High tax vs low tax teams

[Rick Blight]

10 minutes ago, peaches5 said:

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. 

 

 

 

The bolded part is correct but the withholding tax you refer to is income tax paid by you to your CRA account as any other income tax from your normal employment pay. Your income does go up by the amount of your withdrawal but so does the income tax you have already paid.

[dougieL]

2 hours ago, Rick Blight said:

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.

Those may indeed be the market values for those players. In Brobrovsky's case though, it may have been that he had multiple offers of the same amount, but the low taxes in Florida were a factor in him picking the Panthers (you can argue whether or not it worked out well for the Panthers...).

 

I'm not saying that's what happened, but all I'm saying is that it seems logical that a low tax environment is one (of many) factor that can give a team an advantage in terms of signing free agents and being included on lists of teams that a player is willing to be traded to. Since this advantage has nothing to do with how well a team is run, the NHL should look into correcting for this (if indeed it is an issue). Correcting seems perfectly in line with the profit-sharing that occurs between small and large markets. There at least should be a good reason why the NHL corrects for one but not the other.

 

[MattJVD]

14 hours ago, Rick Blight said:

The bolded part is correct but the withholding tax you refer to is income tax paid by you to your CRA account as any other income tax from your normal employment pay. Your income does go up by the amount of your withdrawal but so does the income tax you have already paid.

This is correct. You only pay additional tax at year end if your marginal income tax rate is higher than the 'withholding' tax rate you already paid and you'll just pay the difference.

 

The only time you stand to lose on RRSPs is if you contribute in relatively low-income earning years (deferring low marginal tax) and withdrawing it in high-income earning years. And that's not RRSPs being bad, that's bad financial planning.