Brooks Does the NHL Have a No State Tax Problem?

[Phil]

Quote

If I had only thought to record the call, it would be presented as Exhibit A in the case against addressing the non-state-tax teams’ advantage in the marketplace, but the first sentence from an agent who had just signed a client with one of those clubs was, and I kid you not: “And no state tax!"

 

It’s become a mockery when no-state-tax Nashville hands out a total of $108.5 million in contracts to Brady Skjei, Steven Stamkos and Jonathan Marchessault within the first hour or two of free agency, and no-tax Tampa Bay sweeps in to outdo Carolina on Jake Guentzel, not that I ever mind the penurious Tom Dundon losing out on a player.

 

Quote

Six teams — the Panthers, Lightning, Golden Knights, Stars, Predators and Kraken — have advantages that 26 other clubs do not. They are exploiting them. Four of the past five Cup champions — Florida, Vegas, Tampa Bay twice — are from no-tax states. Eleven of the past 20 conference finalists have come from no-tax states.

 

When in the world are these 26 owners going to step up and demand the league level the cap? Or do they sit back and allow these similar types of inequities in the industries in which they made their fortunes?

https://nypost.com/2024/07/06/sports/devils-have-achieved-heavenly-offseason-with-roster-retool/

[Br4d]

The point of the salary cap is to remove competitive advantage from teams with deep pockets.  Clearly there is a competitive advantage derived from being in a no tax state with a salary cap in effect.

If the NHL were not run from Toronto I'd assume this would never get fixed but now that the evidence is accumulating I assume the problem will get fixed in the next CBA.

 

 

[Pete]

All teams have the same dollars to spend. How those dollars are taxed before they hit the players wallet has nothing to do with the NHL. 

 

 

[jsm7302]

10 minutes ago, Pete said:

All teams have the same dollars to spend. How those dollars are taxed before they hit the players wallet has nothing to do with the NHL. 

 

 

Exactly. This isn't an NHL problem.

 

If they want it changed then they need to lobby the legislative branch that enacts the tax code in each state. Having a state by state salary cap is dumb.

[Pete]

20 minutes ago, jsm7302 said:

Exactly. This isn't an NHL problem.

 

If they want it changed then they need to lobby the legislative branch that enacts the tax code in each state. Having a state by state salary cap is dumb.

I'm not sure about lobbying the states, but you're not going to get the NHL to review every state's tax code annually and formulate that team's salary cap.

 

The point of the salary cap was cost certainty for the owners hidden within a "competitive balance" message coming from the league. As long as the owners are only paying 50% of hockey related revenue to player salaries, that's all they care about.

[jsm7302]

7 minutes ago, Pete said:

I'm not sure about lobbying the states, but you're not going to get the NHL to review every state's tax code annually and formulate that team's salary cap.

 

The point of the salary cap was cost certainty for the owners hidden within a "competitive balance" message coming from the league. As long as the owners are only paying 50% of hockey related revenue to player salaries, that's all they care about.

I'm not saying they should but that makes more sense than the league undertaking individual salary cap for each team. That's craziness. What's next? They take house prices into consideration, commodities? Crazy talk. If that extra cheddar means that much to certain guys then so be it but the reality is, these guys will be fine making millions anywhere.

[Long live the King]

The issue that other sports don't have is that NHL salaries are relatively low.  If you giving 40ish% of $8 mil a year to taxes and your agent, it makes sense to find a little tax break.

 

Simplest fix is double the cap.  It doesn't have to get convoluted state by state.  There's less of a concern about taxes if you're making $15-20 mil a year.

[Pete]

38 minutes ago, Long live the King said:

The issue that other sports don't have is that NHL salaries are relatively low.  If you giving 40ish% of $8 mil a year to taxes and your agent, it makes sense to find a little tax break.

 

Simplest fix is double the cap.  It doesn't have to get convoluted state by state.  There's less of a concern about taxes if you're making $15-20 mil a year.

That's not a fix and will never happen. 

 

If the cap is based on 50% of hockey related revenue, then doubling the cap would mean the owners make $0. 

[LindG1000]

43 minutes ago, Pete said:

I'm not sure about lobbying the states, but you're not going to get the NHL to review every state's tax code annually and formulate that team's salary cap.

 

The point of the salary cap was cost certainty for the owners hidden within a "competitive balance" message coming from the league. As long as the owners are only paying 50% of hockey related revenue to player salaries, that's all they care about.

 

It's really complicated, so they'll never do it, but Capfriendly did. They have an income tax calculator, and it's glaring how much of an advantage it is.

 

Let's use Barkov as an example. Alexander Barkov signed an 8-year, 80M deal with Florida in 2022. He will make 12 million dollars this year. He will net 7.27m after taxes in Florida. He would net ostensibly the same amount in Seattle, in Dallas, in Tampa, in Nashville, or in Vegas (with Vegas hitting Barkov for a mere 4800 more against the cap, probably due to where games get played (California away games play a role here).

 

The next best situation for him is Colorado or Utah, where he nets nearly 550k less. If Barkov were to come to, say, New York, he'd be losing a million dollars in salary versus Florida to taxes. If he were to be traded to Ontario or Quebec, he'd be losing nearly 1.7m a year in payments.

 

It may not be the NHL's problem to solve, but it is very obviously a problem—or at least a clear advantage to these teams, especially when players and agents run the numbers. Barkov will net something like 57M of that 80M he signed for in Florida. If he had signed that same deal in Toronto, he'd be getting 42M of that 80 in his pocket. Obviously, there are variations here (some years Barkov makes 12, some he makes more, some he makes less, etc)

 

Put all this another way, a player signing in any non-tax market is making somewhere between 4.5 and 14% more versus where they came from. That's a lot of money for any person, and when you scale out how much that is for an NHLer and the length of career, the post-career needs, etc. - I get why folks seek these teams out.

 

It's a blatant advantage. I don't have a good idea for fixing it, but it's definitely a problem. 

[Pete]

8 minutes ago, LindG1000 said:

 

It's really complicated, so they'll never do it, but Capfriendly did. They have an income tax calculator, and it's glaring how much of an advantage it is.

 

Let's use Barkov as an example. Alexander Barkov signed an 8-year, 80M deal with Florida in 2022. He will make 12 million dollars this year. He will net 7.27m after taxes in Florida. He would net ostensibly the same amount in Seattle, in Dallas, in Tampa, in Nashville, or in Vegas (with Vegas hitting Barkov for a mere 4800 more against the cap, probably due to where games get played (California away games play a role here).

 

The next best situation for him is Colorado or Utah, where he nets nearly 550k less. If Barkov were to come to, say, New York, he'd be losing a million dollars in salary versus Florida to taxes. If he were to be traded to Ontario or Quebec, he'd be losing nearly 1.7m a year in payments.

 

It may not be the NHL's problem to solve, but it is very obviously a problem—or at least a clear advantage to these teams, especially when players and agents run the numbers. Barkov will net something like 57M of that 80M he signed for in Florida. If he had signed that same deal in Toronto, he'd be getting 42M of that 80 in his pocket. Obviously, there are variations here (some years Barkov makes 12, some he makes more, some he makes less, etc)

 

Put all this another way, a player signing in any non-tax market is making somewhere between 4.5 and 14% more versus where they came from. That's a lot of money for any person, and when you scale out how much that is for an NHLer and the length of career, the post-career needs, etc. - I get why folks seek these teams out.

 

It's a blatant advantage. I don't have a good idea for fixing it, but it's definitely a problem. 

The NHL is not responsible for cost of living after the player is paid. 

 

The cost of housing is also higher in New York than it is in Nashville, should there be an adjustment for that? 

 

Out of the four teams left in the conf finals, two had the highest tax rates and two were tax-free cities. 

 

Tampa is tax free and half the moves they made the past two summers were because they were cap fucked and they weren't even that good this season.

 

This is a non-issue. It's something fans care about but it's not something owners care about. Like LTIR. 

Edited July 7 by Pete

[Long live the King]

46 minutes ago, Pete said:

That's not a fix and will never happen. 

 

If the cap is based on 50% of hockey related revenue, then doubling the cap would mean the owners make $0. 

 

The league generated over $6 billion in 22/23, over $200 million per team.  The cap could easily be much higher.

[LindG1000]

Just now, Pete said:

The NHL is not responsible for cost of living after the player is paid. 

 

The cost of housing is also higher in New York than it is in Nashville, should there be an adjustment for that? 

 

Out of the four teams left in the conf finals, two had the highest tax rates and two were tax-free cities. 

 

Tampa is tax free and half the moves they made the past two summers were because they were cap fucked and they weren't even that good this season.

 

This is a non-issue. It's something fans care about but it's not something owners care about. Like LTIR. 

 

I think it's something players care about and consider. 

 

Again, not sure it's solvable, generally agree that the owners don't care, but it's an issue. What I want to know is if/how other sports handle this, and I wonder if the money is just so excessive that it doesn't matter.

[Pete]

1 minute ago, Long live the King said:

 

The league generated over $6 billion in 22/23, over $200 million per team.  The cap could easily be much higher.

That's not how they calculate HRR, but let's say it was $200M/team...at 50% it would be $100M...It's currently $88M. They're not going to double it and make salaries $180M and the team getting $20M.

 

That's the entire reason there was a lockout.

[Dunny]

Payrolls are lower now than they were in the late 90s. 

 

Owners should build Bettman a statue. 

 

On the other hand, it's hands down the most boring professional sports league on the planet. Teams get players and want to keep them for a decade. It's so frickin boring. 

[Pete]

1 minute ago, LindG1000 said:

 

I think it's something players care about and consider. 

 

Again, not sure it's solvable, generally agree that the owners don't care, but it's an issue. What I want to know is if/how other sports handle this, and I wonder if the money is just so excessive that it doesn't matter.

I don't see how it's an issue. What's the issue? That those teams have more money to spend? Is it making them better? Nashville and Tampa were hovering around wildcard status. So was Vegas.

 

This is only an issue for fans to complain. It's not effecting the on-ice product, nor is there a reasonable way for the NHL to do anything about it, nor does it seem like they want to. 

 

Larry blew his load early for this time killer. Should have saved it for August/arbitration window.

[Pete]

1 minute ago, Dunny said:

Payrolls are lower now than they were in the late 90s. 

 

Owners should build Bettman a statue. 

 

On the other hand, it's hands down the most boring professional sports league on the planet. Teams get players and want to keep them for a decade. It's so frickin boring. 

Players also want guaranteed contracts, so when you mix all that you get what you get.

[BrooksBurner]

It’s absolutely a problem, and it’s an NHL problem. It’s difficult only if they make it difficult. It’s not hard to view state income tax rates and apply a one time cap hit modifier to contracts when they are signed, or a one time cap hit modifier in the event of a trade. That’s all that’s needed. Stuff like property tax rates and cost of living estimates have to be ignored. It’s ok to not have a perfect solution, as long as it’s monumentally better for low effort than the current disaster that is in place now. It’s a major problem for a pro sport that hard caps in the name of competitiveness to have such a clear and noticeable advantage limited to a handful of teams.

Edited July 7 by BrooksBurner

[Pete]

To be clear, the cap was instituted for cost certainty. Owners claimed they were paying 75% of revenue to player costs. 

 

At some point during the stalemate, the fan perception was that this was billionaires fighting with millionaires and Bettman didn't like the optics of that so he started leaning into the "competitive balance" messaging. It was never about parity. 

 

If it was about competitive balance then there would be no cap floor and everybody would be forced to spend for the ceiling. 

[Sod16]

I lived in Nashville in the early 80s.  A charming bucolic backwater that I miss.  How did it become a boom town?  It has the best tax situation in the country (not just income tax).  So what's going on with hockey is just reflective of what's going on in general.  

 

Most no income tax states have high property taxes, but they are still advantageous for people making millions in income.

 

After 28 years in the tax hell of Minnesota, I have signed on as a free agent in no income tax New Hampshire.  What a relief!  Now we just need to use that status to get an NHL team!

[Long live the King]

3 hours ago, LindG1000 said:

 

I think it's something players care about and consider. 

 

Again, not sure it's solvable, generally agree that the owners don't care, but it's an issue. What I want to know is if/how other sports handle this, and I wonder if the money is just so excessive that it doesn't matter.

 

It's this.  The Celtics just resigned 2 guys from their championship winning team for about $60 mil per year.

[Long live the King]

3 hours ago, Pete said:

That's not how they calculate HRR, but let's say it was $200M/team...at 50% it would be $100M...It's currently $88M. They're not going to double it and make salaries $180M and the team getting $20M.

 

That's the entire reason there was a lockout.

 

Fine.  If you don't like raising the cap, institute a luxury tax.

[Long live the King]

3 hours ago, Pete said:

That's not how they calculate HRR, but let's say it was $200M/team...at 50% it would be $100M...It's currently $88M. They're not going to double it and make salaries $180M and the team getting $20M.

 

That's the entire reason there was a lockout.

 

https://www.nhl.com/news/nhl-salary-cap-increases-for-2023-24-season-345067044

 

Also $6 billion is the number Bettman quotes.  Only reason the cap didn't go up more was because the escrow debt isn't paid off yet.  They expect it to be paid off during this season.  Probably means a big cap jump next year to the near $100 mil which would be the 50%

[Pete]

25 minutes ago, Long live the King said:

 

https://www.nhl.com/news/nhl-salary-cap-increases-for-2023-24-season-345067044

 

Also $6 billion is the number Bettman quotes.  Only reason the cap didn't go up more was because the escrow debt isn't paid off yet.  They expect it to be paid off during this season.  Probably means a big cap jump next year to the near $100 mil which would be the 50%

OK... That's still not doubling the cap. That's never going to happen. 

[Pete]

32 minutes ago, Long live the King said:

 

Fine.  If you don't like raising the cap, institute a luxury tax.

It's not about what I like or don't like, it's about what I think is realistic. 

 

Totally down with the luxury tax, have said that before. 

 

If a team exceeds the cap, they have to put an equal amount into revenue sharing and they're not included in the revenue share. Then the teams that have the money to go over the cap can do so and they don't benefit from the RevShare model. 

[Long live the King]

6 minutes ago, Pete said:

OK... That's still not doubling the cap. That's never going to happen. 

 

I was semi exaggerating, although revenue has doubled since the last cba was signed so I can see the players asking for a larger chunk.  60-40ish.