NHL monitors teams’ income tax advantages, but “there are no easy solutions”

LAS VEGAS – Four of the last five Stanley Cup-winning teams got here from states that don’t levy income taxes – and 7 of the last ten finalists.

These winning streaks by the Florida Panthers, Tampa Bay Lightning, Vegas Golden Knights and Dallas Stars have understandably sparked debate about whether the teams involved have an unfair advantage by signing players at below-market prices.

In many cases, players who sign up those states – Florida, Tennessee, Texas, Nevada and Washington are among the many states that impose no income tax apart from federal taxes – would lose thousands and thousands of dollars over the lifetime of their contracts in the event that they played north of the border or in high-income-tax states like California, New York, New Jersey and Minnesota.

The NHL is keeping track of the situation.

In a recent poll of fans, 84.6 percent of the 14,066 respondents said teams in states without income taxes have a bonus. Of those, 42.8 percent said changes should be made to level the playing field, 41.5 percent said the advantage just isn’t large enough to justify complex changes, and 14.7 percent said the problem is overblown.

“This topic comes up in our room from time to time at the board and general manager level,” NHL Vice President Bill Daly said on the NHL's European player media tour in Prague last month. “There are no easy solutions. It's not like we can just pick from column A and solve the problem overnight. Players choose where they want to play for a variety of reasons. Their financial gain is one of them, but the quality of life and the communities they live in are probably more important.”

Daly reiterated that sentiment Tuesday on the NHL's North American Players Media Tour in Las Vegas. He said while it's too early to say if that is a problem that should be addressed, he has spoken to the NHL Players Association concerning the issue and the consensus is that it will be too complicated to level the playing field.

For example, even when the league systematically adjusted the salary cap for teams in states without state income taxes, what would occur if a player was traded or sent to the minor leagues? And assuming a player is willing to sign a “hometown discount” contract that’s lower than he could have gotten elsewhere, how problematic wouldn’t it be to try to find out how much of a reduction he took?

The NHLPA doesn’t see this as a significant problem to this point. Executive Director Marty Walsh met with the 2 dozen players who took part within the media tour in Prague and explained that it’s a difficult problem to unravel and that it just isn’t considered a problem in other leagues.

As Daly said, “This is nothing new. It has always been there.”

However, some actors see a necessity for motion.

“They have to find a way to change that, frankly,” Ottawa Senators forward Shane Pinto said Tuesday. “When you look at all these free agents, you can't blame them for going south. It's the way it is, and it's best for their families, taxes and lifestyle. But I think they have to find a way, especially for the Canadian teams. They have to overpay guys every time to come to Canada, and that messes up the salary cap. I think they have to find a way to balance that out.”

“I know it's not easy, because it's always been that way, but I think it would be nice if everyone had equal opportunities.”

To be fair, few complained about Florida's lack of income tax when the Tampa Bay Lightning were doormats within the Nineteen Nineties. Few brought up the problem when the Florida Panthers didn’t make the playoffs from 2000 to 2011 and didn’t advance past the primary round from 1996 to 2022.

“I think every place has its advantages, whether it's lifestyle, and taxes are certainly a part of it,” said Nashville Predators star Filip Forsberg, whose team, with no state income tax, had a stellar summer by signing Juuse Saros to an eight-year extension and Steven Stamkos, Jonathan Marchessault and Brady Skjei to contracts totaling greater than $166 million. “At the end of the day, it makes quite a difference in our salary. That's a fair point. I don't disagree with that.

“It is above my pay grade 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 and was signed alongside Jonathan Huberdeau in the Matthew Tkachuk blockbuster.

Alberta has a relatively low income tax rate compared to Canadian provinces. Still, on his current $6.25 million-a-year contract, Weegar would earn about $950,000 more if he were paid in Florida, according to the Turbo Tax and Smart Asset websites.

That doesn't bother him. But he would like it if the league and the players' union found a mechanism to create a balance in the next collective agreement.

“You definitely feel like there could be another people drawn to those teams down south,” Weegar said Wednesday. “So there could be something in the following CBA to work something out. But ultimately, the Tampas, Floridas and Nashvilles are winning teams. That's what really attracts people. When we start winning on the New Yorks and Calgary, no one really cares concerning the taxes.

“The contracts are big enough already. You don't really notice the taxes, not that much. You still live pretty comfortably. So I would say when you start winning, you'll get your guys to come and your free agents to want to play there.”

Just as Stamkos and Marchessault moved to Nashville from Tampa Bay and Las Vegas, respectively, defenseman Brandon Montour moved from one state with no income tax to a different. One day after celebrating winning the Stanley Cup during a parade on A1A in Fort Lauderdale, Montour signed a seven-year, $50 million contract with the Seattle Kraken.

He said taxes weren’t the essential reason for his decision.

“You can't say money isn't an issue,” Montour said Wednesday. “But for me, that wasn't what we were going for. We also had places with the highest taxes that we were considering. I've played in California. I've played in New York. Of course, the salary looks a little better when you're in Florida and Seattle. But that wasn't something we were focused on.”

“We tried to find something that fits our lifestyle and our family and that we can call home.”

Montour tried to know how the league and the union could handle the situation.

“What do you do, like take a percentage off the cap?” he said. “For example, if Florida signed someone for $10 million, would they take a percentage or 2 percent off the cap or something? I don't really know what they could possibly do.”

Montour said every player has different reasons for signing some other place, and there are lots of areas with high income taxes which can be attractive. He believes it's only a debate because these teams are in a cycle of winning.

“There are just too many variables that you can't really control,” Daly said, “including the fact that there are some markets that are very attractive to players and that have, so to speak, the highest tax rates in the world. But there are also other opportunities, other things that make these markets attractive to players.”

“So I think there's so much to consider when it comes to where a player wants to play and what he's willing to do to get there. And a lot of that has to do with team chemistry, how teams are put together and how the player positions himself in terms of the needs of the team. Taking all of those variables into account, I think, is going to be a very difficult task.

“However, there are after all rumors, particularly within the Canadian media, that Canadian franchises are at an obstacle. We take these rumors seriously and are at all times searching for ways to enhance the system. I just don't have any obvious answers to them.”

Daly was asked if he could envision a scenario where teams in Florida, Vegas, Nashville, Dallas or Seattle have a lower salary cap than other teams. He said, “I don't think we could ever have a distinct cap for various teams, although in some respects we do, by way of how the CBA works and bonus overages and things like that. So I suppose there's perhaps a formula that you might envision that way.”

“I have other ideas that I prefer to this one.”

When asked if he would share it, Daly laughed: “No.”

“Look, there are some rough ways you may attempt to make adjustments to account for this,” Daly said. “I don't think this issue is about attempting to push something through, especially without really pondering it through thoroughly and running it through all of the possible channels. I feel sometimes once you rush to do something based on talk, you sort of step right into a hole and the unintended consequences sort of come out.

“We'll continue to monitor it. If we can improve it, we will. I mean, I could be wrong. If the next 10 years go the way the last five have, then maybe that's something that needs to be addressed. But at this point, based on a couple of summers, I'm not really running to get there.”

For Radko Gudas, that’s superb.

The Anaheim Ducks defenseman pays 13 percent income tax in California, in comparison with zero percent when he played for the Panthers. Still, Gudas said succinctly: “I don't think the NHL should get into tax trouble.”