Major Penalty for High Taxes: CTF Study Examines Impact of Personal Income Taxes on NHL Players, Teams and the Salary Cap
- In 2014-15 players for the Montréal Canadiens paid the highest taxes, with a tax rate of 54%, while Dallas, Nashville, Florida and Tampa Bay paid the lowest team tax rate of 40.6%
- Tax rates for the Calgary Flames and Edmonton Oilers players rose from 38.5% to 43.5% due to provincial tax increases.
- 54% of Unrestricted Free Agents and 60% of players with no-trade clauses, who moved teams, went to teams with lower taxes.
- Ex-Maple Leaf Phil Kessel will save $170,136 in taxes after being traded to the Pittsburgh Penguins
OTTAWA, ON: A paper co-authored by the Canadian Taxpayers Federation (CTF) and Americans for Tax Reform (ATR) reveals that Montréal, Los Angeles, San Jose and Anaheim are some of the least financially attractive destinations for NHL players due to high tax rates.
The new report, entitled Major Penalty for High Taxes, looks at NHL team salary spending, tax rates in the relevant province or state, and the “true cap,” which is the impact taxes have on the salary cap. The report also examined the tax impact of various off-season trades on players’ incomes.
For example, Canadiens forward Zack Kassian faces a tax hike of $136,226 after being traded from the Vancouver Canucks, moving from British Columbia’s 45 per cent rate to 53 per cent in Quebec. At the other end of the spectrum, former Buffalo Sabres defenceman Tyler Myers can expect to see tax savings of $474,146 after being traded to the Winnipeg Jets, moving from New York’s 50 per cent rate to 46 per cent in Manitoba.
“The numbers don’t lie; NHL players take a financial hit to play in certain jurisdictions,” said paper author and CTF Research Director Jeff Bowes. “Obviously, there are other factors at play besides taxes, but the fact remains that significant disparities in tax rates can penalize players when they move between teams.”
Dallas, Florida, Tampa Bay and Nashville all rank among the best places to play from an income tax standpoint.
“The NHL salary cap was supposed to level the playing field, but teams like the Toronto Maple Leafs have a 16 per cent ‘true cap’ disadvantage compared to their Atlantic Division rivals in Tampa Bay,” noted CTF Federal Director Aaron Wudrick. “There’s more than one reason why a guy like Phil Kessel doesn’t mind being traded to Pittsburgh. He will pocket an additional $170,136 as a result.”
In addition to NHL players moving to lower tax jurisdictions, internal migration patterns in both Canada and the US show a move towards the lower-tax states and provinces. Since 2005, Alberta – the province with the lowest taxes for those earning $200,000 – has seen a net migration of 248,197 people from other parts of Canada. B.C. has the second lowest income tax for those earning $200,000 and that province saw the second largest net migration, with a gain of 68,833.
Conversely, Quebec has the highest taxes on those earning $200,000 and had the second highest net migration loss, losing 90,618 people since 2005.
“NHL players are just one example of highly skilled workers who have a choice of where to work. The same principles apply for doctors, engineers, and CEOs of major companies. Governments need to keep that in mind when they’re considering the impact of tax rates on attracting top talent,” continued Wudrick.
The CTF and ATR’s paper on the taxes of NHL players can be found HERE.
Lead Photo: MONTREAL, CANADA - MAY 3: Daniel Alfredsson #11 of the Ottawa Senators protects the puck as Tomas Plekanec #14 of chases from behind in Game Two of the Eastern Conference Quarterfinals during the 2013 NHL Stanley Cup Playoffs at the Bell Centre on May 3, 2013 in Montreal, Quebec, Canada. (Photo by Francois Lacasse/NHLI via Getty Images)