beukeboom fan, thanks for the insight. But I have to argue the Mathews lives in Arizona and 90% of his salary is not taxed. If that were the case, wouldn't every NHL player have a residence in Arizona?

That is objectively false.

Honest question: do you think "no state taxes" mean "no taxes"?

 

[Gaylord Q Tinkledink]

A lot of those players probably also want to have a chance at the Cup...

That too.

If the fans would calm the f*** down and media would f*** off like the joke they are others might want to stay.

You'll always have those players just want to play from where they're from like Fox, who turned down Calgary and Carolina, but it could help.

 

[Craig Ludwig]

So the guy who agrees with you is great and the other guy is a clown?
What did the clown say that’s untrue?

Can I ask what you pay for homeowners insurance? I live in a house valued at about 450k and pay $11,000 a year to insure it in Florida.
Can I ask what you pay for medical coverage? Players living in Canada pay for a supplement policy (low cost) to cover what isn’t covered by taxes. Family coverage in the US can cost $24,000 a year.
Let’s do property taxes next.
Auto insurance, …
Many costs are held in check by some services being provided with the tax revenue collected. In no tax states those costs are out of pocket and usually not tax deductible.

Good post, but all those things listed are probably less than 0.5% of their overall salary, it is insignificant when it comes to signing a $64 Million contract. So maybe they pay 14% less in taxes, it's still $9 Million extra in their pockets.

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

Yeah, I think as contracts grew so much bigger, the amount of extra cash going into a player's pocket became much more significant.

 

[Craig Ludwig]

That too.

If the fans would calm the f*** down and media would f*** off like the joke they are others might want to stay.

You'll always have those players just want to play from where they're from like Fox, who turned down Calgary and Carolina, but it could help.

Can't argue with you there, the media can be moronic in Montreal and Toronto, but my post is ultimately about money in their pockets.

 

[redcard]

Um no....that would be in the U.S, where there are many loopholes for the wealthy to not pay taxes. Unfortunately not in Canada. Look at that Brian Burke video, like him or not he has the experience of a GM and is a lawyer. Allan Walsh is an absolute clown, I think we all know that.

All deductions, credits and expenses - Personal income tax - Canada.ca

Find out which deductions, credits and expenses you can claim to reduce the amount of tax you need to pay.

www.canada.ca

 

[Empoleon8771]

I hate this discussion every single time it comes up for a million reasons:

1. Most people who bring up this topic do not understand how taxes work or how NHL players are taxed
2. There are a million other things that influence a player's decision to sign one place versus another. Why should we adjust for taxes but not cost of living? Seattle has no state income tax but their cost of living is very high. Why not adjust for weather, quality of teams (better run teams get players to sign for less) or literally anything else?

These threads are always just Canadian fans trying to excuse why their teams suck.

 

[Craig Ludwig]

Because we don't need the Oakland A's in the NHL.

The parody of the NHL is what makes it so much better than alot of other major sports right now. 75% of fanbases going into every year knowing they have no chance doesn't sound like a very good idea or a way to continue growing the game.

Good point, I do remember the Rangers bringing in all of the top FAs before there was a cap.

 

[Beukeboom Fan]

Um no....that would be in the U.S, where there are many loopholes for the wealthy to not pay taxes. Unfortunately not in Canada. Look at that Brian Burke video, like him or not he has the experience of a GM and is a lawyer. Allan Walsh is an absolute clown, I think we all know th

Very good post Beukeboom fan, thanks for the insight. But I have to argue the Mathews lives in Arizona and 90% of his salary is not taxed. If that were the case, wouldn't every NHL player have a residence in Arizona?

It's not just a "residence" - but also where he actually resides in the off-season. People tend to live where they do for a reason. AM also has the leverage as a star player for a team with probably the deepest pockets in the league to get that negotiated as part of his contract.

 

[Frank Drebin]

Why don't you call your representatives to get them to lower taxes instead of complaining that the NHL should have to adjust for your local laws?

Simple

 

[Drumman44]

Whenever this comes up, people from tax disadvantage areas (aka bigger hockey markets in Canada or high tax US area likes NYC) conveniently leave out the larger marketing abilities for a player.

I think it was on the Steve Dangle podcast years ago they quoted a former Leaf who said if you played on the 4th line in Toronto for even 1 season, you could make 6 figures annually doing appearances and signing autographs in retirement.

 

[Craig Ludwig]

I hate this discussion every single time it comes up for a million reasons:

1. Most people who bring up this topic do not understand how taxes work or how NHL players are taxed
2. There are a million other things that influence a player's decision to sign one place versus another. Why should we adjust for taxes but not cost of living? Seattle has no state income tax but their cost of living is very high. Why not adjust for weather, quality of teams (better run teams get players to sign for less) or literally anything else?

These threads are always just Canadian fans trying to excuse why their teams suck.

Hey, as a Habs fan my team does suck, I could give you a few reasons why. But ultimately, it's impossible to argue the negative financial impact of signing/playing in Canada. It's just a fact.

 

[Zetterberg4Captain]

As an American I would agree, if certain teams play in states with low(er) income tax and that's a plus, the teams that generate more revenue should be able to have a higher salary cap to offset that.

To disagree suggests only 1 advantage is allowed and you're biased

 

[SEALBound]

Want change? Vote for political parties and candidates that promote lower taxes.

Easy.

 

[Empoleon8771]

Hey, as a Habs fan my team does suck, I could give you a few reasons why. But ultimately, it's impossible to argue the negative financial impact of signing/playing in Canada. It's just a fact.

Yes, Canada has higher taxes than the United States. That doesn't address why the NHL should care about that and make changes for that specific factor instead of any other factor.

Again, Seattle has no state income tax but a very high cost of living. Having a salary cap that is influenced by local tax rates would be a negative impact on Seattle's ability to sign players. So why are tax rates something that the NHL should adjust for but not cost of living?

 

[Craig Ludwig]

Whenever this comes up, people from tax disadvantage areas (aka bigger hockey markets in Canada or high tax US area likes NYC) conveniently leave out the larger marketing abilities for a player.

I think it was on the Steve Dangle podcast years ago they quoted a former Leaf who said if you played on the 4th line in Toronto for even 1 season, you could make 6 figures annually doing appearances and signing autographs in retirement.

Ottawa and Winnipeg not so much

Want change? Vote for political parties and candidates that promote lower taxes.

Easy.

Since I was once warned about political commenting on this board, I will hesitantly refrain....

 

[WhereAreTheCookies]

It's not just a "residence" - but also where he actually resides in the off-season. People tend to live where they do for a reason. AM also has the leverage as a star player for a team with probably the deepest pockets in the league to get that negotiated as part of his contract.

In the US your state income tax is based upon where your company is located in most instances. States have a non-resident clause in their tax laws. These prevent people for example from living in Vancouver WA, while working in Portland OR from getting away with paying no state income taxes. I believe Canada has a non-resident tax clause as well to prevent this.

 

[Empoleon8771]

Also I just coincidentally saw this on reddit just now:



6 of 10 players on this list played for Canadian teams last year.

 

[CupInSIX]

Good post, but all those things listed are probably less than 0.5% of their overall salary, it is insignificant when it comes to signing a $64 Million contract. So maybe they pay 14% less in taxes, it's still $9 Million extra in their pockets.


Yeah, I think as contracts grew so much bigger, the amount of extra cash going into a player's pocket became much more significant.

Before the lockout and the salary rollback, teams were offering big contracts in the range of 7-9M. I don't believe this was an issue then, either.

 

[Ducks DVM]

Absolutely not, the post is clearly around salaries, seems pretty obvious. Is $10 Million not a a lot to you?

The post is about correcting for financial disadvantages between franchises. All the things I listed will be significantly larger than 10 million dollars, so, if the goal is to provide a level playing field financially, all these things should be on the table. Refusing to consider them means that the goal is not actually a level playing field, it is leveling disadvantages for certain franchises while keeping advantages, which again, the answer is… no.