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U.S. taxes help NHL pay parity: study

Changes make Canadian teams more competitive, adviser says

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Changes to U.S. tax laws have improved the competitive financial position for Canadian NHL teams in the past year, according to research from a tax adviser to more than 125 NHL players.

Sean Packard, tax director at Virginia-based Octagon Financial Services, had seen a number of studies comparing the tax regimes of all 30 NHL cities but wanted to determine the situation on his own.

So he and a couple of colleagues put together a formula that accounted for different taxes in Canada and the U.S., including a provision for deductions.

In the end, what they found doesn't look too bad for the Winnipeg Jets. Using an example of a player earning $2.5 million annually, the team ranked 16th for 2013 with take-home pay of $1.36 million. That's up from 27th a year ago when that same player's after-tax income in the Manitoba capital was virtually identical.

The top two teams in Packard's analysis are the Edmonton Oilers and Calgary Flames, where a player would take home $1.54 million of his $2.5-million salary. The Montreal Canadiens are at the other end of the spectrum at $1.27 million, just below the three teams in the highest-taxed state in the U.S., California. The Toronto Maple Leafs and Ottawa Senators are tied for 25th at $1.29 million while the Vancouver Canucks were seventh at $1.43 million.

'Some guys want to know what their net (earnings are) going to be where they sign' -- Sean Packard, tax director at Virginia-based Octagon Financial Services

A year ago, the top spot was shared by the Florida Panthers, Tampa Bay Lightning, Nashville Predators and Dallas Stars at $1.59 million. Today, they're tied for third at $1.43 million.

A year ago, Canadian teams occupied five of the bottom eight spots. Calgary and Edmonton were tied for 9th.

This report isn't nearly as pessimistic about the financial situation for Canadian teams as a study released two weeks ago by the Canadian Taxpayers Federation, which said high taxes north of the border were potentially keeping the non-Alberta Canadian teams from stockpiling the necessary players to win the Stanley Cup.

Taxes in Manitoba, of course, haven't been slashed to the bone but U.S. taxes have gone up while deductions have gone down.

In 2012, the highest federal tax rate in the U.S. was 35 per cent. This year, it jumped to 39.6 per cent. For residents earning in excess of $200,000 -- which is every player in every U.S. market -- another 0.9 per cent was added on top, bumping the highest rate to 40.5 per cent.

There were no limits on itemized deductions in the U.S. over the last three or four years, Packard said, which was a "huge benefit" to players in the U.S.

There were also deductions on state taxes for agent fees, training costs and other hockey-related expenses.

This year, many of those deductions have been "significantly" reduced, Packard said. "That almost kills the benefit."

American players also have to pay a day's taxes when they play in other U.S. cities. If they arrive a day earlier for extra practice, they're taxed for that day, too.

Canadian players, meanwhile aren't taxed for Canadian road games and they get a foreign tax credit on their tax return for the days they play in the U.S.

The Winnipeg Jets declined to comment on the after-tax income study.

How much a player cares about after-tax income is often dependent on there they are in their career, Packard said.

"A guy who has never won a (Stanley) Cup, probably wants to sign with a good team. Some guys don't care, they want to pocket as much money as they can. Some guys love the area where they're playing and want to live there long-term so they'll stay no matter what the team is or how high the taxes are. Some guys want to know what their net is going to be where they sign," he said.

Republished from the Winnipeg Free Press print edition October 12, 2013 B19

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