The seven Canadian teams in the NHL, plus the Toronto Raptors and Toronto Blue Jays, might have a more difficult time luring free agents to their cities in the years ahead.
If Prime Minister-designate Justin Trudeau goes through on his campaign promise to increase the top marginal federal tax rate from 29 per cent to 33 per cent for anyone who earns north of $200,000 per year, it could be a deterrent to a free agent mulling his options.
“For a lot of players, it does matter, if they’re weighing two offers,” Newport Sports hockey agent and certified financial planner Rand Simon told the Ottawa Citizen. “Any time a player has to make a decision on where he’s going to play, we do want to give him the full picture and tax rates are important.”
The minimum salary for an NHL player in 2014-15 was $550,000. For MLB players it was $507,500, and in the NBA is was $507,336, which means any NHL, MLB or NBA athlete playing and living in Canada would fall under the 33 per cent tax bracket. Adding in provincial tax rates makes it more difficult for athletes, especially for players and teams in Quebec and Ontario.
“Once you go through the deductions, there wouldn’t be anywhere in North America [with tax rates] as high as Quebec and Ontario,” Simon explained.
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 last year moved to teams with lower taxes.
“Injuries can damage your favourite sports team. So can high taxes in your state [or province],” Americans for Tax Reform president Grover Norquist said. “Higher taxes drive talent to other teams in lower tax states and provinces. High taxes and pulled tendons can both keep you out of the playoffs.”