In the National Hockey League, an unrestricted free agent likely considers many factors when choosing a team: salary, coach, teammates, quality of the franchise, and position depth.
A new study suggests that another factor is the personal income tax rate based on the team’s location.
The joint study between the Canadian Taxpayers Federation and Americans for Tax Reform examined team spending on salaries and the tax rate in the team’s Canadian province or U.S. state to determine a player’s after-tax pay.
According to the report, “57 percent of unrestricted free agents who moved teams went to teams with lower taxes.”
“The numbers don’t lie; NHL players take a financial hit to play in certain jurisdictions,” said the report’s author and Canadian Taxpayers Federation Research Director Jeff Bowes. “Obviously, there are other factors at play besides taxes, but the fact remains that disparities in tax rates leave some teams at a major disadvantage.”
The “disparities” in tax rates do vary widely among the states and provinces where NHL teams are located. For example, in 2013-14, the NHL’s pay cap was $12.8 million. After a player paid at that rate subtracts taxes, take-home pay could vary from $5.8 million in California to $7.8 million in Alberta.
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“Is living in California worth a $2 million dollar pay cut?” the report asked.
According to the report:
The purpose of this report is to show the impact that taxes—personal income taxes in particular—have on labour mobility. While the numbers are more extreme with NHL players, the concept is the same for millions of North American families. Jurisdictions with high taxes will continue to lose the most talented, highly-skilled citizens to lower tax jurisdictions.
“If high tax rates make it more difficult to attract free-agents in the NHL, it’s not a stretch to believe it’s also hard to attract other highly skilled workers,” said Canadian Taxpayers Federation Federal Director Aaron Wudrick. “Governments need to keep that in mind when they’re considering the impact of tax rates on attracting top talent.”
Some highlights of the report include:
- Montreal Canadiens players are hit hardest with a tax rate of 53.9 percent.
- Los Angeles Kings players paid a league-high $27.8 million to the federal government and $8.5 million to California.
- The player who saved the most in taxes is Benoit Pouliot. By moving from the New York Rangers to the Edmonton Oilers, he escaped having to pay $575,752 more in taxes.
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