Short,Medium and Long.....A look at where contracts are heading

[Tnuoc Alucard]

Issue is signing bonuses and how they are expected by players as a means of preventing buyouts and getting cash sooner. They aren't being used as they likely were intended when brought into the CBA, and I'd imagine this will be a point of contention in the next lockout.

Plus, in Matthews case (yesterday) the Massive tax savings with the Bonuses (15%) vs the Base Salary (53%)

 

[Cosmix]

"Matthews’ new contract will be paid almost entirely in bonuses (90 percent), with $15.2 million due in each of the first two seasons, $9.7 million in the third season, and $7.2 million in the final two seasons. Matthews will earn the league minimum in salary in all five seasons."

That "bonus" shenanigans is a problem for all teams but particularly the small market lower revenue teams. I think the league must reign in this aspect as well as the the 8 year term contract.

 

[Calvin123]

Plus, in Matthews case (yesterday) the Massive tax savings with the Bonuses (15%) vs the Base Salary (53%)

Can you explain why taxes would be lower on bonuses than on salary?

 

[Cosmix]

Drop the cap 25% over the next five years. Peg it going forward to inflation not league revenues. All existing contracts are honored but the cap hits are scaled down proportionally. If players strike bring in scabs to replace them.

The cap is not the problem. Nor the buyout system. The bonus system needs significant changes to address the inequality in treatment between bonus and salary.

 

[Tnuoc Alucard]

Can you explain why taxes would be lower on bonuses than on salary?

Article XVI of the US-Canada tax treaty states that signing bonuses paid to a resident of the US by a Canadian team are taxed at 15% in Canada, and vice versa for US teams paying bonuses to Canadian residents.

So in his first year of his contract (for example) the 15 Million signing bonus is taxed, in Canada at 15%, leaving his "Base Salary" 750K being taxed in Canada at 53%.


I think this is what Tavares is doing also, or at least it is speculated that he is.

John Tavares Could Save Nearly $12 Million In Taxes On His New Contract

 

[Icelevel]

Sports are stupid.

Why cause a dumbass kid gets a cheque for $15million to push a piece of rubber around? And then gets another one a year later?

 

[Silencio]

Every time the CBA is renegotiated there's always some stupid loophole that gets massively exploited by the same 4 or 5 teams. Last time it was front loaded cap hits, now it's front loaded bonuses. God only knows what the next CBA will spawn.

 

[Calvin123]

Article XVI of the US-Canada tax treaty states that signing bonuses paid to a resident of the US by a Canadian team are taxed at 15% in Canada, and vice versa for US teams paying bonuses to Canadian residents.

John Tavares Could Save Nearly $12 Million In Taxes On His New Contract

Thanks, I wasn't aware of that tax loophole. Amazing what the rich can get written into law...

 

[GrantLemons]

Every time the CBA is renegotiated there's always some stupid loophole that gets massively exploited by the same 4 or 5 teams. Last time it was front loaded cap hits, now it's front loaded bonuses. God only knows what the next CBA will spawn.

I mean the CBA negotiated in 2004-2005 was unprecedented by NHL standards, so you would have to expect some hiccups. I would imagine with each passing CBA negotiation it will get ironed out a little more.

 

[Chabot84]

So what did Matthews get? His contract was 93% all bonus money? So does that mean Stone and Duchene are going to want their contracts structured similar? and then... Chabot... are we even sure the Sens can build a hockey team in this climate?

Look at the top 50 in the NHL though... there is a lot of players scoring at or near PPG

NHL.com - Stats

They cant all be worth 10 million++ now.. right lol

Stone has 10 points less then Marner.. so if Marner gets 11 million$ what does a player like Stone get?

Duchene scoring 48 points in 43 games.. scoring at similar pace as Marner and hes #1C

So basically teams that locked up their stars over the last 3-4 years have a huge advantage moving forward financially for the next window. And of course the Sens are on the butt end of this.. we are always on the wrong side of things.

 

[coladin]

The Sens won't ever survive in this landscape. Neither will a remaining 1/3 of the league. They can lockout the players for 2-3 years at this point for all I care. Guaranteed, up-front money has rendered a good portion of the CBA (as someone worded it) "toothless" for the league. As a Sens fan, it's doubly-hopeless because our owner won't spend to begin with (and it has been that way for some time), but when you factor in the fact the so-called rich teams have once again regained their competitive advantage via up-front money, seriously, what's the point? Recognizing this fact, however, does not absolve Melnyk or the organization for its treatment of its most valuable on-ice assets and refusal to see how investing in the core would improve its brand and image (and in turn, draw people like myself back to ticket purchasing habits), but they've made that decision, as have I.

That Matthews contract has more effect on my apathy for this team than almost anything Sens related. We are doomed. You can't cheer for the young guys because it will be like "what's the point, they will get moved", or you just won't have that sense of attachment as we had in the past with the likes of Alfie and Co.

 

[coladin]

So what did Matthews get? His contract was 93% all bonus money? So does that mean Stone and Duchene are going to want their contracts structured similar? and then... Chabot... are we even sure the Sens can build a hockey team in this climate?

Look at the top 50 in the NHL though... there is a lot of players scoring at or near PPG

NHL.com - Stats

They cant all be worth 10 million++ now.. right lol

Stone has 10 points less then Marner.. so if Marner gets 11 million$ what does a player like Stone get?

Duchene scoring 48 points in 43 games.. scoring at similar pace as Marner and hes #1C

So basically teams that locked up their stars over the last 3-4 years have a huge advantage moving forward financially for the next window. And of course the Sens are on the butt end of this.. we are always on the wrong side of things.

Colorado has to sign Rantanen, good luck with that. And MacKinnon won't be happy, there could be some strife along the NHLPA members too. The Nylander situation has totally made the player a shell of himself. Now Marner's agent is tripping all over himself.

 

[BankStreetParade]

I could see the big CBA fight being owners wanting to cap RFA contract values. This thing is a runaway train. RFAs are getting paid like UFAs, what's the point in even having the distinction between the two except to guarantee exclusive negotiating rights? And even then, Nylander was a hold out because he didn't get what he wanted and Toronto eventually caved in.

The whole point of the first two lockouts was cost control. Now the part of the CBA that was supposed to be the most owner friendly, RFAs, has become one of the biggest problems.

 

[GrantLemons]

I could see the big CBA fight being owners wanting to cap RFA contract values. This thing is a runaway train. RFAs are getting paid like UFAs, what's the point in even having the distinction between the two except to guarantee exclusive negotiating rights? And even then, Nylander was a hold out because he didn't get what he wanted and Toronto eventually caved in.

The whole point of the first two lockouts was cost control. Now the part of the CBA that was supposed to be the most owner friendly, RFAs, has become one of the biggest problems.

I would answer that with: Why shouldn't guys like Matthews, Marner etc. be getting paid like the Tavares' and Kane's when they're putting up similar or better numbers? Besides, with the state of the league right now, paying for a guy's age 22-28 years is 100% better than paying for their 28-34 years.

It makes no difference for teams like the Sens. They can't afford those contracts whether it's for an RFA or a UFA.

The signing bonuses are an issue and need to be addressed. But if guys show on their ELC that they're elite, they're going to want to be compensated as such.

If the league starts wanting to cap RFA salary solely based on age, and not performance, that's going to be lockout material.

 

[topshelf15]

Yep ,by the looks of things things will always get more and more expensive....Pretty means you cant dilly dally around looking for the perfect deal to try and make a push ...You need to strike even faster ,as the time of a controlled player salaries is getting shorter every year.....

 

[Micklebot]

Article XVI of the US-Canada tax treaty states that signing bonuses paid to a resident of the US by a Canadian team are taxed at 15% in Canada, and vice versa for US teams paying bonuses to Canadian residents.

So in his first year of his contract (for example) the 15 Million signing bonus is taxed, in Canada at 15%, leaving his "Base Salary" 750K being taxed in Canada at 53%.


I think this is what Tavares is doing also, or at least it is speculated that he is.

John Tavares Could Save Nearly $12 Million In Taxes On His New Contract

Ugh… you're not really giving the whole picture here. I’m no tax expert, but the above is really misleading due to a pretty substantial omission. Savings, yes, but not as much as one might think based on what you've posted.

The tax treaty has bonuses taxed at 15% in Canada so that, assuming he’s still a US resident for tax purposes, he can claim the full amount as a foreign tax credit when filing his US taxes. He’ll still be on the hook for paying taxes for whatever his US filling requires, assuming it’s Arizona, that means a combined 41.54% in state and federal taxes I believe, of which 15% can be claimed as a tax credit.

If he didn't have the bonus money, it would be taxed at 53%, and he could claim a tax credit to reduce his US taxes to 0%. So he's saving 11.46% which is still something, and Canada only gets 15% instead of 53%. This is probably oversimplified, and I'm sure somebody more familiar with international taxation laws could probably find some errors in what I've said, but it's a more complete picture of what's happening here.

 

[aragorn]

Bonus money has to either be eliminated or included in the salary of the player & the average of the contract. If a player makes $80 mil over the course of 8 yrs & whether it's paid up front in bonuses or not, it should still be a $10 mil per yr average.

Otherwise, this is just another sneaky way for rich teams to buy the best players & the poor teams to get screwed again. It's similar to when rich teams would stick some players in the minor leagues to take their salary off their cap. I believe that got changed & this should be changed as well in all fairness to every market. Of course, something also needs to be done regarding all the different tax structures in Canada & the US as well as in every state & province to try to make it as fair as possible for players, & teams & that won't be an easy fix.

 

[DaveMatthew]

I think the shift that we're seeing makes sense. It used to be that players had to wait until 27 for their payday, and if you go even further back, 31. That meant that teams were paying players for what they had done in the past, not for what they would produce during the length of the contract.

A top-end player's prime is usually between 22 and 30 years of age. That's when they should make the most money, as it coincides with their biggest impact, and that's what we're seeing now with these RFA deals.

It'll take some time for the adjustment to take place, but eventually, this will balance out and older UFAs will be the ones who lose out. The Matthews and Chabots will make more earlier, the Boninos and Niskanens will get much less later. That makes sense, IMO. If you pay attention to baseball, this same thing is happening in the MLB.

Signing bonuses are a different story. I think you'll see those capped in the new CBA.

 

[Sensung]

The solution is increased revenue sharing, but what will it cost the small markets?

Big Markets don’t want a 10 team league. The cap for each team would way higher without the poor revenue generators lowering the average.

How much of their Big Market windfall profits are they willing to share, though is another matter.

 

[Cosmix]

Thanks, I wasn't aware of that tax loophole. Amazing what the rich can get written into law...

Yes it is. But those who propose and approve the laws are getting supported by the rich.

 

[Cosmix]

The solution is increased revenue sharing, but what will it cost the small markets?

Big Markets don’t want a 10 team league. The cap for each team would way higher without the poor revenue generators lowering the average.

How much of their Big Market windfall profits are they willing to share, though is another matter.

Improved revenue sharing would be a good addition to the system, but not sufficient on its own.

 

[Cosmix]

Bonus money has to either be eliminated or included in the salary of the player & the average of the contract. If a player makes $80 mil over the course of 8 yrs & whether it's paid up front in bonuses or not, it should still be a $10 mil per yr average.

Otherwise, this is just another sneaky way for rich teams to buy the best players & the poor teams to get screwed again. It's similar to when rich teams would stick some players in the minor leagues to take their salary off their cap. I believe that got changed & this should be changed as well in all fairness to every market. Of course, something also needs to be done regarding all the different tax structures in Canada & the US as well as in every state & province to try to make it as fair as possible for players, & teams & that won't be an easy fix.

Agree. However, I think the total compensation paid to a player in each year should be used for cap purposes, not the AAV over the contract term.

 

[Karl Prime]

Bonus money has to either be eliminated or included in the salary of the player & the average of the contract. If a player makes $80 mil over the course of 8 yrs & whether it's paid up front in bonuses or not, it should still be a $10 mil per yr average.

On average Matthews is still making $11.630, it's just front loaded for the first two years so he'll have made $31.8 milskies by the summer of '21.

 

[Micklebot]

I could see the big CBA fight being owners wanting to cap RFA contract values. This thing is a runaway train. RFAs are getting paid like UFAs, what's the point in even having the distinction between the two except to guarantee exclusive negotiating rights? And even then, Nylander was a hold out because he didn't get what he wanted and Toronto eventually caved in.

The whole point of the first two lockouts was cost control. Now the part of the CBA that was supposed to be the most owner friendly, RFAs, has become one of the biggest problems.

I'm not sure why teams would make that fight. At the end of the season, player salaries on the whole are locked in at 50% of HRR. Sure, some teams come in above, and some below, but capping RFA deals to a lower % just means more money will go to the UFA, because at the end of the day, 50% has to be spent. If you lower one groups portion of that pie, another group has to get it, and it isn't going to be the owners. If anything, I'd rather see UFA get less, as they are typically the contracts that bite you in the ass.

 

[thinkwild]

It does seem a little ironic how we fans used to get upset at rich teams being able to get an unfair advantage by burying contracts in the minors or gaining by cap circumvention's, but then we propose that rich teams should just get to cancel contracts outright. To me that seems like a far better circumvention advantage for rich teams. Each year they can just cut all their players they think can improve on and offer the big money to small market team stars until they too seem overpaid, then they just cancel that contract, rinse, repeat.

There is an idea that the issue with guaranteed contracts is that we in Ottawa get stuck with an overpaid Bobby Ryan we cant dump. But that was part and parcel of what was initially seen as a really attractive feature of the cap to force big markets to live with their mistakes. And really, that doesnt seem like an issue that is really hurting us anyway, hardly worth dying on a hill for.

If we, and the Rangers, could both just cut any player whenever we wanted, im unconvinced that would be in our best interests as fans of a small market team as I think it through. Being able to sign Chabot to an 8 year contract next time could be in our advantage as well as after all, by the time that contract ends the salary cap could be getting up to $120 mil. and we’d have him at would then seem a great bargain. Guaranteed contracts can protect us too.

I've always felt that the often expressed fan desire to eliminate guaranteed contracts was a bit fuzzy in thinking.