Last November, I examined a report released by the Canadian Taxpayers Federation (in conjunction with Americans for Tax Reform). It claimed 60 percent of last season’s unrestricted free agents and players who waived their no-trade clause clause chose destinations with lower taxes.
I discovered the report contained several glaring flaws. Among the notables:
- Among the players the report included among those it claimed waived their no-trade clauses to go to lower-tax destinations were Tyler Myers, Dougie Hamilton, Travis Moen, Marc Savard and Nathan Horton. In fact, Myers’ clause wasn’t in effect for another two years and thus he had no say over where he was deal. Hamilton was coming off an entry-level contract and lacked a no-trade clause (players on ELCs don’t have those clauses). Moen’s had expired the previous season. Savard and Horton are all but retired due to injury and their trades were simply salary dumps.
- Claiming Curtis Glencross was traded by the Washington Capitals to the Calgary Flames when in fact it was the other way round.
- The claim Jaromir Jagr signed with the Florida Panthers as an unrestricted free agent, when in fact he re-signed with the Panthers, who acquired him a month earlier via trade with the New Jersey Devils.
- Claiming Artem Anisimov signed with the Chicago Blackhawks as a UFA, when in fact he was dealt to the Hawks on June 30 in a multi-player trade and wasn’t eligible for free agency for another year. He eventually re-signed a multiyear deal with the Hawks.
- The report overlooked the marginal increase in this season’s salary cap and its effect upon some of the destinations of last summer’s unrestricted free agents.
- The report also omitted the fact several of last summer’s notable free agents (Brad Richards, Paul Martin, Joel Ward, Alex Semin, Cody Franson) signed with teams in states or provinces with high tax rates.
- It neglected to point out the difficulty of Alberta’s NHL franchises (Calgary and Edmonton) to attract top-caliber free agents despite playing in Canada’s lowest-taxed province.
- I noted how seven of last season’s 16 playoff clubs were in high-tax provinces or states, while six of those that missed the 2015 postseason were from low-tax areas.
- And finally, the fact high tax rates had no bearing on the effectiveness of teams to put together competitive rosters.
However, I acknowledged that taxes could be a consideration for free-agent players or those willing to waive their no-trade clauses. So it was with interest that I read The National Post’s Michael Traikos’ segment on taxes in his ongoing series on the struggles of Canada’s seven NHL franchises.
Charles Lammam, director of fiscal studies at the Fraser Institute, told Traikos that states with lower taxes tend to sign more skilled players. Lamman doesn’t indicate if he’s referring to unrestricted free agents, players waiving their no-trade clauses or both. He also didn’t provide information to substantiate that claim.
Examining the chart in Traikos’ column, of the 22 provinces and states where NHL franchises are located, Ontario, Quebec and Winnipeg account for three of the four highest-taxed areas for NHL teams. The third-highest is California, home to the Anaheim Ducks, Los Angeles Kings and San Jose Sharks. Minnesota, New Jersey, Washington DC, New York, Alberta and British Columbia round out the top 10.
The remaining 12 include Missouri, Tennessee, North Carolina, Massachusetts, Ohio, Colorado, Arizona, Michigan, Illinois, Pennsylvania, Florida and Texas. If we take Lamman at his word, skilled players must be stampeding toward those states. However, that’s simply not the case.
The NHL’s salary-cap system plays a much more significant role in determining the destinations of the most-skilled players. Since the cap was implemented in 2005, the teams with the most available dollars (and the willingness to spend it) each summer hold a distinct advantage in the free-agent and trade markets, regardless of the tax rates in their respective provinces or states.
Florida Panthers GM Dale Tallon told Traikos the lack of a state tax is a nice perk to bring up if he’s struggling to get a player signed. However, he points out it’s not the primary focus.
Traikos also spoke with player agents Don Meehan and Ritch Winter. Their remarks deflate the theory that tax rates determine the destinations of NHL players via trades or free agency.
Meehan told Traikos taxes might be a factor for free agents, but team competitiveness, player role and franchise stability are of more importance.
“People assume or expect that players make decisions simply on the basis of monetary considerations, whether that be the difference of the dollar or taxes,” said Meehan. “And they don’t. It’s only one of the considerations that go into a lengthy process of where they want to be.”
Winter sums it up best:
“It’s a bonus, not a determining factor… “A guy might sign in Dallas and afterwards say, ‘Oh, and they don’t have state taxes?’ On decision day, no one’s saying ‘what’s the taxes in Illinois and Alberta again?’ ”