NHL monitors teams’ income tax benefits, but ‘there are no easy solutions’
LAS VEGAS — Four of the last five Stanley Cup championship teams have come from states that do not levy state income taxes, and seven of the last 10 finalists.
Those runs by the Florida Panthers, Tampa Bay Lightning, Vegas Golden Knights and Dallas Stars have understandably sparked a debate over whether the teams involved have an unfair advantage in signing players at below-market prices.
In many cases, players who sign in those states (Florida, Tennessee, Texas, Nevada and Washington are among the states that pay no income tax beyond federal taxes) would lose millions of dollars over the life of their contracts if they played north of the border or in high income-tax states such as California, New York, New Jersey and Minnesota.
The NHL is closely monitoring the situation.
In a recent poll among fans by The AthleticsOf the 14,066 respondents, 84.6 percent thought teams in states without a state income tax have an advantage. Of those, 42.8 percent said changes should be made to level the playing field, 41.5 percent said it’s not a significant enough advantage to warrant complex changes, and 14.7 percent said the problem has been overblown.
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“It’s an issue that comes up in our room from time to time at the board level and the general manager level,” NHL deputy commissioner Bill Daly said last month during the NHL’s European player media tour in Prague. “There are no easy solutions. It’s not like we can just pick from column A and solve the problem overnight. Players make decisions about where they want to play for a variety of reasons. Their bottom line is one of them, but their quality of life and the communities they live in are probably more important.”
Daly echoed that sentiment Tuesday during the NHL’s North American Player Media Tour in Las Vegas. He said it’s too early to tell if this is something that needs to be addressed, but he’s spoken to the NHL Players’ Association about the topic and the general feeling is that it would be too complicated to level the playing field.
For example, even if the league were to systematically adjust the cap for teams in states without state income taxes, what would happen if a player was traded or sent to the minor leagues? And if a player was deemed willing to sign a “hometown discount” contract for less than he could have gotten elsewhere, how problematic would it be to try to determine how much of a discount they were taking?
The NHLPA doesn’t see this as a major issue so far. Executive Director Marty Walsh spoke to the two dozen players who attended the media tour in Prague and explained that this would be a complicated issue to solve. Furthermore, they don’t see this as a topic of discussion in other leagues.
As Daly said, “This is not new. This has all existed over time.”
But some players do feel that action needs to be taken.
“They’ve got to find a way to adjust it, honestly,” Ottawa Senators forward Shane Pinto said Tuesday. “When you look at all the free agents, you can’t blame them for going south. It’s just what it is, and it’s the best thing for their families, their taxes, their lifestyle. But I do think they’ve got to find a way, especially for the Canadian teams. They’re having to overpay guys to come to Canada every time, and it’s ruining the cap. I think they’ve got to find a way to just even it out.
“I know it’s not easy because it’s been like this forever, but I think it would be nice to have a level playing field.”
To be fair, few complained about Florida’s lack of state income tax when the Tampa Bay Lightning were a doormat in the 1990s. Few brought it up when the Florida Panthers failed to make the playoffs from 2000 to 2011 and failed to advance past the first round from 1996 to 2022.
“I think every place definitely has its advantages, whether it’s (lifestyle), and taxes are definitely a part of it,” said Nashville Predators star Filip Forsberg, whose team had a big summer without a state income tax, signing Juuse Saros to an eight-year extension and Steven Stamkos, Jonathan Marchessault and Brady Skjei to contracts totaling more than $166 million. “Ultimately, that plays a pretty big role in our salary. It’s a fair point. I don’t disagree with it.
“It’s my job to decide whether something is right or wrong.”
Defenseman MacKenzie Weegar signed an eight-year, $50 million contract with the Calgary Flames in 2022. He previously played in Florida, where he was acquired along with Jonathan Huberdeau in Matthew Tkachuk’s blockbuster trade.
Alberta has a relatively low income tax rate among Canadian provinces. Still, Weegar would earn about $950,000 more on his current $6.25 million-a-year contract if he were paid in Florida, according to the websites Turbo Tax and Smart Asset.
He doesn’t care about that. But he does think it would be nice if the league and the players’ union could find a mechanism to level the playing field in the next collective labor agreement.
“You definitely feel like it could attract other guys down south to those teams,” Weegar said Wednesday. “So there could be something in the next CBA to work something out. But at the end of the day, the Tampas, Florida, you look at Nashville, the teams are winning. That’s what really attracts people. The New Yorks and Calgary, if we start winning, nobody really cares about taxes.
“The contracts are big enough already. You don’t really notice the tax, too much. You’re still living pretty comfortably. So I’d say, start winning, get your guys in and your free agents that want to play there.”
Just as Stamkos and Marchessault went from Tampa Bay and Las Vegas to Nashville, respectively, defenseman Brandon Montour went from a state with no state income tax to a state with no state income tax. A day after winning the Stanley Cup during a parade on A1A in Ft. Lauderdale, Montour signed a seven-year, $50 million contract with the Seattle Kraken.
He said taxes were not the deciding factor in his decision.
“You can’t say money isn’t a factor,” Montour said Wednesday. “But for me, that wasn’t what we were looking for. We also had the highest tax places that we were looking at. I’ve played in California. I’ve played in New York. Obviously, the salaries look a little better when you’re in Florida and Seattle. But it wasn’t something we were focused on.
“We tried to find something that fit our lifestyle and our family and could be a place and home.”
Montour tried to figure out how the union and the labor union could even address the situation.
“What do you do, like take a percentage off the cap?” he said. “If Florida signed someone worth $10 million, would they take a percentage off the cap or 2 percent off the cap or something? I don’t really know what they could do.”
Montour said that each player has different reasons for signing in different places, and that there are many areas with high tax revenues that are attractive. He thinks this is only a debate because these teams are in a winning cycle.
“There are just too many variables to really control,” Daly said, “including the fact that there are markets that are highly desirable to players that have the highest tax rates in the world. Yet there are other opportunities, other things, that make those markets attractive to players.
“I think there’s so much that goes into the equation of where a player wants to play, what he’s willing to do to play there. And a lot of that has to do with team chemistry and how teams are constructed and how the player sees himself fitting into the team in terms of their needs. And to take all of those variables into account, I think it’s going to be a very difficult exercise.
“That said, there’s obviously a lot of talk, particularly in the Canadian media, that Canadian franchises are at a disadvantage. We take that talk seriously and we’re always looking for ways to improve the system. I just don’t have any obvious answers.”
Daly was asked if he could envision a scenario where teams in Florida, Vegas, Nashville, Dallas or Seattle would have a lower ceiling than other teams. He said, “I don’t think we could ever have a different ceiling for different teams, even though in some ways we do with how the CBA works and bonus overages and things like that. So I guess there’s maybe a formula that you could come up with that way.
“I have other ideas that I will give priority to.”
When asked if he would share it, Daly laughed: “No.”
“Look, there are some crude ways that you can try to make adjustments to account for it,” Daly said. “I don’t think this is a problem at the level of trying to push something through, especially without really thinking it through and running it through every channel possible. I think sometimes you get into a hole when you rush to do something based on chatter, and the unintended consequences kind of come to the surface.
“We’ll continue to monitor it. If we can make it better, we will. I mean, I could be wrong. If the next 10 years are anything like the last five, then maybe it’s something that needs to be addressed. But right now, based on a couple of summers, I’m not really running toward it.”
Radko Gudas thinks that’s fine.
The Anaheim Ducks defenseman pays 13 percent in California state income tax, compared to zero percent when he played for the Panthers. Still, Gudas said succinctly: “I don’t think the NHL should get involved in tax issues.”
(Photo of Matthew Tkachuk at the Florida Panthers’ Stanley Cup rally: Rich Storry/Getty Images)
