TSN: League looking at signing bonuses CBA

[Hunter Gathers]

Actually the cap greatly helped out the big market teams just as much, if not more. New York, Toronto, Detroit and others are bringing significantly more dollars to the bottom line now that their payroll arms race has been limited. Toronto has increased their operating profits 5-6x. Detroit has gone from losing money most years pre-cap to generating solid operating profits every season. The Rangers have gone from approximately break even to generating $80-100m operating profits each year.

Quite a lot of big market owners wanted to see the cap implemented, and it's worked out great for them.

And I can safely say that many or all of those teams would much prefer to have the ability to spend over the cap if they could. A team like Detroit would have a threshold it would be willing to spend to. Same with all of the teams listed.

The Rangers and Knicks both spend right to their respective caps every year and go as far as they can go without going over (this will be one of the first years in memory that the Rangers aren't knocking on the cap). Both teams would go over the cap (much like the Yankees have, until this year, gone into the luxury tax threshold for most of their seasons).

 

[Ciao]

Right. So let's go my route. Keep the cap and floor but install a "soft" ceiling that can be spent over at a $2-for-$1 hit. That way garbage franchises have to spend a certain amount, well-run franchises can choose to spend a higher amount, and everyone ends up winning. We also avoid crazy tax discussions and the like since it all ends up meaningless.

But the small market teams will cry that they have no competitive advantages and all of this will end up as a nonstarter.

I don't think the players go for this because unless the tie is cut between the players' share and HRR, this will just increase escrow and cause salary deflation.

The owners really don't give a shit how the players' share of HRR is distributed. They could give it all to McDavid, or Ovechkin (or dare I say Matthews, Malkin or Crosby in one breath) and let the others suck eggs as long as the owners still get their share of the pie.

As a group, the owners overspend every year, and it has no effect on the who gets what share of HRR. When total salaries exceed the players' share of HRR, their salaries all go down proportionately, and this is whey they have escrow.

In the NHL, a salary is not a real salary. It is an aspirational salary that is never paid out 100%. The real salary is the contract amount, minus escrow.

Allowing big-market teams to overspend would only make this worse.

 

[nturn06]

Call it what you want, but when the league goes on a work-stoppage as much as this one does, you gotta be smart and take in as much of your money as possible.

True, but that is exploiting the CBA and defeats the purpose of the lockout.

It will be interesting though what will happen with Tavares type of contracts if the CBA year will be a short season. JT will make 11 mils for 40 something games, will his cap hit be 20+mils?

 

[Riptide]

Explain how the Leafs make more money by having to pay money into revenue sharing.

Because of the artificial cap on salaries that goes along with it. In 2003/04 Toronto was spending something like 65-70m on salaries. Their operating revenue according to Forbes was something like 115m. Now they're still spending 65-70m on salaries, but their operating revenue according to Forbes is something like 211m. So they have to share 10% (probably less than that) by contributing that to the RS pot. They still come out way ahead by having revenue sharing and a salary cap then they did when they had neither. And it's not even close.

 

[Hunter Gathers]

You say im making it complicated, yet youre the one pushing for a tax-adjusted salary cap. Who is really making it complicated?

It's incredibly easy to adjust for taxes. You pay income tax in the state you work. Ignore local taxes and any other tax implications (including states that may not have full reciprocity). The idea that that is complicated is a bit humorous to me.

I've actually pushed for years to just install a luxury tax style system and allow teams to spend over the cap. That's a nonstarter for the garbage small market franchises, though. So adjusting for taxes is the next best thing in terms of fairness.

 

[Ciao]

I would kinda disagree. Now that the Leafs are a consistent playoff team again, it's nice because they get the additional revenue from the playoffs. However, when they sucked, I am almost certain that MLSE would gladly pay 100M in payroll if that would get the Leafs to the playoffs, and I am sure they would be willing to pay 100M in payroll to keep them successful now that they are.

Look at the Raptors. Masai has said since he got here that MLSE has been supportive and have said they are willing to go into the Luxery Tax if it meant keeping the team successful.

You could be right.

However, whoever is responsible for the financial performance of MLSE must truly love this conundrum.

I thank God that Harold Ballard is dead. This would have been his cup of tea.

 

[Starat327]

It's not complicated for accountants. It's their job. You can likely hire 5-10 accountants and pay them 100k each to get the job done. That is $1M taken off the yearly $3B revenue. If they can figure out a way to implement a salary cap/escrow management team, they can figure this out as well.

Maybe this is the problem with parity. If creating parity doesn't put money in the owners pockets (Salary Cap splitting revenue 50/50 between players and owners for example), they have no incentive to do it. But you can bet that with rising salaries (North of $10M), it's going to be a conversation at the owners and GM meetings in future years.

The difference between most teams is minor. However, their are a few teams in the US with no or very little state tax. Panthers, Lightning, Knights, Preds are teams that come to mind. The difference between the rest of the teams in the league is not as much and has less impact.

You think 5-10 accountants are going to become tax experts on 31 different state, and local tax codes, as well as cost of living issues (property taxes, and everything else) which are constantly changing?

Again, all this ignores the idea that the numbers your estimating are minor, since Tampa only plays wjhat, 44 games in florida (41 home, 3 at Panthers?) where they see this benefit.

To boot, most of these 'cheap' contracts that everyone takes issue with are heavily signing bonus related, so they're not even taxed at local tax rates - theyre taxed at the residency rate. Stamkos has a 1Million dollar salary that hes "not going to pay taxes on", and the 7.5 million signing bonus he makes will be taxed at his residency location. Presumably, that's tampa, but i dont know. Everyone else is just as welcome to set up a house in florida as a tax shelter and take advantage.

 

[Habs Halifax]

New CBA outlaws PB each year.

Big market teams offer a massive signing bonus. 50% up front, small market teams start crying and next CBA they change it to accommodate. The line will continue to get moved.

Reality is every team is gonna try to take advantage of every economic factor under the CBA. They will also use any geographic factor (Lifestyle, no sales tax, etc). There will never be true parity in the league as long as there are teams who are bottom feeders just looking for hand outs.

There is a huge difference in parity that creates more money in the owners pockets vs parity that does not put more money in the owners pockets. I think there has to be incentive or opportunity for the NHL owners and Bettman to want to change anything drastically. CBA was fined tuned in the current one and I only expect minor adjustments at this stage. However, there are way more teams with no tax advantage vs teams that have tax advantages and that is a biggest hurdle at this point IMO. Panthers, Lightning, Preds, Knights, Stars, are outnumbered and the higher the salaries the players make (north of $10M), the bigger the factor.

 

[Starat327]

It's incredibly easy to adjust for taxes. You pay income tax in the state you work. Ignore local taxes and any other tax implications (including states that may not have full reciprocity). The idea that that is complicated is a bit humorous to me.

I've actually pushed for years to just install a luxury tax style system and allow teams to spend over the cap. That's a nonstarter for the garbage small market franchises, though. So adjusting for taxes is the next best thing in terms of fairness.

Why are we ignoring local taxes, again? If you want equality because people can 'take home more' in these states, we should be makign that cap around what they actually take home, not just adjusting for income tax. Why choose just one tax out of the many?

 

[Hunter Gathers]

Why are we ignoring local taxes, again? If you want equality because people can 'take home more' in these states, we should be makign that cap around what they actually take home, not just adjusting for income tax. Why choose just one tax out of the many?

It's almost like I already explained this and you somehow missed it.

 

[Riptide]

Also for everyone crying that poor teams cant do this, I just want to remind everyone that the Islanders started it with Laad.

It started long before A.Ladd's latest contract. One could make a very credible argument that it started with the David Clarkson contract that Toronto signed him to in 2013, where only 9m of a 36.75m contract was paid in salary.

No, take a model the NHL had until 2005.

You mean the one where Toronto was making significantly less money and the rest of the league was struggling? Even Toronto if they had the choice wouldn't want to go back to that system.

 

[Habs Halifax]

You think 5-10 accountants are going to become tax experts on 31 different state, and local tax codes, as well as cost of living issues (property taxes, and everything else) which are constantly changing?

Again, all this ignores the idea that the numbers your estimating are minor, since Tampa only plays wjhat, 44 games in florida (41 home, 3 at Panthers?) where they see this benefit.

To boot, most of these 'cheap' contracts that everyone takes issue with are heavily signing bonus related, so they're not even taxed at local tax rates - theyre taxed at the residency rate. Stamkos has a 1Million dollar salary that hes "not going to pay taxes on", and the 7.5 million signing bonus he makes will be taxed at his residency location. Presumably, that's tampa, but i dont know. Everyone else is just as welcome to set up a house in florida as a tax shelter and take advantage.

Yes to the bolded part. I'm not looking for parity with property tax and everything else). Salaries and tax are not that complicated to figure out for 5-10 accountants.

 

[Starat327]

It's almost like I already explained this and you somehow missed it.

No, you offered a half-hearted explanation to the tune of "i dont think its worth it", to which i showed you one example of which it would be worth it.

Again, creating a tax-adjusted salary cap has to be an all tax-adjusted game. You cant pick and choose which taxes you adjust for simply because you think its the only way players are taxed.

 

[Harvey Birdman]

There is just no way the league would go to teams having different salary caps based on state/local taxes. It just won't. I would take that bet any day of the week that it will not.

 

[Starat327]

Yes to the bolded part. I'm not looking for parity with property tax and everything else). Salaries and tax are not that complicated to figure out for 5-10 accountants.

Well then youre not looking for parity at all. You're looking for the NHL to adjust something due to how a government chooses to run its 'business'. How canada collects and spends their money is not the business of the NHL. Adjusting for that requires adjustments for every state, county, and city collects their money. Just because Canada has chosen to do that at the national or provincial level, doesnt mean all states here have.

You want a take home pay cap, but arent willing to factor in everything that makes up 'take home pay'.

 

[Hunter Gathers]

No, you offered a half-hearted explanation to the tune of "i dont think its worth it", to which i showed you one example of which it would be worth it.

Again, creating a tax-adjusted salary cap has to be an all tax-adjusted game. You cant pick and choose which taxes you adjust for simply because you think its the only way players are taxed.

I actually offered a couple examples. I take it you missed that post and just now tried to quickly read it.

What you're offering is an intellectually dishonest viewpoint that ignores the fact that players live in multiple states with multiple tax codes and many (most?) of them rent. So all of that is meaningless and inconsistent.

The only reason you're offering that up (and this is where your overly apparent intellectual dishonesty in this discussion comes in) is to try and make a really bad comparison of the different taxes to try and muddy up the discussion. If you were actually offering up an honest point of view, you'd concede that local taxes are a completely individualized issue that impact every single player differently across the spectrum (and, thus, could really only properly be analyzed retroactively).

The idea that we'd have to consider all of these taxes is simply absurd and completely untrue. But no worries. I can see through your bad-faith argument pretty well.

 

[Habs Halifax]

Why are we ignoring local taxes, again? If you want equality because people can 'take home more' in these states, we should be makign that cap around what they actually take home, not just adjusting for income tax. Why choose just one tax out of the many?

Cause we are in version 3 of the CBA in the next negotiations. Teams found a way to circumvent the cap in the 1st CBA and it was fixed in the next CBA. At some point, there will be focus at taxes and how they can help create a equal playing field. However, this don't mean more money in the owners pockets so Bettman would not have much incentive to convince all the owners it's a good idea. It will be a topic of conversation and the focus of several teams who pay high tax.

I like the idea with creating parity in taxes but I don't see the incentive where all NHL teams are on the same page about it like the salary cap was.

 

[mouser]

And I can safely say that many or all of those teams would much prefer to have the ability to spend over the cap if they could. A team like Detroit would have a threshold it would be willing to spend to. Same with all of the teams listed.

The Rangers and Knicks both spend right to their respective caps every year and go as far as they can go without going over (this will be one of the first years in memory that the Rangers aren't knocking on the cap). Both teams would go over the cap (much like the Yankees have, until this year, gone into the luxury tax threshold for most of their seasons).

I would not make that assumption. Let's look at the NBA for example, a majority of the owners would like to eliminate the luxury tax and go to a hard cap. They've had a fight with the NBA PA every time this has come up and have so far been unsuccessful in removing it. However they have significantly upped the luxury tax penalty with each new CBA to make it more and more punishing to exceed the cap.

Letting teams exceed the cap just re-opens the pre cap arms race. Many of the top spending teams would feel like they need to exceed the cap to keep up with the jones, decreasing their profitability. Even though at the end of the day the players don't get paid one single penny more. It's all just re-adjusting what share of the 50% HRR pie each individual player gets.

 

[Cor]

You could be right.

However, whoever is responsible for the financial performance of MLSE must truly love this conundrum.

I thank God that Harold Ballard is dead. This would have been his cup of tea.

Sure. Making money with the Leafs is foolproof under a Salary Cap System.

Ballard would have definitley been a supporter of the Salary Cap.

 

[Hunter Gathers]

I would not make that assumption. Let's look at the NBA for example, a majority of the owners would like to eliminate the luxury tax and go to a hard cap. They've had a fight with the NBA PA every time this has come up and have so far been unsuccessful in removing it. However they have significantly upped the luxury tax penalty with each new CBA to make it more and more punishing to exceed the cap.

Letting teams exceed the cap just re-opens the pre cap arms race. Many of the top spending teams would feel like they need to exceed the cap to keep up with the jones, decreasing their profitability. Even though at the end of the day the players don't get paid one single penny more. It's all just re-adjusting what share of the 50% HRR pie each individual player gets.

It's an easy assumption to make when you see who Dolan spends money on. It may not be as easy with other teams and owners. I can guarantee you that Dolan would spend above the cap in the NHL. It's not even a discussion. The only discussion is how much he'd spend above the cap.

The problem with the NBA cap is that it's overly complex and stupid with all kinds of random rules attached.

 

[Habs Halifax]

Well then youre not looking for parity at all. You're looking for the NHL to adjust something due to how a government chooses to run its 'business'. How canada collects and spends their money is not the business of the NHL. Adjusting for that requires adjustments for every state, county, and city collects their money. Just because Canada has chosen to do that at the national or provincial level, doesnt mean all states here have.

You want a take home pay cap, but arent willing to factor in everything that makes up 'take home pay'.

How is not not trying to create parity when there could be a difference of $1-$2M in take home pay (annually) between two cities a player is thinking about signing with?

I understand it's not easy to implement a system of tax parity. However, A salary cap was implemented with a escrow. Change is only going to happen if there is a will to change by the people in control. If you brought up the salary cap idea back in the 80's, how well would people welcome that idea? Time has a way of evolving things or ideas to be more welcomed. Takes a guy like Bettman to come along and push it into reality

 

[tucker3434]

10-20 % of $90k vs $8M. I'll let you do the math. If you used your logic as an NHL agent and tried to tell this to your player, you would get fired.

It doesn’t matter. It all just scales up. It seems like a ton of money to us but when you make that much money, your perceptions change. To someone else an extra $9-18k per year would be a fortune.

Tried to tell what to a player? I’m not offering advice. I’m telling you why they make the choices they make. We see it literally all the time. We hear stories every single July 1 about guys turning down more money for this reason or that reason. UFA isn’t just a simple bidding war. These players weigh everything and make the best decision for their family.

There’s a reason there isn’t a steady stream of players out of Canada, NY, and CA and into TX, TN, and FL.

 

[byrath]

Why are we ignoring local taxes, again? If you want equality because people can 'take home more' in these states, we should be makign that cap around what they actually take home, not just adjusting for income tax. Why choose just one tax out of the many?

Agreed, too arbitrary to adjust based solely on state income tax and trying to incorporate local taxes and fees, cost of living etc would be way too convoluted and not worth the effort. Seattle will be a prime example of why income tax adjustment would be unfair. No state income tax but the ridiculous cost of living there would pretty much offset that benefit from a players POV, the older ones looking to settle down and buy a home anyway.

 

[Habs Halifax]

It doesn’t matter. It all just scales up. It seems like a ton of money to us but when you make that much money, your perceptions change. To someone else an extra $9-18k per year would be a fortune.

Tried to tell what to a player? I’m not offering advice. I’m telling you why they make the choices they make. We see it literally all the time. We hear stories every single July 1 about guys turning down more money for this reason or that reason. UFA isn’t just a simple bidding war. These players weigh everything and make the best decision for their family.

There’s a reason there isn’t a steady stream of players out of Canada, NY, and CA and into TX, TN, and FL.

Scales up eh?

- 15% of 90k = $13.5k
- 15% of $8M = $1.2M

A person making $13.5k more loses about half that in taxes and has an extra $7k in annual salary. If you are smart, you invest it to offset your taxes even more but how much quality of life does it make best case? It's a small boost but is your family set for life? NO! You would have to wait many years for this investment to grow.

A person making an extra $1.2M can invest it cause they are already making enough money to maintain an above average quality of life. $1.2M in extra funds invested over 10-15 years is a hell of a lot of money and your family can retire on these funds alone.

You have no idea what you are talking about.

 

[Starat327]

I actually offered a couple examples. I take it you missed that post and just now tried to quickly read it.

What you're offering is an intellectually dishonest viewpoint that ignores the fact that players live in multiple states with multiple tax codes and many (most?) of them rent. So all of that is meaningless and inconsistent.

The only reason you're offering that up (and this is where your overly apparent intellectual dishonesty in this discussion comes in) is to try and make a really bad comparison of the different taxes to try and muddy up the discussion. If you were actually offering up an honest point of view, you'd concede that local taxes are a completely individualized issue that impact every single player differently across the spectrum (and, thus, could really only properly be analyzed retroactively).

The idea that we'd have to consider all of these taxes is simply absurd and completely untrue. But no worries. I can see through your bad-faith argument pretty well.

"I want a tax-adjusted cap, but i dont want to adjust it for all taxes that affect people. Just the ones that are affecting my team".

And im the intellectually dishonest one here.

Let me ask you something - Does my 4% city wage tax affect my take home pay as much as 4% of my state income tax the same amount, or a different amount?

 

[JoelWarlord]

I take offense of your Habs troll comment BTW. You should shift your focus.

Cool. I'm a Habs fan too. I think Habs fans should shift their focus to the team's horrid management instead of whining about taxes, especially considering the primary argument is always about UFAs and the Leafs just signed the best one in a decade with basically the same tax rates. The Rangers and Kings were perennial contenders with tax rates a percent or two lower, the Ducks are (were?) always good despite top 5 tax rates (and an internal cap!) and the Jets/Leafs are currently among the elite teams in the league despite taxes that are only a half percent lower than Montreal (and in the case of the Jets, a substantially less attractive city). My position isn't "tax rates don't matter", it's that I don't think they're a primary factor in the Habs lack of success or something significantly hampering the team and I think they're very far down the list of problems for the amount of discussion they get among Habs fans.

Even with the highest taxes in the league the Habs already have a massive financial advantage over other teams. They can't ensure as much post-tax payroll in a vacuum as Tampa Bay but the fact money is truly no object to the Canadiens (and Leafs and Rangers) is a huge advantage and they've used it a lot recently. A lot of teams couldn't afford to pay Therrien over 4M to stay home and then shell out 25M to sign Julien for 5 years. Lots of teams can't afford to sign a bunch of AHL ringers for 925k each (and pay them 300-400k in the minors) to bolster their AHL team. Lots of teams couldn't afford to give Tavares the exact contract structure he got, the Habs could have and absolutely would have if they had the chance. A lot of teams couldn't afford to trade for Weber a week before he was owed an 8M signing bonus, or offer Price 26M in signing bonuses in his first two years. A lot of teams couldn't afford to do the Mason+Armia trade, the Habs effectively paid 4.5M in buyouts and salary to buy a signed Armia, a 4th, and a 7th at the drop of a hat.

Price at $10.5M, Subban at $9M were deals that were more than most thought would be signed (including non Habs fans). Now look at Hedman, Stamkos, and Kucherov contracts. Of course the team you play with has a factor (Tavares in Toronto for example) but ignoring the difference is taxes is not something Habs fans created. It's been a topic of conversation for years now.

Taxes aren't the reason Subban and Price got the biggest AAV for their positions at the time they signed. It was because the 2012-13 lockout added contract limits so it was no longer possible to front-load deals, and Subban and Price just happened to be the first elite guys around their own age cohort to get close to UFA status. At the time Doughty and Karlsson were signed long-term on deals right after their ELCs so they were far from arbitration and UFA rights and didn't have the leverage to get 9M like Subban. Now that LA has to pay for Doughty's UFA years they're spending 11M for them, and Karlsson will get about the same.

That's basically what the past generation of elite defensemen got as well, but it was just masked by those front loaded cap circumvention deals. Over the first 8 years of Shea Weber's contract he got 92M (11.5 AAV), and for Suter it was 80M (10M AAV). Same for Price, Lundqvist's 8.5M is about the same as a percentage of the cap as Price's 10.5M. Price was just the first of his generation of elite goalies to sign a contract as a near-UFA and his peers (Holtby, Bobrovksy) just haven't got a chance to cash in yet. I expect Holtby and Bobrovsky will get similar money in the next couple years.