Impact of taxing the rich on Canadian Hockey teams

[ricardodw]

A few years ago Phil Housley would not consider signing a contract with the Jets because of Manitoba's high income taxes.

In today's environment it seem that all the provinces are looking for extra tax revenue by raising taxes on anyone making more than $300k.

The federal Liberal economic plan wants to raise the tax on everyone making more than 200K ( all NHL players) from a top rate of 29% to 33 %

That combined with provincial income tax Ontario comes in at 53.53%, Quebec’s combined top rate would be 53.3 per cent, 50.4 per cent in Manitoba and 49.8 per cent in British Columbia. Alberta's provincial income tax top rate was set to be 11.5 % in 2016 so overall income tax for the Flames players would be 45.5%

The USA federal income tax (400K+) is 39.6%... with Arizona, Florida, Tennesse, Texas having no state income tax.

Do hockey players have tax avoidance schemes? or do they really pay millions in taxes? Do the Flames pay the taxes in Alberta?

Would a trade from The Leafs to the Stars mean 13% more take home pay?

[CroFlames]

You forgot Nevada for no state income tax. I'm actually considering moving there from California myself to save some dough.

I would assume players take tax brackets into consideration when signing contracts, but most guys don't have the negotiating power that Sid or Ovi do, so they'll basically play wherever a contract is offered to them. I think rarely would a guy avoid a team over taxes, unless he is an absolute superstar.

[squiggs96]

I've written on the topic a few times, but here was my post from last June when discussing Brad Richards going to NYR. Any new tax changes would alter these slightly.

Why would he pay more in taxes in Calgary? With the Bush tax cuts expiring January 1, 2013, the highest marginal rate in the US returned to 39.6%. Alberta has the lowest personal tax rate in Canada at 39%. Flames and Oilers players receive the highest after-tax income of any of the 30 NHL teams, including Florida and Tampa Bay. Alberta also has much lower property taxes than Florida, receive free health care, and don't pay a 0.9% tax on income over $200,000.

Fun fact, a player in Montreal will take home the least amount of after-tax dollars. The three California teams are next, with Toronto being the fifth worst.

[kipperiggy]

I imagine doing income taxes for an American-citizen hockey player would be a nightmare as I seem to remember from tax class that they get taxed at whatever state rate the work is performed. So you'd be taxed at 23 different US state rates plus whatever the foreign rate would be for games played in Canada.

Canada taxes based on residency and not citizenship as at Dec 31. For Canadian players resident in the US, I'm not sure if it would be State-specific or one foreign rate.

There's a reason I'm in audit and not in tax... what a mess!

[Flabbibulin]

Originally Posted by squiggs96

I've written on the topic a few times, but here was my post from last June when discussing Brad Richards going to NYR. Any new tax changes would alter these slightly.

And thank god for us that New York made the most financial sense for Richards. Imo, the only time where tax percentiles become a deciding factor is in absolutely massive deals with FA. In most cases, I think it is probably wise that we stay away from those anyway.

[ricardodw]

Originally Posted by squiggs96

I've written on the topic a few times, but here was my post from last June when discussing Brad Richards going to NYR. Any new tax changes would alter these slightly.

Why would he pay more in taxes in Calgary? With the Bush tax cuts expiring January 1, 2013, the highest marginal rate in the US returned to 39.6%. Alberta has the lowest personal tax rate in Canada at 39%. Flames and Oilers players receive the highest after-tax income of any of the 30 NHL teams, including Florida and Tampa Bay. Alberta also has much lower property taxes than Florida, receive free health care, and don't pay a 0.9% tax on income over $200,000.

Fun fact, a player in Montreal will take home the least amount of after-tax dollars. The three California teams are next, with Toronto being the fifth worst.

Can't imagine that a hockey's players family would be waiting in line for Canadian health care rather than going to a Mayo Clinic. The health expense would likely be tax deductible and the player would end up getting it half paid for with his Canadian tax break.

[squiggs96]

Originally Posted by ricardodw

Can't imagine that a hockey's players family would be waiting in line for Canadian health care rather than going to a Mayo Clinic. The health expense would likely be tax deductible and the player would end up getting it half paid for with his Canadian tax break.

That is not what I was talking about at all. This is the provincial premium (MSP) that was not in place when I wrote that. I believe the premiums are coming back for Alberta residents, but it hasn't been implemented. The premiums for are US residents are much higher than they are in Canada.

Yes anyone in Canada can claim medical expenses on their tax returns, but only for those expenses in excess of the lesser of $2,208 or 3% of net income qualify. These are also non-refundable tax credits. They aren't getting half paid for with the tax break.

[mrkajz44]

Originally Posted by kipperiggy

I imagine doing income taxes for an American-citizen hockey player would be a nightmare as I seem to remember from tax class that they get taxed at whatever state rate the work is performed. So you'd be taxed at 23 different US state rates plus whatever the foreign rate would be for games played in Canada.

Canada taxes based on residency and not citizenship as at Dec 31. For Canadian players resident in the US, I'm not sure if it would be State-specific or one foreign rate.

There's a reason I'm in audit and not in tax... what a mess!

I've done a few professional athlete's tax returns and it is a nightmare, no matter if their American, Canadian, whatever. You basically have to do a state tax return for every single state they played in during the year - it's awful. You also have to pro-rate their Canadian income for the provinces they play in; they don't get the "just tax them in their province of residence as of Dec 31" rule.

And there is no perk where you meet with the client as someone else usually handles all the money, so its just a hard return with no upside.

[kipperiggy]

Originally Posted by mrkajz44

I've done a few professional athlete's tax returns and it is a nightmare, no matter if their American, Canadian, whatever. You basically have to do a state tax return for every single state they played in during the year - it's awful. You also have to pro-rate their Canadian income for the provinces they play in; they don't get the "just tax them in their province of residence as of Dec 31" rule.

And there is no perk where you meet with the client as someone else usually handles all the money, so its just a hard return with no upside.

So is the bolded part how it works for us ordinary residents?

[mrkajz44]

Originally Posted by kipperiggy

So is the bolded part how it works for us ordinary residents?

Well, yes. The difference being most people are not earning income in multiple locations, while hockey players travel and work in different provinces.

It's not like there is some professional athlete exemption or something. If you toured Canada giving public speeches, you'd be taxed in various provinces as well, as you earned income in multiple locations.

[Number 39]

Is a professional athlete able to have their income flow through a numbered company which they set up to take advantage of business tax rates? If this is possible I assume most would do this and this would change the taxation discussion somewhat. Might be a non starter but I just don't know.

[ricardodw]

Originally Posted by mrkajz44

Well, yes. The difference being most people are not earning income in multiple locations, while hockey players travel and work in different provinces.

It's not like there is some professional athlete exemption or something. If you toured Canada giving public speeches, you'd be taxed in various provinces as well, as you earned income in multiple locations.

So the thousands of Oil patch workers that live in Kelowna and work in the Alberta Oil patch get to pay Alberta taxes rather than BC taxes?

I don't think so.

What about long haul truckers?


Or IT/Business consultants.

[calf]

Originally Posted by Number 39

Is a professional athlete able to have their income flow through a numbered company which they set up to take advantage of business tax rates? If this is possible I assume most would do this and this would change the taxation discussion somewhat. Might be a non starter but I just don't know.

They would likely be deemed a Personal Services Business, which would tax them at the regular personal rates.

[ricardodw]

Originally Posted by calf

They would likely be deemed a Personal Services Business, which would tax them at the regular personal rates.

Would they set up foundations?

The Sedin's made a 1.5M donation to BC Children's hospital.

Would there be a way for them to leverage their donation?

[vicarious]

Originally Posted by ricardodw

Would they set up foundations?

The Sedin's made a 1.5M donation to BC Children's hospital.

Would there be a way for them to leverage their donation?

I don't know enough about tax law to say for sure but I would think that a hockey player starting his own charity could provide some significant tax saving opportunities as well as being able to direct more of their funds where they want it spent rather then to Ottawa or Uncle Sam. A win-win

[Locke]

Originally Posted by mrkajz44

I've done a few professional athlete's tax returns and it is a nightmare, no matter if their American, Canadian, whatever. You basically have to do a state tax return for every single state they played in during the year - it's awful. You also have to pro-rate their Canadian income for the provinces they play in; they don't get the "just tax them in their province of residence as of Dec 31" rule.

And there is no perk where you meet with the client as someone else usually handles all the money, so its just a hard return with no upside.

Ha! I know. I've done a few and they suck. I also did the taxes for a notorious radio celebrity one year when I was working for another firm and that sucked hard. Not even crappy event tickets out of the deal.

Originally Posted by Number 39

Is a professional athlete able to have their income flow through a numbered company which they set up to take advantage of business tax rates? If this is possible I assume most would do this and this would change the taxation discussion somewhat. Might be a non starter but I just don't know.

Not usually as they have an employment relationship and they're bound by the regulations of the CBA and NHLPA.

It can be hard to be an independent contractor thats part of a union.

But there are other ways, various foundations and companies and investments that they can filter money through.

Originally Posted by ricardodw

Would they set up foundations?

The Sedin's made a 1.5M donation to BC Children's hospital.

Would there be a way for them to leverage their donation?

Well yeah, they can have their foundations but those are set up with the money that they earned.

[calf]

Originally Posted by ricardodw

Would they set up foundations?

The Sedin's made a 1.5M donation to BC Children's hospital.

Would there be a way for them to leverage their donation?

Not sure - maybe in some way. Is the goal for a player to minimize taxes or keep more of their own money? Setting up a foundation or making a donation means you give away more money than you'd save in taxes by making said donation. Either way, players definitely have advisers and would structure their contracts in such a way to be as tax efficient as possible.

Or is the goal to give back to the community that's given you so much - because that's a thing NHL players do as well, without it being financially motivated.

[Locke]

If you ever want a really interesting analysis of taxing the highest income earners in sports go and have a look at some of the studies that have been done on Ligue 1, the French top flight soccer league.

[saillias]

Originally Posted by ricardodw

A few years ago Phil Housley would not consider signing a contract with the Jets because of Manitoba's high income taxes.

The flaw of this analysis is that you are taking Housley at his or his agent's word. Vanek had a convenient excuse for not re-signing with the NYI too. He just really liked Long Island, and didn't like the arena moving to Brooklyn... lol.