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The Business of Hockey Discuss the financial and business aspects of the NHL. Topics may include the CBA, work stoppages, broadcast contracts, franchise sales, NHL revenues, relocation and expansion.

should state taxes be factored into the cap?

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Old
12-14-2007, 04:33 PM
  #1
Mr Sakich
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should state taxes be factored into the cap?

I am not a Habs fan, but their provincial tax rate is roughly 20% higher than some states. This means they have to pay 20% extra to pay a player the same amount, after tax. This seems grossly unfair to the habs.

There is enough variation in state taxes that it might make sense to give teams in high tax regions a salary cushion. It may not have to be a 1 for 1 cushion but maybe a few extra million so that the playing field is somewhat levelled.

Every spring, the NHL big brains could calculate a schedule for each of the teams prior to July 1 in order to keep a competitive balance.

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Old
12-14-2007, 05:27 PM
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Ducksforcup
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No, I can't agree with this. Just because Quebec has higher taxes doesn't mean that they should be rewarded for it. It is just another factor for the players. Along with the weather, fan support etc.

And (political hat on), Quebec's tax rate is way too high, but I digress.

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12-14-2007, 05:43 PM
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Allen Degenerate
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I'm not sure, but wouldn't this give the Habs an unfair advantage? I imagine a player in Montreal would get a much nicer tax return than one anywhere else, so the Habs would be able to pay players more than their cap hit. And could a Canadiens player be able to avoid paying Montreal taxes by claiming residence in the US?

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Old
12-14-2007, 06:20 PM
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Nope.....if the Habs don't like the taxes, they can move the team to New Hampshire.

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12-14-2007, 07:00 PM
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I'm sure the Habs aren't struggling financially where they'd need to join the list of teams getting NHL welfare.

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Old
12-14-2007, 07:23 PM
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I'll admit I don't understand taxes completely, but I do well enough to formulate an opinion.

I agree with the OP's idea - but not the way he presented it.

I think the cap should be for a players salary after taxes - that way, it stays even all over the place. I'm sure players aren't blind that the salaries they receive are affected by taxes, so though on contract they're making more, they may be making the same in two different tax regions.

If you introduced the cap as being on players salaries after taxation, it may help bring some equality between teams with areas in high taxation compared to areas with low taxation.

For this to be reality, though, I think that the cap would have to be lowered.

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12-14-2007, 08:04 PM
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mouser
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Would I be correct in guessing that NHL players are treated the same as other major professional atheletes (and entertainers)--being taxed by most of the road jurisdictions that they play in and filing a dozen+ different tax returns?

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Old
12-14-2007, 08:12 PM
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Originally Posted by mouser View Post
Would I be correct in guessing that NHL players are treated the same as other major professional atheletes (and entertainers)--being taxed by most of the road jurisdictions that they play in and filing a dozen+ different tax returns?
Yup.

The CA Franchise Tax Board taxes visiting players (at a top rate of 9.3%) based on 1/82 of their NHL salary for every game played in San Jose, LA, or Anaheim.

Most other states (with state income taxes) do the same.

I would be very surprised if Provincial tax authorities didn't do the same.

http://www.thehockeynews.com/article...an-cometh.html

Quote:
Of course, players are subject to withholding tax like the rest of us but an NHL player's paystub does not include just one line for tax withheld. In fact, players are responsible for paying tax in every state (and some cities) in which they play and earn above a certain income threshold. It is not uncommon for a player to file a dozen or more tax returns a year.

One player whose file I was working on recently and is currently with the St. Louis Blues had to file all the following returns in 2006: United States and Canadian Federal, States of Arizona, North Carolina, Minnesota, Missouri, Ohio, California, Colorado, New Jersey, New York, Massachusetts, Illinois, Pennsylvania and the City of St. Louis.


Last edited by kdb209: 12-14-2007 at 08:15 PM. Reason: Added THN blurb
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Old
12-14-2007, 10:23 PM
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Old
12-14-2007, 10:36 PM
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Quote:
Originally Posted by RyderAllNight View Post
I agree with the OP's idea - but not the way he presented it.

I think the cap should be for a players salary after taxes - that way, it stays even all over the place. I'm sure players aren't blind that the salaries they receive are affected by taxes, so though on contract they're making more, they may be making the same in two different tax regions.
How would you figure out how much salaries are after taxes? Let's say two Montreal players with same salary amounts, other one is doing tax planning, other one not. And what would happen to player transfers, i.e. player from Florida, no state tax, is traded to Montreal, would he get automatic salary increase?
Now that players gross salaries are public information but how much are their net salaries, have anybody ever seen their tax returns?

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Old
12-14-2007, 10:42 PM
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Originally Posted by RyderAllNight View Post
I'll admit I don't understand taxes completely, but I do well enough to formulate an opinion.

I agree with the OP's idea - but not the way he presented it.

I think the cap should be for a players salary after taxes - that way, it stays even all over the place. I'm sure players aren't blind that the salaries they receive are affected by taxes, so though on contract they're making more, they may be making the same in two different tax regions.

If you introduced the cap as being on players salaries after taxation, it may help bring some equality between teams with areas in high taxation compared to areas with low taxation.

For this to be reality, though, I think that the cap would have to be lowered.
I absolutely agree with this.

I think it would make sense in the same way all player's salaries are paid in US dollars, rather than the currency of the country they play in. There are differing exchange rates which could lead to advantages for some teams over others, much as the taxes of each region hinder some teams. It should be a given, but it is unlikely.

However, this would be more relevant if they expand to teams in Europe down the line.

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Old
12-15-2007, 12:07 PM
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I'm generally anti this idea.

These guys are multi-millionaires. Why should the fans pay their taxes for them, which is essentially what you are proposing.

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Old
12-15-2007, 10:10 PM
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Originally Posted by kdb209 View Post
I would be very surprised if Provincial tax authorities didn't do the same.
I'm no expert but I don't think they do. I've lived in one province while working in the other and I only had to pay tax based on where I lived. My employer withheld tax for the province of work, but the governments figure it out based on the return.

There was a suggestion at one point when a few Canadian teams were struggling that the provinces (Ontario and Alberta) could start doing what U.S. States do and then put the money back into team support but that didn't fly. Partially because Toronto was massively opposed.

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Old
12-16-2007, 01:02 AM
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This is a ridiculous idea. It has no place in the Cap system whatsoever.

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Old
12-16-2007, 01:35 PM
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Originally Posted by Cup 2008 Sens Rule View Post
This is a ridiculous idea. It has no place in the Cap system whatsoever.
I wouldn't say it's ridiculous. If one of the main reasons for a cap is to prove a more equal competitive environment then anything that gives a few teams an advantage might need to be addressed. Imagine if the CBA had a hard cap measured in after-tax income instead of pre-tax. Then players would make the same no matter where they went, and teams in low-tax locales would not find it easier to sign players compared to Montreal (for example).

This would mean that teams spending to the cap in high tax locales would need to spend considerably more than some others.

Having explained it and defended it, I should probably point out that I'm not in favour. Aside from players with NTCs anyone can end up anywhere via trade or waivers. I think the players take the attitude that it doesn't really matter. I think their main motivation for signing for $4.7mil instead of $4.2mil is where it places them in relation to the rest of the league. The extra money is nice, but not crucial.

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12-17-2007, 12:33 AM
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Quote:
Originally Posted by RTWAP View Post
I wouldn't say it's ridiculous. If one of the main reasons for a cap is to prove a more equal competitive environment then anything that gives a few teams an advantage might need to be addressed. Imagine if the CBA had a hard cap measured in after-tax income instead of pre-tax. Then players would make the same no matter where they went, and teams in low-tax locales would not find it easier to sign players compared to Montreal (for example).

This would mean that teams spending to the cap in high tax locales would need to spend considerably more than some others.

Having explained it and defended it, I should probably point out that I'm not in favour. Aside from players with NTCs anyone can end up anywhere via trade or waivers. I think the players take the attitude that it doesn't really matter. I think their main motivation for signing for $4.7mil instead of $4.2mil is where it places them in relation to the rest of the league. The extra money is nice, but not crucial.
The idea is preposterous. What do the Owners care what the tax rate is in a certain city? They care about the actual amount of money they pay in a contract. Whether 34% or 38% goes to taxes on the player side is irrlevant.

I can't believe anyone would even consider this a possible factor in a future CBA.

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Old
12-17-2007, 12:50 PM
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If they were going to index the cap per locale, it would seem to make more sense to index it to cost of living and not just taxes. Thoughts?

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Old
12-17-2007, 01:12 PM
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There's no way this could easily be implemented - especially since tax rates can [and do] fluctuate across all of the involved markets from year-to-year. [I won't get into the possible scenarios where one team could have a huge advantage over another due to the tax situation of each franchise.]

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12-17-2007, 03:32 PM
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Quote:
Originally Posted by Cup 2008 Sens Rule View Post
This is a ridiculous idea. It has no place in the Cap system whatsoever.

thanks for the insight.

anyways, I am not a Habs fan so it does not improve my favourite teams' chances. I do think that a pre-tax salary cap is not completely fair when some teams are located in states/provinces with widely varying tax rates.

If I am a player, a 20% difference in tax rates is the difference between a 4 mill offer and a 5 mill offer. The Habs have to offer 20% more to have an identical opportunity to attract / retain players. IMO, this isn't fair to them and I have heard Gainey mention it a few times.

I am not certain how this can be addressed but there must be indexes available to the nhl hq that could be used to give some of the hardest hit teams a bit of a break.

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Old
12-17-2007, 04:20 PM
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Quote:
Originally Posted by Mr Sakich View Post
thanks for the insight.

anyways, I am not a Habs fan so it does not improve my favourite teams' chances. I do think that a pre-tax salary cap is not completely fair when some teams are located in states/provinces with widely varying tax rates.

If I am a player, a 20% difference in tax rates is the difference between a 4 mill offer and a 5 mill offer. The Habs have to offer 20% more to have an identical opportunity to attract / retain players. IMO, this isn't fair to them and I have heard Gainey mention it a few times.

I am not certain how this can be addressed but there must be indexes available to the nhl hq that could be used to give some of the hardest hit teams a bit of a break.
The tax situation for an NHL player is vastly different than the average person, so a regular tax index wouldn't be of much help. With all of the different techniques available to players to manage their taxation levels, it's near impossible to come up with what the average tax situation is. How do you deal with trades, if a player in a city with low taxes, moves to a city in a place with high taxes? What do you do about What do you do about the cap floor? Should Montreal have a higher cap floor, to account for the taxation issue, should they be in a period where they're rebuilding? How do you deal with a situation where a team is situated right on the border between two different taxation districts, and, players could be living in either one (i.e. New Jersey vs. New York state, Ottawa, with Ontario vs. Quebec, St. Louis with Missouri vs. Illinois, etc.). There's tons of assumptions, with each one that could and would be argued by team owners, to give them whatever advantage they can get. Getting consensus around hockey related revenues was probably tough enough.

I also agree with Cup 2008 Sens Rule, in that it has no place in a cap system. An employer shouldn't be concerned with how much taxes you pay. It's not up to the employer to account for the different taxation levels. It's one of many factors that influence where a player signs. It's not up to the cap to nullify all of these.

Plus, there's the issue of why the taxes are so high. A society decides on it's taxation levels, and, has to live with the results. Hockey isn't the only industry that has to deal with the issue of high taxes for certain employees. In Canada, we have higher taxes, and, we collectively have to live with the strains on the industry that deal with it. What's often interesting, is the complaints from hockey fans, that the taxation levels creates. They don't seem to mind high taxes on the upper brackets, when it's on people they don't know, and, if they leave, they don't directly impact their life in any meaningful way. But, if that person is a high profile hockey player, they often seem desperate for someone, be it the government or the NHL, to step in to help them out.

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Old
12-17-2007, 04:44 PM
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Originally Posted by discostu View Post
Plus, there's the issue of why the taxes are so high. A society decides on it's taxation levels, and, has to live with the results. Hockey isn't the only industry that has to deal with the issue of high taxes for certain employees. In Canada, we have higher taxes, and, we collectively have to live with the strains on the industry that deal with it. What's often interesting, is the complaints from hockey fans, that the taxation levels creates. They don't seem to mind high taxes on the upper brackets, when it's on people they don't know, and, if they leave, they don't directly impact their life in any meaningful way. But, if that person is a high profile hockey player, they often seem desperate for someone, be it the government or the NHL, to step in to help them out.
Very well said. If a society (like Quebec) wants to have high taxes to support its various entitlement programs, well then so be it. They are consequences as well as benefits to increasing taxes.

Also, as has been said, this system would be very difficult to manage effectively.

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Old
12-17-2007, 06:31 PM
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I'm not sure, but wouldn't this give the Habs an unfair advantage? I imagine a player in Montreal would get a much nicer tax return than one anywhere else, so the Habs would be able to pay players more than their cap hit. And could a Canadiens player be able to avoid paying Montreal taxes by claiming residence in the US?
Claiming US residence means nothing against most taxes. Great example, My family lives in New Jersey, we all a residents of the states of New Jersey but I go to school in Boston, Mass and because I have a job up a school I have to pay states taxes, while my father works in New York so he has to pay state taxes there. Of course in the US state taxes are written off of your federal taxes, but you still have to pay them.

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Old
12-17-2007, 06:56 PM
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Slightly ot:

Do players really fill out several tax papers? Isn't their entire salary paid out in their state of residency?

How are they different that a salesman who goes around the country, but receives salary from only one source?

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12-17-2007, 07:20 PM
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Taxes arent the only thing to be factored. How about cost of living? It takes alot of money to live and raise a family in the New York area compared to somewhere like Vancouver or Edmonton. Should New York have a different cap based on those factors as well?

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Old
12-17-2007, 07:25 PM
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Originally Posted by AD View Post
Slightly ot:

Do players really fill out several tax papers? Isn't their entire salary paid out in their state of residency?

How are they different that a salesman who goes around the country, but receives salary from only one source?
It's where you perform the services for which you are paid.

Travelling salesman would have to pay taxes in multiple states.

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