Now that NHL "experts" are finally taking note of the link between Stanley Cup success and player income tax rates, here are facts supporting the need for a change.
Expansion provides evidence that not only are Gary Bettman and the NHL owners aware of the player income tax inequity, they’re profiting from it. Expansions to Vegas and Seattle, both zero state income tax cities, provided $1.15 Billion to the NHL.
Vegas and Florida clearly have one goal in mind, winning Stanley Cups. If you examine Vegas and Seattle from a playoff success perspective, there is simply no comparison, the Golden Knights have eaten the Kraken’s lunch. I can't point out about the NHL player income tax inequity without acknowledging Vegas and Florida are the class of the league. Yet, the tax advantage exists. From Matt Tkachuk choosing a zero-state tax team to Rasmus Andersson admitting he will only sign in Vegas, players are flocking to well run franchises, who also have the tax advantage. Are these players going to Edmonton? Toronto? Boston? The last six Stanley Cup winners all have a distinct player income tax advantage (see attached). I agree they all are well run organizations, but the charted results are undeniable.
The Washington Capitals are the only team in the higher half of the player income tax rates to win the Cup since 2012.
The pandemic and resulting salary cap freeze exacerbated this unfairness. For the last three years teams have been jammed up against the cap, looking for every advantage they can find. Long Term Injury Reserve (LTIR) is another topic for another day, but the recent cap freeze has thrown a spotlight on player income tax inequity.
What would be the potential fix for this tax inequity issue?
The NHL salary cap must be "after tax dollars". No matter where a player plays, they would bring home the same amount of money. Existing contracts would be grandfathered in, but when players and teams sign new contracts, they would be bound by the new set of rules. Eventually, within 8 years, the maximum length of an NHL contract, all teams and players would be using the new after-tax salary cap system.
If you are Mitch Marner, isn't the relative anonymity of playing in a southern US market already a huge selling point? Better weather too? Some argue the lower Canadian dollar helps to sell players on Canada, but I ask, do you believe an NHL player making $12 million per season cares that his cucumber costs 21 cents less in Canada? Or do you think pocketing an extra couple million a year might just be more incentive to pick a zero-state tax team? For Marner to bring home the same amount of money in Toronto that he is bringing home in Vegas, Marner would need to have a cap hit of $15,700,000. $3.7M more than Vegas’s cap hit at $12M. Canadians have a higher hurdle yet; our clubs bring in revenue in Canadian dollars yet pay wages in US$. Marner would need to be paid $21.5 million Canadian in Toronto to bring home the same as he is in Vegas.
To be fair, this calculation is not completely accurate. When a player plays in Alberta, even though they live and play for Vegas, they are responsible to pay taxes in Alberta and so on. Even with that, the cap savings for these zero state tax teams is over half of the amount shown. The 2025-26 cap number is $95.5M, given this income tax inequity, Toronto would need a cap of between $110M to $124M to allow their players to bring home the same amount as the Golden Knights at $95.5M. Even with the blended tax rate reducing this amount, the Leafs are still short well over $14.0M in cap space when compared to Vegas.
Mitch Marner chose Vegas because they are well run, but they have a built-in advantage to both his pocketbook and his odds of winning the Cup.
Another issue will be changing tax rates. From the last time I completed this exercise to now, some jurisdictions have made changes to their income tax rates. A modest increase in escrow would be required until a fund is created which would allow for increases or decreases in tax rates.
This is math.
This is correctable.
Do you honestly believe Gary Bettman isn’t smart enough to solve a math problem?
The original six NHL franchises are at a significant competitive disadvantage, we can debate how much this impacts the outcome, but the results speak for themselves.
The commissioner claims the player income tax inequity isn't an issue. In 2021 Gary Bettman purchased a 12,000 sq ft mansion for $8 million, in Boca Raton, Florida although he is said to live in New Jersey.
Mr. Bettman reportedly earns $9.5 million per year. The New Jersey income tax rate is 38.22%. In Florida, where there is no state income tax, the rate is 31.27%, a difference of 6.95%. That’s $660,250.00 more take home per year in Florida than New Jersey. So, if you were Gary Bettman with a choice on where you file your taxes, which state would you choose?
