Sam Bennett “ain’t [expletive] leaving” tax-free Florida, not after two Stanley Cups

By Dave Feschuk
Dave Feschuk is a Toronto-based sports columnist for the Star.

It’s a trend that’s hard not to notice. Five of the past six Stanley Cup champions are based in U.S. locales with zero state income tax. Ditto three of the past six finalists.
In a league with a hard salary cap, the financial advantage is obvious. Managed well, teams in no-tax states can make a compelling case to players. They can ask them to accept a contract with a lower salary-cap hit while pocketing the same take-home pay they’d get while earning a heftier cap hit in a higher-tax jurisdiction. With more cap money left to spend on better teammates, it’s a win-win.

If taxes can get mind-bogglingly complicated — NHL players, for instance, pay tax in each of the jurisdictions in which they play, practise or travel — it’s relatively simple math. A financial advisory firm that works with NHLers recently provided clients with a case study of two theoretical players earning the same $5-million (U.S.) salary.

If that player is a Maple Leaf, he pays $2.6 million in annual tax. If that player is a Florida Panther, he pays $1.9 million. That’s a $700,000-a-year difference in take-home pay, or $3.5 million over the span of a five-year contract.

“There’s definitely something to (the zero-state-tax advantage),” said Chris Slawson, a Toronto-based financial expert for Cardinal Point Athlete Advisors, which ran that case study. The tax advantage might help explain why Sam Bennett, the Conn Smythe Trophy winner and potential free agent, signaled his intention to forego the open market and stay with the Panthers from the stage of a Florida nightclub this week: “I ain’t (expletive) leaving,” Bennett told the party crowd.

And it might help explain why centreman Matt Duchene signed a four-year deal with an annual average value of $4.5 million to stay with the Dallas Stars, considerably lower than the industry consensus of what he might have earned had he exercised his right to become a free agent July 1. That the Stars are based in no-state-tax Texas perhaps at least partly mitigated any fear of missing out on a bigger payday.

For all that, Slawson, like a lot of hockey industry types, is of the mind that the advantage is often overblown. “To the extent the general public thinks there’s a huge gap, it’s probably not as wide as people think,” Slawson said.

Indeed, of all the factors that go into an athlete’s decision on where to play, taxes are just one. And as much as the burden for players on Canadian teams is higher, there are ways to mitigate it. Signing bonuses are taxed at 15 per cent in Canada (although former Leafs captain John Tavares and the country’s tax authorities have engaged in a dispute about what should be considered a signing bonus and what should be regular income). Tax expert Robert Raiola, a director with PKF O’Connor Davies, pointed out that Canada’s tax code also includes a retirement compensation agreement, or RCA, that can lop a considerable chunk off a tax bill if a player is willing to defer income until his post-playing days.

Amid all the talk of the financial pluses enjoyed by teams in Florida and Texas and Nevada, all zero-tax havens, what’s less discussed are the many benefits of playing in markets where hockey is bigger. To name just one, endorsement deals are generally easier to come by in Canadian markets. And earning a salary in U.S. dollars while living in Canada, where a U.S. dollar is currently worth about $1.37, has its charms.

Beyond all that, to chalk up the Panthers’ success or that of their state rivals, the Tampa Bay Lightning, as a product of tax policy would be ludicrous. Both Florida teams have built Cup winners within the confines of top-class organizations. In decades past, both have also had eras of competitive irrelevance when the taxes and the weather were equally favourable.
When the Los Angeles Kings won Stanley Cups in 2012 and 2014, there was little talk of them overcoming a California state income tax that is perennially among the highest in the U.S. And as one NHL agent said Friday, nobody is ranking New York State’s nation-topping tax rate particularly high on the list of reasons why the Buffalo Sabres haven’t been to the playoffs in 14 years and counting. Poor management tops that list.

There are those in the sport who’ve made a case that the league should attempt to level the playing field, perhaps by creating a system to give teams in higher-tax jurisdictions commensurate salary-cap credits. Given how commissioner Gary Bettman signalled his disdain for the issue, that seems unlikely any time soon. But perhaps if teams from zero-tax states keep dominating, that movement for change will get more militant.

If, as the old saying goes, nothing is certain but death and taxes, there’s at least one other thing that many in the hockey industry seems to see as a sure thing. If the current system is far from fair, building an equalization system that makes everyone happy would be beyond difficult.

As one agent said: “Good luck with that.”