How taxes could impact Stamkos signing with Maple Leafs

Hockey Central at Noon discuss the Lightning’s speculated $68M offer to UFA Steven Stamkos, comparing it to Anze Kopitar’s $80M deal with the Kings.

The Tampa Bay Lightning are the only pro team Steven Stamkos has known. The first-overall pick from 2008 has made a life for himself in Florida, but the face of the franchise has to make a decision on his hockey future and time is slowly winding down.

As a pending unrestricted free agent, there’s more for Stamkos to consider than mere dollars and cents, however the bottom line will undoubtedly be one of the deciding factors in where Stamkos ends up.

The two-time Maurice “Rocket” Richard Trophy winner has stated in the past his desire to stay with the team that drafted him, yet there has been years of speculation that one day he’d like to test free agency and suit up for his hometown Toronto Maple Leafs.

If Stamkos does hit the open market on July 1, rest assured there would be a bidding war and Toronto would presumably be in on the action.

Sportsnet’s Elliotte Friedman reported over the weekend that Stamkos received an offer from the Lightning that would carry an annual salary cap hit of $8.5 million. On an eight-year deal (the max for a re-signing player) that would be worth $68 million. Even though Friedman said the $8.5-million cap hit offered by Tampa should be viewed as a starting point in negotiations, many felt that number was a low-ball offer by the organization.

To put things in perspective, though, that proposed $8.5-million cap hit in Tampa would earn Stamkos more money than a hypothetical $10-million cap hit with a team like the Maple Leafs.

One reason for this is that there is no state income tax in Florida, which is a perk to remaining with the Lightning. Tampa could also use this as potential leverage in negotiations. The goal is to win the Stanley Cup and if the Lightning had an extra $1-1.5 million or so to spend annually they could theoretically build a stronger team. So, a lower cap hit doesn’t necessarily mean a lower bottom line.

Joe Smith of the Tampa Bay Times, with help from sports tax specialist Robert Raiola, did a terrific job breaking down what Stamkos and his agent will have to consider before signing a long-term deal.

Raiola determined that if Stamkos signed the proposed eight-year, $68-million deal he’d walk away with $36,782,272 in net income after deducting agent fees, federal taxes and any state/city/jock taxes.

In contrast, if Stamkos were to sign a seven-year (because seven years would be the limit if he joined a new team) deal worth $70 million with a team like his hometown Maple Leafs his net income after agent fees plus federal and provincial taxes would be $29,729,000. That’s roughly $7 million less than the Tampa total presuming he lived in the Toronto area.

Ryan Callahan signed a six-year, $38.5 million deal with the Lightning in 2014 despite likely being able to fetch a bigger number if he hit the open market. His agent, Steven Bartlett, told Smith taxation definitely played a role.

"I know some of the big stars get hung up on the number because it's almost an egotistical thing — and I'm not saying it's this way with Stamkos," Bartlett said. "I'm just saying a guy feels like, 'He gets 10 (million), I need 10 (million). I need nine just to validate.' But if you're smart you realize, 'I have to run the calculation.' It isn't always just the number that's thrown out there that's the real number. And, believe me, the teams that have the advantage are more than willing to point that out to you, too."

Stamkos admitted state taxes didn’t play much of a role when he signed his five-year, $37.5-million deal when he was a restricted free agent in 2011 but when referring to his next contract told reporters “it’s obviously a perk of playing in Florida."

A study titled called Home Ice Tax Disadvantage released by the Canadian Taxpayers Federation in 2014 found that 57 per cent NHL unrestricted free agents moved to teams with lower taxes.