Why not after tax salary cap?

[LDN]

Has the idea of the cap being adjusted to the area the team is in’s tax rate. This would even the playing field for teams that are taxed higher. Then make players salaries only percentages of the cap vs a fixed amount? So when/if they are traded it’s adjusted as per where they live…thoughts?

 

[CTHabsfan]

Has the idea of the cap being adjusted to the area the team is in’s tax rate. This would even the playing field for teams that are taxed higher. Then make players salaries only percentages of the cap vs a fixed amount? So when/if they are traded it’s adjusted as per where they live…thoughts?

How many threads have there been suggesting this? Please shut this down now.

 

[rsteen]

99% of cap suggesations are either "Why would the owners agree to this" or "Why would the NHLPA agree to this, are you a fan of lockouts?"

 

[Fourier]

Has the idea of the cap being adjusted to the area the team is in’s tax rate. This would even the playing field for teams that are taxed higher. Then make players salaries only percentages of the cap vs a fixed amount? So when/if they are traded it’s adjusted as per where they live…thoughts?

This would be much more complicated than it might seem on the surface. There is no way the league would even consider it.

 

[Moose Head]

The cap is to create a better level of cost certainty, not to be fair

 

[mouser]

Has the idea of the cap being adjusted to the area the team is in’s tax rate. This would even the playing field for teams that are taxed higher. Then make players salaries only percentages of the cap vs a fixed amount? So when/if they are traded it’s adjusted as per where they live…thoughts?

About every two months we get a similar thread on the main hockey forum.

A summary of many common answers would include:
a) Determining after tax salaries is not trivial. People with lots of income and good tax planning often have tax deferral and avoidance strategies. Many players are even receiving their signing bonuses in taxing districts other than where the team itself is located.
b) Why stop at calculating after tax salaries? What about locations with higher endorsement opportunities? Better training facilities? More desirable places to live in? Less long distance travel?
c) If people believes taxes in location A are unfair compared to location B then why not advocate to lower the taxes in location A rather than ask the NHL to be an arbiter?
d) Why isn't there a cap on non player spending to even the playing field? Is it fair team A spends more on coaches and facilities than team B? Is it fair western teams log far more air travel and overnight stays than eastern teams?
e) The cap isn't about perfect "fairness". The cap is about constraining total spending on players to an amount close to 50% of hockey revenue, while keeping the maximum spending of teams within a reasonable limit.

 

[93LEAFS]

About every two months we get a similar thread on the main hockey forum.

A summary of many common answers would include:
a) Determining after tax salaries is not trivial. People with lots of income and good tax planning often have tax deferral and avoidance strategies. Many players are even receiving their signing bonuses in taxing districts other than where the team itself is located.
b) Why stop at calculating after tax salaries? What about locations with higher endorsement opportunities? Better training facilities? More desirable places to live in? Less long distance travel?
c) If people believes taxes in location A are unfair compared to location B then why not advocate to lower the taxes in location A rather than ask the NHL to be an arbiter?
d) Why isn't there a cap on non player spending to even the playing field? Is it fair team A spends more on coaches and facilities than team B? Is it fair western teams log far more air travel and overnight stays than eastern teams?
e) The cap isn't about perfect "fairness". The cap is about constraining total spending on players to an amount close to 50% of hockey revenue, while keeping the maximum spending of teams within a reasonable limit.

I generally agree. But, on topic C, I think I'd prefer the higher taxes in my location than say Florida considering an injury or health problem wouldn't bankrupt me or force me to beg for cash on GoFundMe, but I can feel annoyed it puts the teams I cheer for at a competitive disadvantage since the Leafs in theory could outspend everyone outside the Rangers, and revenue sharing and the cap really do nothing for me as a fan. Like, why should the Leafs tickets cost more than pretty much every team in the league be used to prop up other franchises. The Leafs ticket prices or local tv deal wouldn't change whether there is 32 or 20 teams.

 

[CharasLazyWrister]

The salary cap ultimately exists as a direct benefit to the owners who can maintain exclusive and rather unshakable standing as the beneficiaries of the best hockey league in the world. It has zero relation to any actual fairness between player salaries. You may be right that certain teams have a slight disadvantage due to higher income taxes in acquiring players, but it's not nearly a gap that puts any of said teams in peril with a league-wide minimum and maximum cap. Altering that structure which the league has locked out for multiple times would be a massive, unnecessary burden.

The only way I can see the NHL doing something about its cap structure is if Canadian teams were to once again be pushed to the brink by a strong American dollar/weak Canadian dollar. Or vice-versa.

 

[coolboarder]

This gives me an idea of the tax where teams are free to go over the cap on a certain percentage and money goes to poorer teams with lower cap and use that money to cover. I do not mean the lower revenue teams but on floor cap. Should they elect to have this tax money from the taxes, they must use the money to sign free agent or they can use the tax money to go over the cap for next season. For example, a team has to pay 10 million of tax money due to going over the cap and tax from 5 teams that has gone over the cap pay 20 million of overall tax to be split amongst 27 teams that would have been around 740k and the cap will raise from current 81.5 to 82.2 million and they cannot keep the tax money to themselves for profits by owner and must be used and raise their payroll by $740k. This is just an example. I'd like to see free market for players without being restricted to the cap.

 

[mouser]

This gives me an idea of the tax where teams are free to go over the cap on a certain percentage and money goes to poorer teams with lower cap and use that money to cover. I do not mean the lower revenue teams but on floor cap. Should they elect to have this tax money from the taxes, they must use the money to sign free agent or they can use the tax money to go over the cap for next season. For example, a team has to pay 10 million of tax money due to going over the cap and tax from 5 teams that has gone over the cap pay 20 million of overall tax to be split amongst 27 teams that would have been around 740k and the cap will raise from current 81.5 to 82.2 million and they cannot keep the tax money to themselves for profits by owner and must be used and raise their payroll by $740k. This is just an example. I'd like to see free market for players without being restricted to the cap.

The NHL and PA have agreed on a CBA where Hockey Revenue (HRR) is split 50/50 between the players and the teams.

Would your proposal require that 50/50 split to be broken, such that the players now receive more than 50% and the teams less than 50%?

If your answer is Yes, then that’s gonna be a non-starter with the NHL.

If your answer is No, then you’re going to have to reduce the salary cap ceiling under your new system so the total revenue players receive is still 50%.


This is the fundamental problem with every suggestion to alter the current salary cap system to allow teams to spend more on players—Whether that’s via a luxury tax, discounted cap hits, etc. The players still only receive half of the revenue pie. Any change to increase player spending over the current system needs a balancing change to decrease spending.

 

[patnyrnyg]

This argument is so overblown. If the no income-tax states are so much more attractive, why didn't guys like Crosby, Ovechkin, Malkin, Kane, etc sign with one of these teams the minute they could?

Tennessee does not have state income tax on earned income. My friend just came back from Nashville, said there was a 35% tax on alcohol. Should we factor that into the equation?

 

[Yukon Joe]

So the idea of an after-tax salary cap isn't completely insane. The notion that certain teams have an advantage because they are in low or no-tax jurisdictions is based in reality.

But it is so much more complex than that.

1. Remember players pay tax based on where they play games, not where the team is based. So even if you play in Florida, you can still be taxed on your road games in taxed jurisdictions. So you're going to have to adjust the "after tax salary cap" every season for every team based on your road schedule.

2. Teams like Florida perennially suck, despite being in a no-tax jurisdiction. Boston is killing it this year, despite Massachusetts being a high-tax jurisdiction.

3. Why limit it to only tax rates? Why not adjust the salary cap for being in a warm-weather versus cold-weather city? Big market (and thus big endorsement potential) versus small market? Canadian versus American city? Original


So I get it. I'm a fan of the Winnipeg Jets. It perennially feels like the deck is stacked against the Jets: a small, cold, Canadian market with no winning history and a high tax rate. It's no secret the Jets have incredible trouble signing high-profile free agents. I'd kind of love it if the salary cap could try to adjust for all those factors. But I can't imagine it happening. And in a year like this, with the Jets battling for the top of the Central, perhaps it isn't as necessary as I sometimes think it would be.

 

[patnyrnyg]

So the idea of an after-tax salary cap isn't completely insane. The notion that certain teams have an advantage because they are in low or no-tax jurisdictions is based in reality.

But it is so much more complex than that.

1. Remember players pay tax based on where they play games, not where the team is based. So even if you play in Florida, you can still be taxed on your road games in taxed jurisdictions. So you're going to have to adjust the "after tax salary cap" every season for every team based on your road schedule.

2. Teams like Florida perennially suck, despite being in a no-tax jurisdiction. Boston is killing it this year, despite Massachusetts being a high-tax jurisdiction.

3. Why limit it to only tax rates? Why not adjust the salary cap for being in a warm-weather versus cold-weather city? Big market (and thus big endorsement potential) versus small market? Canadian versus American city? Original


So I get it. I'm a fan of the Winnipeg Jets. It perennially feels like the deck is stacked against the Jets: a small, cold, Canadian market with no winning history and a high tax rate. It's no secret the Jets have incredible trouble signing high-profile free agents. I'd kind of love it if the salary cap could try to adjust for all those factors. But I can't imagine it happening. And in a year like this, with the Jets battling for the top of the Central, perhaps it isn't as necessary as I sometimes think it would be.

NYC-metro is the biggest market on population, and there is little if any endorsement opportunities for NHLers here.

Aside, why not adjust for Cost of Living? Cost of Living in the NYC metro area is certainly higher than Buffalo, Raleigh, Miami, Tampa.

 

[cheswick]

This is such an overblown argument based on oversimplification of how taxation works. I remember an interview a few years ago with a prominent players agent and he basically said after tax salary was rarely if ever a consideration for where players sign. That if they wanted him to "sharpen his pencil" and figure it out they ofcourse would, but it's never asked.

 

[BlueBaron]

Bit of a can of worms. When you start trying to balance competitive qualities that are linked to region you do have to think about more than taxes if your goal is fair.

Warm places
Big Markets
Original 6 appeal
What about guys who take less to play for their hometown team?

You end up creating 32 distinct market profiles which would be absurd to manage and maintain. It would also hinder player movement even more.

It's bad enough fans have to know about cap hits to understand their roster construction. Needing to know tax codes etc is a lot to ask.

 

[Dirty Old Man]

Like, why should the Leafs tickets cost more than pretty much every team in the league be used to prop up other franchises. The Leafs ticket prices or local tv deal wouldn't change whether there is 32 or 20 teams.

Your continued misguided concern that your team is "propping up other franchises" distracts you from the fact that you need to take ticket costs up with your own team. You really should move to Europe so you can root for Real Madrid or Bayern Munchen - they have the kind of league you're looking for.

 

[McGarnagle]

Massachusetts Question 1, Tax on Income Above $1 Million for Education and Transportation Amendment (2022)

Ballotpedia: The Encyclopedia of American Politics

ballotpedia.org

This bill was passed in November and took effect January 1st in the state of Massachusetts to add an additional 4% tax on income over a million dollars. So would the league adjust the Bruins' cap hit on January first to reflect the new post-tax net pay of their players, thus giving them a nice little cushion for the deadline? And if a deadline target is traded to the Bruins he'll come with a different cap hit than if he's traded to Vegas or Carolina? Affecting who has flexibility to do what and such.

There's too many moving parts to keep track of. It won't work in practice.

 

[93LEAFS]

Your continued misguided concern that your team is "propping up other franchises" distracts you from the fact that you need to take ticket costs up with your own team. You really should move to Europe so you can root for Real Madrid or Bayern Munchen - they have the kind of league you're looking for.

Except why would ticket prices go down if the market dictates these prices? They would just be sold at a discount to the lucky few and some middle-man would see the profit. If demand didn't dictate these prices they wouldn't be able to sell them at those prices and adjust.

 

[Tobias Kahun]

About every two months we get a similar thread on the main hockey forum.

A summary of many common answers would include:
a) Determining after tax salaries is not trivial. People with lots of income and good tax planning often have tax deferral and avoidance strategies. Many players are even receiving their signing bonuses in taxing districts other than where the team itself is located.
b) Why stop at calculating after tax salaries? What about locations with higher endorsement opportunities? Better training facilities? More desirable places to live in? Less long distance travel?
c) If people believes taxes in location A are unfair compared to location B then why not advocate to lower the taxes in location A rather than ask the NHL to be an arbiter?
d) Why isn't there a cap on non player spending to even the playing field? Is it fair team A spends more on coaches and facilities than team B? Is it fair western teams log far more air travel and overnight stays than eastern teams?
e) The cap isn't about perfect "fairness". The cap is about constraining total spending on players to an amount close to 50% of hockey revenue, while keeping the maximum spending of teams within a reasonable limit.

Players taking signing bonus' in districts other than the teams location, wouldnt that be considered tax evasion?

 

[Shad]

After tax
Cost of living
Weather
Crime

There’s a million and one factors to consider if you go down this road.

The tax thing is overblown anyhow. Players aren’t taxed for all games at their home team’s tax rate, plus many loopholes.

 

[mouser]

Players taking signing bonus' in districts other than the teams location, wouldnt that be considered tax evasion?

Tax laws are complex.

Matthews' New Contract Structured to reduce his overall tax burden.

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ustaxiq.com

 

[cheswick]

Players taking signing bonus' in districts other than the teams location, wouldnt that be considered tax evasion?

Tax avoidance and tax evasion are two different things. There are plenty of legal tax avoidance mechanics employed by every NHL player. Which makes this whole argument blown way out of proportion. Players are not necessarily considered residents of the province/state their team is based in. They also pay income taxes for away games, jock taxes, etc. When people are earning this obscene amounts of money they employ every tax avoidance mechanism they can. Its far far far more complicated then simple comparing two different states income tax rates.