According to a new study high tax rates seem to be impacting the competitive balance in the National Hockey League. The study shows that most of the NHL free agents chose to move to teams in locations with lower taxes – saving those players millions of dollars!
The NHL may be the first time that we are noticing the trend but it may not stop there.
In January of 2014 star Japanese pitcher Masahiro Tanaka signed with Major League Baseball’s New York Yankees for 7-years and $155 MILLION! Sadly for Mr. Tanaka because he signed to play in New York, he will never see $90 MILLION of those dollars.
According to the analysis:
Tanaka will pay a combined marginal income tax rate of 56.1 percent – over half of his contract. For New York state and local taxes alone he will lose an estimated $2,811,257 a year. The combined marginal income tax rate Tanaka will pay is comprised of the federal, state and local tax rates, plus the Medicare payroll tax.
Former Yankee Robinson Cano signed a deal with the Seattle Mariners around the same time – for 10-years $240 MILLION. The Yankees had made Cano an offer of 7-years and $175 Million… but to match the money that Cano will make playing for the Mariners they would have had to offer $265 Million!
That kind of financial difference has to be playing in the minds of professional athletes searching for new contracts…
Most National Hockey League free agents moved to teams in states or provinces with lower taxes in the 2014 offseason, which saved them a combined $8 million, according to a new study published jointly by Americans for Tax Reform and the Canadian Taxpayers Federation.
“Injuries can damage your favorite sports team,” Grover Norquist, president of ATR, said in a statement. “So can high taxes in your state or province.”
The study analyzed NHL salary payments and income tax rates for players to demonstrate the true cost tax rates have on so-called labor mobility. It found that 57 percent of 123 free agents went to teams with lower taxes, costing the rejected states or provinces $7,951,784 in lost tax revenue.
In terms of taxes, U.S. states are generally less attractive than Canada, according to the study. Players in Alberta paid less in federal and provincial taxes combined than players in U.S. states without an income tax. Players for the Los Angeles Kings paid the highest amount of taxes — $27.8 million to the feds and $8.5 million to California.
In the past two years, 21 of the 23 American teams fell in the rankings of best places to play.
“NHL players are just one example of highly skilled workers who have a choice of where to work,” CTF Federal Director Aaron Wudrick said in a statement. “The same principles apply far beyond professional athletes, but also for doctors, engineers, and CEOs of major companies.”