Your thoughts on a After-taxes salary cap

[Dominator13]

Simple question.


Why doesn't the league look at that financial structure in the next CBA negotiations.

Why should teams like Montreal, Toronto and California teams pay for their tax brackets and keep losing players to teams in Texas, Florida and Tennesse?

It makes no sense whatsoever. Either 1) They pick the team that offers the same salary with the lower tax rate, or 2) like Stamkos, teams are able to sign players at a discount because it's the exact same net revenue as signing for 2+ more millions in Canada.

My solution; An after-tax salary cap. It's still more expensive for teams with a higher tax bracket, but atleast their on-ice asset acquisitions isn't penalised. It's their choosing.

What do you guys think?

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[LPHabsFan]

You should look through this forum as this concept has been brought up numerous times. What it boils down to is a few things.

1 - Slippery slope. There are a lot more factors than just taxes that go into how much a player taxes home after expenses and so the question immediately becomes "why not calculate the cap hit after X? Or Y?" etc.....

2 - The way that taxes are calculated is a lot more complicated that some articles and writers make it out to be. There are a number of different ways that players can lessen the burden of taxes. Here are a couple of articles (paywall) that outline a number of points.

Yes, Quebec has high taxes, but here's how the Canadiens can...

Why an after-tax salary cap is unlikely to ever come to the...

3 - The NHL is not the type of league that sees a lot of free agent movement period. If you look at the second article it actually gives the stats (assuming they're correct) for UFA's signing at 4+ million and where they signed. It's not that significant. Players, especially the big name players, are more likely to re-sign with their original team than anything else because they've spent 5-7 years there and are generally happy. There are obviously the odd exceptions though but that majority stay put when they're in their prime.

 

[Fenway]

 

[Ted Hoffman]

Simple question.


Why doesn't the league look at that financial structure in the next CBA negotiations.

Why should teams like Montreal, Toronto and California teams pay for their tax brackets and keep losing players to teams in Texas, Florida and Tennesse?

It makes no sense whatsoever. Either 1) They pick the team that offers the same salary with the lower tax rate, or 2) like Stamkos, teams are able to sign players at a discount because it's the exact same net revenue as signing for 2+ more millions in Canada.

My solution; An after-tax salary cap. It's still more expensive for teams with a higher tax bracket, but atleast their on-ice asset acquisitions isn't penalised. It's their choosing.

What do you guys think?

Let me give the short answer.

 

[Dominator13]

Let me give the short answer.

Why? What's the downfall?

 

[MasterDecoy]

But isn’t that only for home games? So the difference at the end of the day in real dollars is not the financial apocalypse a lot of people make it out to be.

And Florida has other taxes where they get ya no?

 

[mouser]

Simple question.


Why doesn't the league look at that financial structure in the next CBA negotiations.

Why should teams like Montreal, Toronto and California teams pay for their tax brackets and keep losing players to teams in Texas, Florida and Tennesse?

It makes no sense whatsoever. Either 1) They pick the team that offers the same salary with the lower tax rate, or 2) like Stamkos, teams are able to sign players at a discount because it's the exact same net revenue as signing for 2+ more millions in Canada.

My solution; An after-tax salary cap. It's still more expensive for teams with a higher tax bracket, but atleast their on-ice asset acquisitions isn't penalised. It's their choosing.

What do you guys think?

Players in Canada actually have a huge tax reducing avenue available, the Retirement Compensation Agreement (RCA). It’s possible to stuff large portions of player compensation into a RCA and then take it out later at lower tax rates depending on which country the player lives in at the time and the tax treaties in place with Canada.

You can’t simply look at nominal tax rates to try and make things “fair”. Every player, especially the ones at higher salaries have tax accountants to help maximize their take home pay.

Frankly we never heard any of this tax whining until Stamkos chose to understandably stay with Tampa—the team he played his entire career with and positioned for more future success then the Leafs at the time. There’s also no empirical evidence that teams in lower tax districts are more successful on the ice. If taxes are such a big issue why aren’t the low tax districts raking in the Stanley Cups?

 

[BigBadBruins7708]

Simple question.


Why doesn't the league look at that financial structure in the next CBA negotiations.

Why should teams like Montreal, Toronto and California teams pay for their tax brackets and keep losing players to teams in Texas, Florida and Tennesse?

It makes no sense whatsoever. Either 1) They pick the team that offers the same salary with the lower tax rate, or 2) like Stamkos, teams are able to sign players at a discount because it's the exact same net revenue as signing for 2+ more millions in Canada.

My solution; An after-tax salary cap. It's still more expensive for teams with a higher tax bracket, but atleast their on-ice asset acquisitions isn't penalised. It's their choosing.

What do you guys think?

and teams like Montreal and Toronto can also have their cap reduced to account for the massively larger sponsorship deals players in those cities have access to compared to a Florida or Tennessee, a big factor in a free agents decision

 

[cheswick]

1. I once heard an interview with Don Meehan and he pretty much said that players decisions never come down to the absolute most money they can make and that after tax calculations is something they can of course do but players never ask for that.

2. There are taxes other than income tax that people pay. Should they do calculations for property tax? Sales tax? What about general cost of living. It costs a hell of lot more to live in Manhattan then it does in Winnipeg. Take that into account?

 

[Gnashville]

Simple question.


Why doesn't the league look at that financial structure in the next CBA negotiations.

Why should teams like Montreal, Toronto and California teams pay for their tax brackets and keep losing players to teams in Texas, Florida and Tennesse?

It makes no sense whatsoever. Either 1) They pick the team that offers the same salary with the lower tax rate, or 2) like Stamkos, teams are able to sign players at a discount because it's the exact same net revenue as signing for 2+ more millions in Canada.

My solution; An after-tax salary cap. It's still more expensive for teams with a higher tax bracket, but atleast their on-ice asset acquisitions isn't penalised. It's their choosing.

What do you guys think?

Please list all the players that left Toronto, Montreal ect and signed in Dallas, Nashville, Florida! It doesn’t happen

 

[Ted Hoffman]

Why? What's the downfall?

I want to have time to find all the threads in the last year where this idea has been lobbed out and blown out of the sky, but let's see if I can just hit the high points here:

1. No other professional sports league with a salary cap system considers taxes in various jurisdictions when setting the cap for each team; all teams have the same cap. Why should the NHL be different?

2. Which taxes are we talking about? Just pure income taxes, or are we going to consider property taxes, sales taxes, and other such taxes and assessments [including, but not limited to, SSI/Medicare payroll taxes in the U.S. and any similar counterpart in Canada]? If we're only considering certain taxes, why aren't others being considered - especially if their differences are as large [or larger] between certain areas? With respect to income taxes, tax rates can [do] vary by level of income; it may not be particularly material at higher levels, but it may be material when considering salary vs. bonuses. How do the "correct" tax rates get calculated - by using actual data as it exists [actual salary vs. actual bonuses], by treating all team payments to players as salary, or by using some estimated split? Why should that approach be used?

3. Are we only talking federal and state/province taxes, or are we including all the municipality taxes? And what municipalities - just the "primary" cities where each team operates, or those of the surrounding areas where players actually live and where tax impacts may be more or less favorable?

4. Are we factoring in the impact of #3 on teams who play games in away cities that levy taxes on players, or not? If not, why not? If so, how does that get treated when division rivals may not play the same number of home/away games each year or even year-to-year? Do we have an "average" cost based on "average" games played in a location, or do we explicitly calculate that based on whatever the schedule happens to be?

5. What if a tax change is passed that's applied retroactively to July 1 or prior, after the league year has started? Should the cap be re-calculated for everyone? If the answer is 'no' and the impact of the change is material [say, at least equal to 50% of the league minimum salary], why not?

6. What about cost-of-living differences between cities? Shouldn't that be considered, since two areas with similar tax rates could have a different cost of living that could impact the purchasing power of a player's after-tax income? If so, what components are going to be considered in calculating that cost-of-living difference? If not, why not?


And I'm not even scratching who's going to collect this data, build the database to house it, do the work necessary to calculate an "after-tax" cap, and administer it and keep it up-to-date.

That's just sitting here off the top of my head in about 15 minutes and expanding as needed. I guarantee there's other considerations that didn't come to mind, more elaboration that could be done on the above points, and others points that others have mentioned and I can't recall. Put bluntly: even attempting to "fix" the "problem" of differing tax rates between franchise locations is a logistical nightmare and no matter what, someone is still going to complain that things still aren't fair because [insert reason]. Which brings me back to the lesson I keep trying to teach some people: life isn't fair.

 

[LadyStanley]

The cap cannot be set "after taxes" in advance. It's fairly easy to calculate for "home" games, but road games are another matter.

First, schedule changes from year to year. This year, before the calendar turns, the team may be in majority of no-tax states, which next season they do no-tax before Christmas.

Second, if a player is out injured (or for personal reasons) they may not make the trip and play in cities where they tax liability may be impacted.

Third, if a player is traded or demoted, that changes their tax liability. (And if on a two-way deal, could get much less being in AHL.)

Ergo, impossible to calculate cap hit WRT taxes in advance.

 

[cynicalcitizen]

Simple question.


Why doesn't the league look at that financial structure in the next CBA negotiations.

Why should teams like Montreal, Toronto and California teams pay for their tax brackets and keep losing players to teams in Texas, Florida and Tennesse?

It makes no sense whatsoever. Either 1) They pick the team that offers the same salary with the lower tax rate, or 2) like Stamkos, teams are able to sign players at a discount because it's the exact same net revenue as signing for 2+ more millions in Canada.

My solution; An after-tax salary cap. It's still more expensive for teams with a higher tax bracket, but atleast their on-ice asset acquisitions isn't penalised. It's their choosing.

What do you guys think?

Vote better.

 

[Spazkat]

I want to have time to find all the threads in the last year where this idea has been lobbed out and blown out of the sky, but let's see if I can just hit the high points here:

1. No other professional sports league with a salary cap system considers taxes in various jurisdictions when setting the cap for each team; all teams have the same cap. Why should the NHL be different?

2. Which taxes are we talking about? Just pure income taxes, or are we going to consider property taxes, sales taxes, and other such taxes and assessments [including, but not limited to, SSI/Medicare payroll taxes in the U.S. and any similar counterpart in Canada]? If we're only considering certain taxes, why aren't others being considered - especially if their differences are as large [or larger] between certain areas? With respect to income taxes, tax rates can [do] vary by level of income; it may not be particularly material at higher levels, but it may be material when considering salary vs. bonuses. How do the "correct" tax rates get calculated - by using actual data as it exists [actual salary vs. actual bonuses], by treating all team payments to players as salary, or by using some estimated split? Why should that approach be used?

3. Are we only talking federal and state/province taxes, or are we including all the municipality taxes? And what municipalities - just the "primary" cities where each team operates, or those of the surrounding areas where players actually live and where tax impacts may be more or less favorable?

4. Are we factoring in the impact of #3 on teams who play games in away cities that levy taxes on players, or not? If not, why not? If so, how does that get treated when division rivals may not play the same number of home/away games each year or even year-to-year? Do we have an "average" cost based on "average" games played in a location, or do we explicitly calculate that based on whatever the schedule happens to be?

5. What if a tax change is passed that's applied retroactively to July 1 or prior, after the league year has started? Should the cap be re-calculated for everyone? If the answer is 'no' and the impact of the change is material [say, at least equal to 50% of the league minimum salary], why not?

6. What about cost-of-living differences between cities? Shouldn't that be considered, since two areas with similar tax rates could have a different cost of living that could impact the purchasing power of a player's after-tax income? If so, what components are going to be considered in calculating that cost-of-living difference? If not, why not?


And I'm not even scratching who's going to collect this data, build the database to house it, do the work necessary to calculate an "after-tax" cap, and administer it and keep it up-to-date.

That's just sitting here off the top of my head in about 15 minutes and expanding as needed. I guarantee there's other considerations that didn't come to mind, more elaboration that could be done on the above points, and others points that others have mentioned and I can't recall. Put bluntly: even attempting to "fix" the "problem" of differing tax rates between franchise locations is a logistical nightmare and no matter what, someone is still going to complain that things still aren't fair because [insert reason]. Which brings me back to the lesson I keep trying to teach some people: life isn't fair.

And that doesn't even get into

* the absurd calculations that would be involved if a player gets traded mid season.

* owners love cost stability and this would destroy that. Tax changes could cause huge fluctuations in payroll liability dollars from year to year

* since teams are paying it, are they going to have to calculate individual tax rates for each player or are they taxed at the teams corporate rate?

 

[NorthCoast]

Simple question.


Why doesn't the league look at that financial structure in the next CBA negotiations.

Why should teams like Montreal, Toronto and California teams pay for their tax brackets and keep losing players to teams in Texas, Florida and Tennesse?

It makes no sense whatsoever. Either 1) They pick the team that offers the same salary with the lower tax rate, or 2) like Stamkos, teams are able to sign players at a discount because it's the exact same net revenue as signing for 2+ more millions in Canada.

My solution; An after-tax salary cap. It's still more expensive for teams with a higher tax bracket, but atleast their on-ice asset acquisitions isn't penalised. It's their choosing.

What do you guys think?

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

It's not a simple question.

 

[tarheelhockey]

What I want to know is why we can't just give my team $15M more in cap space, straight up.

No rationale. Just give it.

 

[DudeWhereIsMakar]

I really want there to be a cap on it because it's what attracts players to Vegas, Florida, Tampa, Nashville, Dallas, and soon Seattle. General managers are getting clever with it.

But it would work as the player would be making the same amount no matter where they go.

 

[drktmplr12]

it nearly took them until draft day to figure out the league-wide map and we want to make this process MORE complicated by splitting hairs to make the fans perceive that is it more equitable?

hell, we won't know what the cap is until training camp!

 

[kaiser matias]

I really want there to be a cap on it because it's what attracts players to Vegas, Florida, Tampa, Nashville, Dallas, and soon Seattle. General managers are getting clever with it.

But it would work as the player would be making the same amount no matter where they go.

How many players have been attracted to those places?

People keep saying this but as shown just a few weeks ago: everyone had Panarin penciled in with the Panthers, but he instead signed in high-tax New York.

 

[NorthCoast]

How many players have been attracted to those places?

People keep saying this but as shown just a few weeks ago: everyone had Panarin penciled in with the Panthers, but he instead signed in high-tax New York.

It's ironic to me that this subject keeps coming up over and over, yet I don't see any threads advocating for 100% revenue parity. How is being able to offer a player a 2-3% tax advantage more of an unfair advantage than allowing teams to offer 20 mil more to their players because of market size.

 

[DudeWhereIsMakar]

How many players have been attracted to those places?

People keep saying this but as shown just a few weeks ago: everyone had Panarin penciled in with the Panthers, but he instead signed in high-tax New York.

Not just UFA, but RFAs too or upcoming UFAs such as Tyler Seguin. Mark Stone is a big example as per a player that had shown attraction to that sort of thing when being traded from Ottawa to Vegas. I could go on but I stated it in a few previous posts. I just think it should be a rule just to balance out the league.

 

[David Dennison]

Kind of related, but does the NHL do anything with regards to adjusting for the exchange rate between Canada and the US? Don't Canadian teams have to pay players in USD (or pay USD amount in CAD), but obviously earn a lot of their money in CAD. Or is it just small potatoes and Canadian teams eat the loss when the exchange rate sinks for them?

 

[LeHab]

Kind of related, but does the NHL do anything with regards to adjusting for the exchange rate between Canada and the US? Don't Canadian teams have to pay players in USD (or pay USD amount in CAD), but obviously earn a lot of their money in CAD. Or is it just small potatoes and Canadian teams eat the loss when the exchange rate sinks for them?

Currency fluctuations are definitely a concern for Canadian teams and the league as a whole since about a third of revenues is reported to come from Canada. To hedge against fluctuation teams can purchase currency futures. In other words a way to purchase USD at a future date at a agreed rate regardless of what that rate will be in the future. This way teams know what exchange rate they will pay.

 

[David Dennison]

Currency fluctuations are definitely a concern for Canadian teams and the league as a whole since about a third of revenues is reported to come from Canada. To hedge against fluctuation teams can purchase currency futures. In other words a way to purchase USD at a future date at a agreed rate regardless of what that rate will be in the future. This way teams know what exchange rate they will pay.

So its on the team to purchase as opposed to the league spreading the risk over the entire league? I guess that makes sense since those franchises are probably more solvent on average than then American teams and at the end if the day, it is the Canadian team's issue.

 

[LeHab]

So its on the team to purchase as opposed to the league spreading the risk over the entire league? I guess that makes sense since those franchises are probably more solvent on average than then American teams and at the end if the day, it is the Canadian team's issue.

I don't know these days but I read in early 00s when CND was in the toilet without a salary cap NHL created a Canadian Assistance Program to help Canadian teams offset some of currency issues and high tax burden. I'd be surprised if this was still in effect.