How Taxes affect Teams Salary Cap

[Mackcanuck]

Dallas has a huge advantage over OTT and MTL when trying to lure FA's

[Rick Blight]

57 minutes ago, Mackcanuck said:

Dallas has a huge advantage over OTT and MTL when trying to lure FA's

What is the source of this information?

If column one is the salary cap, why is it not the same for every team?

Column 2 says for a payroll of $8M but I presume it is actually the tax rate for an $8M salary. If that is true, this whole chart is flawed as payrolls are not populated with only players making $8M.

[Mackcanuck]

6 minutes ago, Rick Blight said:

What is the source of this information?

If column one is the salary cap, why is it not the same for every team?

Column 2 says for a payroll of $8M but I presume it is actually the tax rate for an $8M salary. If that is true, this whole chart is flawed as payrolls are not populated with only players making $8M.

https://twitter.com/NHLCanadaFB

[Slegr]

How difficult would it be for the NHL to address this inequity by combining the state / province tax factor into a formula that makes each team's salary cap unique to create an even playing field? That's the whole point of a salary cap, isn't it? For an even playing field? Yet this table indicates that teams like Dallas and Tampa can pay 125%+ over teams like Ottawa and Montreal for quality players. Five of the eight bottom teams hindered by tax are Canadian teams. Perhaps not a surprise that no Canadian team has won the cup in the salary cap era..

[Rick Blight]

1 hour ago, Mackcanuck said:

https://twitter.com/NHLCanadaFB

I have no idea where they come up with these numbers but it is pretty hard to take this chart seriously when they show Pittsburgh having a $13M advantage over Philadelphia when players on both teams pay the exact same taxes for the exact same salary. Why would there be a discrepancy between Toronto/Ottawa or Calgary/Edmonton or Rangers/Islanders, etc?

[Mackcanuck]

37 minutes ago, Rick Blight said:

I have no idea where they come up with these numbers but it is pretty hard to take this chart seriously when they show Pittsburgh having a $13M advantage over Philadelphia when players on both teams pay the exact same taxes for the exact same salary. Why would there be a discrepancy between Toronto/Ottawa or Calgary/Edmonton or Rangers/Islanders, etc?

I'm not sure how you are having a hard time seeing that the U.S. teams that pay almost no Income tax have a huge salary Cap advantage

 

Notice the 5 Canadian teams are hurt the most

OTT, NJ, NYI and CAR don't come close to spending to the Cap Max

 

Slegr's post says it perfectly

[Rick Blight]

1 minute ago, Mackcanuck said:

I'm not sure how you are having a hard time seeing that the U.S. teams that pay almost no Income tax have a huge salary Cap advantage

 

Notice the 5 Canadian teams are hurt the most

OTT, NJ, NYI and CAR don't come close to spending to the Cap Max

 

Slegr's post says it perfectly

I do not have a hard time seeing that PLAYERS playing on teams where there is no state income taxes take home more pay.

 

I do, however, take exception with reports that contain mis-leading, as opposed to factual, information. If someone wants to make a case that there is evidence that UFA's will sign for less money in certain locations due to tax considerations then please feel free to do so but at least use factual information.

 

If players sign for less than fair market value because they are going to play in a state tax free state then they are taking a huge gamble that they will not be traded to a less tax friendly location. The NHLPA would also discourage players doing this as these artificially reduced salaries would be used by other teams in negotiating contracts for their players.

 

Every team has the same salary cap and it is up to each team owner how close to the cap they want to spend. A TEAM receives no financial benefit from taxes paid by their players..I have not heard reports of players saying they want to play in locations where taxes are lower, have you? Why would a player ever request a NMC to play on teams where taxes are higher?

 

I just see no evidence that this is a problem but I am willing to listen to those that want to make a factual case that there is indeed a problem. Identifying solutions would also be welcome.

[Wanless]

14 hours ago, Mackcanuck said:

Dallas has a huge advantage over OTT and MTL when trying to lure FA's

Easiest solution. Make all salary totals an after tax after exchange rate

[skolozsy2]

13 hours ago, Rick Blight said:

I do not have a hard time seeing that PLAYERS playing on teams where there is no state income taxes take home more pay.

 

I do, however, take exception with reports that contain mis-leading, as opposed to factual, information. If someone wants to make a case that there is evidence that UFA's will sign for less money in certain locations due to tax considerations then please feel free to do so but at least use factual information.

 

If players sign for less than fair market value because they are going to play in a state tax free state then they are taking a huge gamble that they will not be traded to a less tax friendly location. The NHLPA would also discourage players doing this as these artificially reduced salaries would be used by other teams in negotiating contracts for their players.

 

Every team has the same salary cap and it is up to each team owner how close to the cap they want to spend. A TEAM receives no financial benefit from taxes paid by their players..I have not heard reports of players saying they want to play in locations where taxes are lower, have you? Why would a player ever request a NMC to play on teams where taxes are higher?

 

I just see no evidence that this is a problem but I am willing to listen to those that want to make a factual case that there is indeed a problem. Identifying solutions would also be welcome.

I'm having trouble understanding how exactly this data is being interpreted.  Something seems seriously flawed. 

 

Raleigh has a sales tax of 4.95%, Chicago has a sales tax of almost 10%.  Raleigh has an income tax of 5.4%, Chicago is 5.95%.  Property taxes are nearly double in Cook County, Illinois over North Carolina.  So how the hell are the Carolina Hurricanes at such a disadvantage compared to the Blackhawks when it comes down to taxes.....shouldn't it be the other way around?

[Diamonds]

20 hours ago, Rick Blight said:

I have no idea where they come up with these numbers but it is pretty hard to take this chart seriously when they show Pittsburgh having a $13M advantage over Philadelphia when players on both teams pay the exact same taxes for the exact same salary. Why would there be a discrepancy between Toronto/Ottawa or Calgary/Edmonton or Rangers/Islanders, etc?

I don't know about the validity of all of the data, but in Pennsylvania you pay a municipal income tax in addition to state and federal income taxes. In Pittsburgh, you pay 3% municipal tax if you live in the city and 1% if you work in the city but live elsewhere. By contrast, the municipal income tax in Philadelphia is 3.88% (called the City Wage Tax).

 

Regarding the first column, I think it's just poorly labeled. It lists how much salary teams have committed against the cap rather than the league wide salary cap (which is the 79.5M number). In other words, the combined AAVs of contracts on the Canucks this year adds up to $71,187,048 which is the number displayed in the first column (same as the cap hit listed on Cap Friendly). So rather than assuming that all teams are spending to the cap it instead bases calculations on what they are actually spending this year.

[Diamonds]

6 hours ago, skolozsy2 said:

I'm having trouble understanding how exactly this data is being interpreted.  Something seems seriously flawed. 

 

Raleigh has a sales tax of 4.95%, Chicago has a sales tax of almost 10%.  Raleigh has an income tax of 5.4%, Chicago is 5.95%.  Property taxes are nearly double in Cook County, Illinois over North Carolina.  So how the hell are the Carolina Hurricanes at such a disadvantage compared to the Blackhawks when it comes down to taxes.....shouldn't it be the other way around?

The chart takes into account income tax only (ignores things like sales tax and property tax because those don't affect actual income, just post income expenses). Also, I'm pretty sure Illinois has state income tax of 4.95%, not 5.95%.

 

In states like Florida there is no state or municipal income tax so residents only pay federal income tax (in this scenario that's 36.56%). In contrast, Illinois does have a state income tax so residents have to pay both federal and state income taxes which add up to 41.51% (36.56 + 4.95). Pittsburgh residents on the other hand have to pay federal, state (3.07%), and municipal (3%) income tax which adds up to 42.63% (36.56 + 3.07 + 3).

[Rick Blight]

33 minutes ago, Diamonds said:

I don't know about the validity of all of the data, but in Pennsylvania you pay a municipal income tax in addition to state and federal income taxes. In Pittsburgh, you pay 3% municipal tax if you live in the city and 1% if you work in the city but live elsewhere. By contrast, the municipal income tax in Philadelphia is 3.88% (called the City Wage Tax).

 

Regarding the first column, I think it's just poorly labeled. It lists how much salary teams have committed against the cap rather than the league wide salary cap (which is the 79.5M number). In other words, the combined AAVs of contracts on the Canucks this year adds up to $71,187,048 which is the number displayed in the first column (same as the cap hit listed on Cap Friendly). So rather than assuming that all teams are spending to the cap it instead bases calculations on what they are actually spending this year.

You have laid out some of the reasons why this chart is flawed. The 1st column should be the same starting point for every team and then determine what taxes are deemed significant enough to include in calculations to come up with your take home pay numbers. The chart, as it stands, is mis-leading in showing what teams spend as opposed to what they are allowed to spend and you cannot blame income tax rates for owners, like Ottawa, that do not want to spend to the cap.

[Diamonds]

26 minutes ago, Rick Blight said:

You have laid out some of the reasons why this chart is flawed. The 1st column should be the same starting point for every team and then determine what taxes are deemed significant enough to include in calculations to come up with your take home pay numbers. The chart, as it stands, is mis-leading in showing what teams teams spend as opposed to what they are allowed to spend and you cannot blame income tax rates for owners, like Ottawa, that do not want to spend to the cap.

I agree that it definitely could have been done better and more clearly. I would also prefer that it just assumed every team was at the cap ceiling. However, I do still think it does a decent job at showing some of the discrepancies.

 

Two teams that can be pretty much directly compared with the chart are Toronto and Nashville though. Both have cap hits close to $75.5M this year, but Toronto has the highest income tax rate and Nashville has the lowest income tax rate in the league. If both teams were to pay the tax rate of Montreal (basically the same as Toronto's), and the players were to take home the same amount post taxes, Toronto's cap hit would essentially stay the same but Nashville's would have to be increased to ~$101.5M. That's a difference of ~$26M which is quite a bit.

 

Edit: I'm not going to lie, it did take me a while to figure out how to read the chart and my initial reaction was pretty similar to yours. 

[ForsbergTheGreat]

The fight for equality has gone way to far. There’s always going to be advantages for players to choose one city over another. I can think of a hundred reasons (outside taxes) why I would choose to live in Florida over Winnipeg. 

[Sean Monahan]

4 minutes ago, ForsbergTheGreat said:

The fight for equality has gone way to far. There’s always going to be advantages for players to choose one city over another. I can think of a hundred reasons (outside taxes) why I would choose to live in Florida over Winnipeg. 

Which to me says they should do more to level playing field. If there’s a hundred other reasons Florida would be preferable, why not so something about this one. 

[Rick Blight]

9 minutes ago, Diamonds said:

I agree that it definitely could have been done better and more clearly. I would also prefer that it just assumed every team was at the cap ceiling. However, I do still think it does a decent job at showing some of the discrepancies.

 

Two teams that can be pretty much directly compared with the chart are Toronto and Nashville though. Both have cap hits close to $75.5M this year, but Toronto has the highest income tax rate and Nashville has the lowest income tax rate in the league. If both teams were to pay the tax rate of Montreal (basically the same as Toronto's), and the players were to take home the same amount post taxes, Toronto's cap hit would essentially stay the same but Nashville's would have to be increased to ~$101.5M. That's a difference of ~$26M which is quite a bit.

 

Edit: I'm not going to lie, it did take me a while to figure out how to read the chart and my initial reaction was pretty similar to yours. 

The Toronto rate though is for someone making $8M. A $2M salaried player pays 51.64% as opposed to the 53.06% assigned to the entire payroll.....it assumes the team is constructed of nothing but $8M players! A $700K player would pay 48.13%.........

There are so many variables not taken into consideration with this report that I don't think it is of much value.

 

[ForsbergTheGreat]

34 minutes ago, Rick Blight said:

You have laid out some of the reasons why this chart is flawed. The 1st column should be the same starting point for every team and then determine what taxes are deemed significant enough to include in calculations to come up with your take home pay numbers. The chart, as it stands, is mis-leading in showing what teams spend as opposed to what they are allowed to spend and you cannot blame income tax rates for owners, like Ottawa, that do not want to spend to the cap.

Not to mention tax rates change with every election (approx 4 years) where these contracts are signed for 7 to 8 years. A team could be perfectly under the cap one season, make absolutely zero changed in the off season. Have a liberal govt get elected and be completely screwed over with there teams cap adjustment the following year. Add in what happens when higher marginal income tax rates hit. 

 

I find it odd that the same people that complain about these tax advantages and want equality for all, are likely people that complain about the NHL supporting bottom teams like Florida and Arizona through revenue sharing. 

[Rick Blight]

7 minutes ago, Sean Monahan said:

Which to me says they should do more to level playing field. If there’s a hundred other reasons Florida would be preferable, why not so something about this one. 

And yet the Jets have 5 players with NTC/NMC's so there are players that see it as a preferred destination. By the way, Florida has only 4 such contracts.

 

I

[Sean Monahan]

2 minutes ago, Rick Blight said:

And yet the Jets have 5 players with NTC/NMC's so there are players that see it as a preferred destination. By the way, Florida has only 4 such contracts.

 

I

Fair point, but could that be because Florida ownership doesn’t want to get stuck with bigger money contracts and players are willing to make concessions to stay there? I see the clauses as working against the argument. It’s the player wanting more positives to their deal in order to sign in that city. 

[ForsbergTheGreat]

26 minutes ago, Sean Monahan said:

Which to me says they should do more to level playing field. If there’s a hundred other reasons Florida would be preferable, why not so something about this one. 

I have to ack why is leveling the playing field even more than it already is a good thing.  What is the goal you think you want to accomplish. Vs what is the goal the NHL wants to accomplish.   Think of it from an nhl business perspective. The NHL’s main goal is to bring in as much revenue as possible, so how would this help them achieve that. 

 

For example. If florida is so appealing to ufa’s because of there tax advantage. how come they are in the bottom 2 for team revenue generated. How would removing this advantage help them bring in more revenue?

 

Also it’s easy to see that canadian teams will generate revenue regardless of tax advantages/disadvantages. So adjusting the cap would have zero overall affect on the NHL’s main goal . 

 

Adding a new cap structure the way the nhl is currently set, would in theory go against and hurt the NHL accomplishing there main goal.