What is the solution to balancing the salary cap with no tax states?

[kaiser matias]

No it’s not. It’s not a cycle. The rules tangibly changed in 2013-2014 when the back diving contracts were outlawed. Almost immediately after no state tax teams had a massive advantage and all of them
At the exact same time started to get players to sign for less. That’s not a cycle.

I've noted this before, but the talk about tax being a factor in contracts only really started to gain traction in 2016, when Stamkos re-signed with Tampa after meeting with Toronto (who had the CEO of Canadian Tire at that meeting, ostensibly to highlight endorsement options). His deal with Tampa was 8 years at $8.5 million, less than the supposedly much less than what Toronto was prepared to offer. Rather than note that the Leafs were terrible at the time and Tampa was not, Toronto media focused on the taxation issue as a factor for why he would re-sign with a team he had played with for the past 8 years.

 

[Legion34]

I've noted this before, but the talk about tax being a factor in contracts only really started to gain traction in 2016, when Stamkos re-signed with Tampa after meeting with Toronto (who had the CEO of Canadian Tire at that meeting, ostensibly to highlight endorsement options). His deal with Tampa was 8 years at $8.5 million, less than the supposedly much less than what Toronto was prepared to offer. Rather than note that the Leafs were terrible at the time and Tampa was not, Toronto media focused on the taxation issue as a factor for why he would re-sign with a team he had played with for the past 8 years.

1.) people noticing something does not mean it wasn’t an issue before or is not an issue

2.) again. This came on the heels of the league (correctly) getting rid of cheater contracts. Stamkos not signing with the leafs didn’t change that he signed for less than “market” value in any high tax market.
He probably would have just signed for 12 years in LA or something.

Plenty of top ufas haven’t signed in Toronto over the years. Including. Gretzky.

 

[OrangePMD]

Sometimes, who cares about Bettman and his system?

The owners and the players ? You know, the two parties that who have any say in the matter.

 

[Stephen]

The owners and the players ? You know, the two parties that who have any say in the matter.

Well, it’s actually a 2 way partnership and also 32 fanbases who are essentially the paying client, so they should think about that as well one of these decades lest people start tuning out the sport.

 

[OrangePMD]

Well, it’s actually a 2 way partnership and also 32 fanbases who are essentially the paying client, so they should think about that as well one of these decades lest people start tuning out the sport.

Those boycotts after the lockouts really hurt their business. I doubt they can survive more.

 

[KJoe88]

It’s a big problem.

TB, Florida, Vegas.

It’s a big problem. Anyone thinking otherwise is delusional.

 

[I Hate Blake Coleman]

They should tax fans who whine incessantly online about it and give to the players affected as a salary top up

 

[Obvious Fabertism]

Higher tax regions theoretically come with higher quality of life perks that make up the difference, it’s on the region to sell those perks.

The issue I have with the NHL cap is the selective application of the rules and punishments for contracts. Retroactive cap recapture was the dumbest thing this league did, artificially limiting a few teams while letting others get away completely free with LTIR shenanigans.

 

[Hockey Outsider]

Denote one team as baseline in terms of its tax burden and assign a coefficient on every other franchise, respectively, to even things out. Update on every offseason if need be.

That won't work, because the tax burden is determined at the individual level, not at the team level. It's not uncommon to see two teammates with similar salaries pay vastly different amounts in taxes (Matthews vs Marner is a good example). The NHL owners would never pay an army of accountants many hundreds of thousands of dollars per year to maintain an accurate calculation, simply to appease (and this part isn't directed to you) fans who whine online about a topic that's vastly more complicated than they can understand.

 

[AvroArrow]

I don't think it should be touched, it's state/provincial laws and should be respected as such.

My only suggestion would be, a luxury tax, not as big as the NBA. Multiple reasons for this. It would help the LTIR issue and allow teams to spend a bit more.

My idea, allow for a MAX (maybe reduce it even) 20M luxury tax + make it so that players who are on LTIR to end the regular season are ineligible to play in the playoffs

How it helps ? If teams have legitimate injuries and are expecting guys back, they can add a bit to the roster, then activate injured player at an appropriate time and still be within the cap. Other teams can spend the same amount. It'll allow for some cap/injury flexibility and let teams spend a bit more if they need to.



If you're going $1 - $10,000,000 over the cap, you pay a 50% tax. Meaning the team pays $5M tax to the league assuming you spent maximum over cap

If you're going $10,000,001 - $15,000,000 over the cap you pay a 75% tax, $11.25M tax to the league assuming you spent maximum over cap

If you're spending between $15,000,001 - $20,000,000 over the cap, you pay a 100% tax, $20M to the league assuming you spent maximum over cap



The league then takes that money and redistributes it among the lowest revenue generation teams, bottom 5 or bottom 10, to help balance.

What this does is, allow teams to spend more, teams are flexible in case of injury, and if rich teams like Toronto/Montreal are just spending $20M over cap, they're also paying the other teams in the league a tax, those owners can then use that same tax money to spend on their roster. Lets say the top 5 richest teams all go max luxury tax, that's then $100M split between 5 or say 10 teams, $10M-$20M each to those teams, so it balances the owners would be able to spend a bit more for "parity" sake


So if a tax free state team is able to sign guys for under market value, the other teams have the ability to slightly exceed the cap to acquire the same player or type of players.

Now obviously the tax free states could spend the same amount on their roster as well, but that's a pretty big tax they have to pay which would go directly to their competitors

This may lead to higher salaries for players so not sure owners would want to do it but I think it helps two of the biggest issues in our game right now

1) LTIR nonsense. If player isn't activated, he's ineligible. You expect him back ? Good you have a $20M luxury tax, activate the player and whatever your cap hit comes to for game 82, you pay the tax. Everyones happy, you get your player back and it's within the cap/rules

2) Tax-free advantage. Other teams would have to pay more, higher salary to give the player the same amount of take home money, but teams could compete for signing/acquiring players


The biggest downside I see to this proposal would be inflated player salaries, instead of GM's using the luxury tax as intended, in case of injury or to compete with tax-free states, they just inflate player salaries by like 20%. So maybe cap the tax at $10M ?

Or I don't know if this is too complicated, but some sort of clause in a players contract that makes said players contract eligible to be applied to the luxury tax. Then you put a limit, something like maximum 2 or 3 contracts per team that can be applied towards the luxury tax.


Long as shit I know, but I think it could work. Just don't think owners would ever want to pay the players more, that's why they introduced the cap in the first place. From a players/fans perspective I think it would be great.

 

[herashak]

Were people worried about this when Florida was a shit team?

 

[Johnny Concussion]

Nothing. Penalizing teams because of something their governments did is dumb.

 

[Summer Rose]

Actually the signing bonus is paid in July each year and is taxed at the rate of the players legal residence.
For instance Matthews LEGALLY resides in the state of Arizona. His annual signing bonus is not assessed state or local taxes.

That’s up to the players themselves. Matthews chose to give no discount to Toronto while over 90% of his income (signing bonus) is paid to his legal Arizona (no state tax) address.
Our own (previously) Seth Jones played in Ohio and Illinois while maintaining his legal residence in Tennessee.

Slight nitpick to you two: Arizona does have state income tax, it just happens to not be that high (and the threshold for how much money you make in order to be obligated to pay state income tax in Arizona is on the high end, hence I never had to pay any myself while I lived there). However, it exists, and Matthews surely has to pay into it.

However, your point still stands with that nitpick corrected. His tax burden is lower by receiving most of his compensation in the form of a signing bonus charged to his legal residence being Arizona at the time he receives it.

 

[ManofSteel55]

The only solution is to make the cap what the player will be making after taxes, but that's nearly impossible with tax rates being able to fluctuate over time. But then its not really a hard cap anymore in some ways. I don't believe there will be an appetite for this among owners or players.

 

[oXo Cube]

Maybe hot take but the pervasiveness of no trade protection around the league is a way bigger barrier to team building than the tax burden deal.

If your team isn't good you can't sign free agents because you suck and you can't add quality players in the trade market because you're on everyone's no trade list. You don't have other choices except tank for 5+ years and hope it works(it usually doesn't).

 

[Gil Gunderson]

Apparently big markets can offer big endorsement deals and celebrity status so I don’t see what the big problem is.

 

[x Tame Impala]

I would rather pay higher taxes and live in Montreal than have my garbage cans melting on the sidewalk living in do-nothing Texas. You Canadians need a support group or something, this tax issue is entirely overblown.

 

[Cool Hand Puke]

Why did it take so long for the teams with no state income tax to win with this massive advantage? Why did it take 15 years for the first No State Tax team to win the cup?

 

[Stephen]

Those boycotts after the lockouts really hurt their business. I doubt they can survive more.

If you’re based in Finland your level of financial commitment to the NHL product would not be the same as someone in a local market paying wildly different prices for a ticket depending on where they live in North America.

The quality of product is capped but your expenses as a fan are unlimited. There’s a real tension there.

 

[JianYang]

Most of that is either wrong or misleading.
Many professions have people “on the road” for the majority of any given year.
Matthews “WORKS” in Toronto his legal residence is in Arizona. Signing bonuses are paid at the residence rate. The rest is based on the city, state/province where the money was earned.
He owns a home in Arizona and rents a luxury condo in Toronto (which is at least partially deductible as a cost of him doing business in Toronto). If he chose he can certainly OWN a car with Arizona plates though I believe the vehicle he drives there is payment for a commercial.

Also to the person who claimed they have to have resided in a place 6 months plus a day is also misleading. Traveling for work is subtracted from that.

Also, i think that 183 day rule is not a conclusion of residence in itself (in canada). It's a primary factor, but i think there also other factors and secondary factors to consider.

Matthews would not have done this tax planning if there were no court rulings in the past which reinforced what he is doing.

 

[Voight]

Were people worried about this when Florida was a shit team?

Or when Dallas missed the playoffs in 8 out of 10 seasons.

 

[Summer Rose]

Also, i think that 183 day rule is not a conclusion of residence in itself (in canada). It's a primary factor, but i think there also other factors and secondary factors to consider.

Matthews would not have done this tax planning if there were no court rulings in the past which reinforced what he is doing.

The 183 day rule, from what I can tell with regards to Arizona, is that if the state can prove that you resided in Arizona for at least that period of time, then it creates a "presumption of residency" and they can consider you an Arizona resident for tax purposes. As with anything, this doesn't mean that they will, so like you said, it's not a conclusion of residence. One of the many complexities about tax code in the United States is that there are lots of things like this that are technically "guidelines" rather than a hard and fast rule. It's possible to spend fewer than 183 days in Arizona and be considered a resident, and likewise it's possible to spend 183 or more days in Arizona and find a way to not be considered a resident (for tax purposes). Also for Arizona specifically, you can signal your intent to be considered an Arizona resident by doing things like owning a home there, registering your vehicle there, obtaining an Arizona driver's license, establishing banking relationships in the state, and so on. We could reasonably assume that Matthews has done some (or all) of these, and has found a way to be considered an Arizona resident for tax purposes.

Although at the same time, with all the complexities and nuances of tax code in the US, I'd be willing to bet that Matthews could do all of these things and find a way to be considered a resident of somewhere else for tax purposes, which is funny even if legally possible.

 

[Pancakes]

And they have never got players to sign for the rate that they consistently sign in no state tax areas.

If the rangers are such a desirable place to play. Then why do they have to pay 14% of the cap to star ufas?

Panarin/sheshterkin? Why did they have rk pay Trouba 8 million? Lafrienere.

If you take 10 minutes and look. You will see that Toronto. NYR. LA. Chicago all have to consistently pay much higher than Florida/tampa/dallas/vegas.

Won't somebody please think of the poor big market Rangers, Leafs, Kings, and Hawks?

 

[JaegerDice]

I don't think it should be touched, it's state/provincial laws and should be respected as such.

My only suggestion would be, a luxury tax, not as big as the NBA. Multiple reasons for this. It would help the LTIR issue and allow teams to spend a bit more.

My idea, allow for a MAX (maybe reduce it even) 20M luxury tax + make it so that players who are on LTIR to end the regular season are ineligible to play in the playoffs

How it helps ? If teams have legitimate injuries and are expecting guys back, they can add a bit to the roster, then activate injured player at an appropriate time and still be within the cap. Other teams can spend the same amount. It'll allow for some cap/injury flexibility and let teams spend a bit more if they need to.



If you're going $1 - $10,000,000 over the cap, you pay a 50% tax. Meaning the team pays $5M tax to the league assuming you spent maximum over cap

If you're going $10,000,001 - $15,000,000 over the cap you pay a 75% tax, $11.25M tax to the league assuming you spent maximum over cap

If you're spending between $15,000,001 - $20,000,000 over the cap, you pay a 100% tax, $20M to the league assuming you spent maximum over cap



The league then takes that money and redistributes it among the lowest revenue generation teams, bottom 5 or bottom 10, to help balance.

What this does is, allow teams to spend more, teams are flexible in case of injury, and if rich teams like Toronto/Montreal are just spending $20M over cap, they're also paying the other teams in the league a tax, those owners can then use that same tax money to spend on their roster. Lets say the top 5 richest teams all go max luxury tax, that's then $100M split between 5 or say 10 teams, $10M-$20M each to those teams, so it balances the owners would be able to spend a bit more for "parity" sake


So if a tax free state team is able to sign guys for under market value, the other teams have the ability to slightly exceed the cap to acquire the same player or type of players.

Now obviously the tax free states could spend the same amount on their roster as well, but that's a pretty big tax they have to pay which would go directly to their competitors

This may lead to higher salaries for players so not sure owners would want to do it but I think it helps two of the biggest issues in our game right now

1) LTIR nonsense. If player isn't activated, he's ineligible. You expect him back ? Good you have a $20M luxury tax, activate the player and whatever your cap hit comes to for game 82, you pay the tax. Everyones happy, you get your player back and it's within the cap/rules

2) Tax-free advantage. Other teams would have to pay more, higher salary to give the player the same amount of take home money, but teams could compete for signing/acquiring players


The biggest downside I see to this proposal would be inflated player salaries, instead of GM's using the luxury tax as intended, in case of injury or to compete with tax-free states, they just inflate player salaries by like 20%. So maybe cap the tax at $10M ?

Or I don't know if this is too complicated, but some sort of clause in a players contract that makes said players contract eligible to be applied to the luxury tax. Then you put a limit, something like maximum 2 or 3 contracts per team that can be applied towards the luxury tax.


Long as shit I know, but I think it could work. Just don't think owners would ever want to pay the players more, that's why they introduced the cap in the first place. From a players/fans perspective I think it would be great.

The only way a luxury tax would be accepted by the board of directors is if it's on a crippling scale. Like exponential.

1 million over the cap = 1 million paid in luxury
2 million over the cap = 4 million paid in luxury
3 million over the cap = 9 million paid in luxury
.
..
...
10 million over the cap = 100 million paid in luxury

Thats the only way the revenue sharing benefit could potentially balance the advantage the bigger markets would have.

 

[Monsieur Miz]

Huge advantage.