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dougieL
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This has bothered me for a while, but Burke just mentioned it in the first intermission. Given the NHL's interest in parity and profit sharing between large and small market teams, has there been a good explanation for why they don't somehow try to level the playing field for high tax teams, who effectively have a lower salary cap to work with? I understand it's impossible to equalize every factor (some cities are more desirable to live in than others) but the tax issue seems to be an obvious one to address, on par with the small/large market profit sharing.

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Apparently Allan Walsh directly addressed the video via Twitter:

 

NHL players in Canada are allowed to set up Retirement Compensation Arrangements (RCAs) that allow them to defer access to up to 50% of their earnings until retirement. From a tax perspective, this works similarly to an RRSP where you defer accessing savings until your tax rate is lower, except in this case, the benefit would come from moving somewhere where the tax rate is lower when you retire. More about that here: https://www.theglobeandmail.com/investing/globe-wealth/article-how-pro-athletes-and-other-high-earners-stick-handle-high-canadian/

Obviously it's different from being taxed at a lower rate while you're still playing, but players on Canadian teams still have options to avoid paying higher taxes if they're willing to wait to access some of their earnings.

Edited by Brad Marchand
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5 minutes ago, NewbieCanuckFan said:

Sure helped the teams in Alberta with their lower taxes vs British Columbia.:P

Yes, but as I said, there are of course other factors such as desirability of the city (most would probably agree that Vancouver is more desirable as a city to live in vs Edmonton and Calgary). I'm okay with the NHL addressing this too, but I suspect it would be incredibly difficult and would understand why they wouldn't. The tax disparity, though, is pretty black and white, and very much on par with the large/small market issue, which the NHL does work to equalize.

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5 minutes ago, Brad Marchand said:

Apparently Allan Walsh directly addressed the video via Twitter:

 

NHL players in Canada are allowed to set up Retirement Compensation Arrangements (RCAs) that allow them to defer access to up to 50% of their earnings until retirement. From a tax perspective, this works similarly to an RRSP where you defer accessing savings until your tax rate is lower, except in this case, the benefit would come from moving somewhere where the tax rate is lower when you retire. More about that here: https://www.theglobeandmail.com/investing/globe-wealth/article-how-pro-athletes-and-other-high-earners-stick-handle-high-canadian/

Obviously it's different from being taxed at a lower rate while you're still playing, but players on Canadian teams still have options to avoid paying higher taxes if they're willing to wait to access some of their earnings.

Question is, are they able to invest those funds in that account or is it just a savings account. That can also make a huge difference as there is sunk opportunity cost there.

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5 minutes ago, Brad Marchand said:

Apparently Allan Walsh directly addressed the video via Twitter:

 

NHL players in Canada have access to Retirement Compensation Arrangements (RCAs) that allow them to defer access to up to 50% of their earnings until retirement. From a tax perspective, this works similarly to an RRSP where you defer accessing savings until your tax rate is lower, except in this case, the benefit would come from moving somewhere where the tax rate is lower when you retire. More about that here: https://www.theglobeandmail.com/investing/globe-wealth/article-how-pro-athletes-and-other-high-earners-stick-handle-high-canadian/

Obviously it's different from being taxed at a lower rate while you're still playing, but players on Canadian teams still have options to avoid paying higher taxes if they're willing to wait to access some of their earnings.

I suppose it depends on how much the player values money in his pocket now versus after retirement, but thanks very much for this.

 

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6 minutes ago, 24K PureCool said:

Question is, are they able to invest those funds in that account or is it just a savings account. That can also make a huge difference as there is sunk opportunity cost there.

Apparently any capital gains from funds invested in an RCA are subject to a 50% refundable tax, so that definitely limits how much you can use RCA funds to invest.

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1 hour ago, dougieL said:

This has bothered me for a while, but Burke just mentioned it in the first intermission. Given the NHL's interest in parity and profit sharing between large and small market teams, has there been a good explanation for why they don't somehow try to level the playing field for high tax teams, who effectively have a lower salary cap to work with? I understand it's impossible to equalize every factor (some cities are more desirable to live in than others) but the tax issue seems to be an obvious one to address, on par with the small/large market profit sharing.

Is your issue that you think teams that are in "state tax" exempt states are at an advantage because they can sign players for less money? If so, ask yourself this question. Will you sign a contract in Dallas for less than market value if they could trade you away to Montreal or L.A. next month? Why would any player do that?

 

Players that have NMC will usually take a little less than fair market value but that is because they want the security that a NMC brings and that would apply to players in every city..

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38 minutes ago, Brad Marchand said:

Apparently Allan Walsh directly addressed the video via Twitter:

 

NHL players in Canada are allowed to set up Retirement Compensation Arrangements (RCAs) that allow them to defer access to up to 50% of their earnings until retirement. From a tax perspective, this works similarly to an RRSP where you defer accessing savings until your tax rate is lower, except in this case, the benefit would come from moving somewhere where the tax rate is lower when you retire. More about that here: https://www.theglobeandmail.com/investing/globe-wealth/article-how-pro-athletes-and-other-high-earners-stick-handle-high-canadian/

Obviously it's different from being taxed at a lower rate while you're still playing, but players on Canadian teams still have options to avoid paying higher taxes if they're willing to wait to access some of their earnings.

That twitter post is incredibly naive. RRSP are a complete joke and are designed to make more money off you. If you ever want to pull money out of your RRSP or get rid of it you have to pay penalty and then get taxed on it as income. The penalty changes based on the amount being pulled out but you could pay 30% on top of taxes. It is designed for when you retire to pull out very small amounts of money. All the money you "saved" is more than likely going to be paid back at some point and then some. The government also sets up programs like first time homeowner where they let you take out money penalty free to buy a home but that must be paid back within 15 years. There is no reason at all to have an RRSP especially with TFSA now.  

 

Saying that an RCA is the same as not being taxed as much is laughable and naive. 

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3 minutes ago, peaches5 said:

That twitter post is incredibly naive. RRSP are a complete joke and are designed to make more money off you. If you ever want to pull money out of your RRSP or get rid of it you have to pay penalty and then get taxed on it as income. The penalty changes based on the amount being pulled out but you could pay 30% on top of taxes. It is designed for when you retire to pull out very small amounts of money. All the money you "saved" is more than likely going to be paid back at some point and then some. The government also sets up programs like first time homeowner where they let you take out money penalty free to buy a home but that must be paid back within 15 years. There is no reason at all to have an RRSP especially with TFSA now.  

 

Saying that an RCA is the same as not being taxed as much is laughable and naive. 

That is not true. I have been living off of my investments in my RRSP's and RIF's for years and there is absolutely no penalty paid for withdrawals. You usually pay a flat $25 fee for your withdrawals and that is it. There is also a $2000 tax free exemption for RIF withdrawals.

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20 minutes ago, Rick Blight said:

Is your issue that you think teams that are in "state tax" exempt states are at an advantage because they can sign players for less money? If so, ask yourself this question. Will you sign a contract in Dallas for less than market value if they could trade you away to Montreal or L.A. next month? Why would any player do that?

 

Players that have NMC will usually take a little less than fair market value but that is because they want the security that a NMC brings and that would apply to players in every city..

It's more of the big ticket players signing for less, and they are more likely to have the NMCs. Indeed they take less for the security of the NMC on any team, but of course if it's an NMC in a low tax state, they would be even more inclined to take less than for an NMC in a high tax state.

 

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36 minutes ago, Rick Blight said:

That is not true. I have been living off of my investments in my RRSP's and RIF's for years and there is absolutely no penalty paid for withdrawals. You usually pay a flat $25 fee for your withdrawals and that is it. There is also a $2000 tax free exemption for RIF withdrawals.

Yes it is: 

https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/rrsps-related-plans/making-withdrawals/tax-rates-on-withdrawals.html

 

Quote

When you withdraw funds from an RRSP, your financial institution withholds the tax. The rates depend on your residency and the amount you withdraw. For residents of Canada, the rates are:

  • 10% (5% in Quebec) on amounts up to $5,000
  • 20% (10% in Quebec) on amounts over $5,000 up to including $15,000
  • 30% (15% in Quebec) on amounts over $15,000

You are immediately taxed when you withdraw early from a RRSP on withholding tax and then it has be qualified as income and it is taxed once again. If you are retired and pulling out small amounts of money below the tax bracket the money would have been taxed in you save a bit of money but if you try to pull it out all at once you'll likely be charged at a higher or the same tax bracket saving absolutely nothing/losing money.


As I pointed out there are few ways to "withdraw" without paying the penalty but the money must be paid back within 15 years and the money needs to be used for very specific things like buying a home. 

 

RRSP's are a complete joke.

 

 

 

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5 minutes ago, dougieL said:

It's more of the big ticket players signing for less, and they are more likely to have the NMCs. Indeed they take less for the security of the NMC on any team, but of course if it's an NMC in a low tax state, they would be even more inclined to take less than for an NMC in a high tax state.

 

But I don't think the facts bear that out. Vegas has only 1 player with a NMC and that is Mark Stone at $9.5M, Florida has 3 (Barkov, Huberdeau and Bobrovsky), Tampa has 3 (Kucherov, Stamkos and Hedman), Nashville has 1 (Josi), Dallas has 3 (Benn, Pavelski and Seguin) and I don't think any of those players signed for less than fair market at the time of signing.

 

In my opinion, the teams that have an unfair advantage are the teams that can afford front loaded contracts with large signing bonuses. For example, if I can sign a 7 year 6 million dollar contract but I get 8 million per season the first 4 seasons I am going to jump at that as I can make more money on the up front money. Toronto does that all of the time. Marner, Matthews and Tavares are the 3 highest paid players in the league right now in terms of annual income (not cap hit).

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2 minutes ago, Rick Blight said:

But I don't think the facts bear that out. Vegas has only 1 player with a NMC and that is Mark Stone at $9.5M, Florida has 3 (Barkov, Huberdeau and Bobrovsky), Tampa has 3 (Kucherov, Stamkos and Hedman), Nashville has 1 (Josi), Dallas has 3 (Benn, Pavelski and Seguin) and I don't think any of those players signed for less than fair market at the time of signing.

 

In my opinion, the teams that have an unfair advantage are the teams that can afford front loaded contracts with large signing bonuses. For example, if I can sign a 7 year 6 million dollar contract but I get 8 million per season the first 4 seasons I am going to jump at that as I can make more money on the up front money. Toronto does that all of the time. Marner, Matthews and Tavares are the 3 highest paid players in the league right now in terms of annual income (not cap hit).

It's impossible to know what they would have signed for on a different team, but it just seems to be common sense that players would care more about take-home pay rather than gross salary. 

 

I agree with the point on up-front payment, but then it makes the Allan Walsh tweet completely moot, since according to his plan, players have to wait until retirement get a big chunk of their money.

 

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6 minutes ago, peaches5 said:

Yes it is: 

https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/rrsps-related-plans/making-withdrawals/tax-rates-on-withdrawals.html

 

You are immediately taxed when you withdraw early from a RRSP on withholding tax and then it has be qualified as income and it is taxed once again. If you are retired and pulling out small amounts of money below the tax bracket the money would have been taxed in you save a bit of money but if you try to pull it out all at once you'll likely be charged at a higher or the same tax bracket saving absolutely nothing/losing money.


As I pointed out there are few ways to "withdraw" without paying the penalty but the money must be paid back within 15 years and the money needs to be used for very specific things like buying a home. 

 

RRSP's are a complete joke.

 

 

 

You still don't have it right. The 10, 20 and 30% that you quote is taxes deducted from your withdrawal and is deposited to your CRA account as taxes paid. When you do your income tax return that amount deducted is the same as tax deducted as per your your normal pay. There is no penalty or double taxing.

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1 minute ago, Rick Blight said:

You still don't have it right. The 10, 20 and 30% that you quote is taxes deducted from your withdrawal and is deposited to your CRA account as taxes paid. When you do your income tax return that amount deducted is the same as tax deducted as per your your normal pay. There is no penalty or double taxing.

No. I've done this before and I understand how it works. If you withdraw from your RRSP early before you are retired you are subject to a withholding tax which are the rates above. Then the money has to be classified as income and it can have taxed added onto it from that. If you pull a ton of money out of an RRSP you are going to get hammered with taxes. There isn't some 25 dollar processing fee and that's the end of it. It is specifically designed to deter people from taking money out and to keep money invested in the market. 

 

 

 

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9 minutes ago, dougieL said:

It's impossible to know what they would have signed for on a different team, but it just seems to be common sense that players would care more about take-home pay rather than gross salary. 

 

I agree with the point on up-front payment, but then it makes the Allan Walsh tweet completely moot, since according to his plan, players have to wait until retirement get a big chunk of their money.

 

There may be some that are more concerned about take home pay but I bet it isn't many. I have a lot of difficulty believing that Bobrovsky ($10M) and Stone ($9.5M) would have had higher NMC offers from other teams although I acknowledge anything is possible.

 

As for the Allan Walsh tweet don't forget that the NHL official "retirement" age is only 45.

Read the NHLPA Collective Bargaining Agreement for more information (pg 101 for pension benefits). The plan’s normal retirement age is 45.

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