On how NHL tax talk really isn't that simple and how there's parts here that could impact Mitch Marner, and not the way you think

Let's try to throw some nuance into one of the hot take twitter arguments.

Under the rules of viral content creation and SEO worship, it’s a pretty good time to write about hockey and taxes.

The Florida Panthers are in the Stanley Cup Final for the third straight season, and that success combined with the Tampa Bay Lighting’s prior run, has created a situation where at least one Stanley Cup Finalist in each of the past six seasons has come from an American state without individual income tax.

Add in the Vegas Golden Knights championship in 2023 and the Dallas Stars four trips to the Western Conference Final in that same span, and it becomes easy to spin up a hot take about how the lack of state tax must be impacting the NHL’s balance of power.

Similar to the usage of long-term injured reserve, it also happens to be more of a media and fan-driven conversation about change than one that NHL stakeholders are actually concerned with.

It’s the typical song-and-dance at each media availability for NHL Commissioner Gary Bettman, he’s asked about the unfair advantages of “tax havens” in Florida, Tennessee, Tennessee, and Washington, and he often shoots it down noting how this has only been something we’ve seen complaints about in recent years¹.

The NHL and NHLPA also aren’t interested in making it an issue in the next CBA, which means that tax argument won’t be acted upon, but will be argued about for seemingly perpetuity.

It’s also not a simple black-and-white argument, which is really the only thing people seem to give on social media about the deal.

As a quick refresher, NHL players — and all athletes — pay taxes wherever they are working, so while a player on the Florida Panthers might be not being taxed for home games, they are being taxed for road games.

I know someone who started traveling with an NHL team in a supporting role, not a player and not a big-money person, and they started having to pay taxes to other states each year because they were now part of the team’s traveling group.

Some states are also more aggressive about going after their money. Most notably, California aggressively seeks out tax dollars, Detroit Red Wings goalie Cam Talbot told me a story this season about how he had a battle with California over how much tax he owed because of a past NHL playoff series where his representation had to argue and prove that NHL players are paid less in the postseason.

This isn’t to deny the tax thing isn’t an advantage, but it’s simply one card amongst many that teams have at their disposal when it comes to wooing players. Put it right next to cost of living, the value of exposure in an Original Six market… pick a market and the right GM/salesman can find you the advantages to pick that one over another.

And players, if they are smart, also have the ability to move and make the most of their money, even if they are playing in Canada — where a lot of the media state tax outrage comes from, particularly in Toronto.

For example, last summer Toronto Maple Leafs defender Chris Tanev picked to stay in Canada because of taxes. Something Tanev brought up himself in his media availability with the Toronto media horde on July 1 last year.

How the tax situation helped keep Chris Tanev in Canada

That’s always been fresh in my mind when I think about taxes. I also saw recent postings about Retirement compensation arrangements (RCAs) when it comes to Canadian options, which led to a conversation this week with my pal Kyle Stich.

Kyle understands taxes, it’s his job. Kyle is Director of Operations at AFP Consulting LLC and a tax specialist. AFP Consulting works with NHL players and agents on financial matters, including how players manage and make most of their money on things like taxes.

I had a couple tax questions in mind, so I posed them to Kyle, starting with why is this an NHL thing? Why don’t we hear more about this in any other sport?

“So it was 2016 or 2017 and we were talking to another agency and ran some scenarios for a basketball player and a football player, and it’s not like they don’t care, but I think it’s that the money is so much bigger,” Stich said. “Players will reference it and stuff in other sports, but with how much more money is made in those sports, I think that’s why it feels bigger in hockey.”

It makes sense. Leon Draisaitl’s $14 million cap hit will be the highest in the NHL next season. His cap hit is the equivalent of being the 116th best-paid player in the NBA this season, Atlanta Hawks’ forward Onyeka Okongwu.

There are other factors at play here — NHL roster size vs. NBA for example — but the when it comes to bottom line and raw return for pro athletes, NHLers are the poverty class amongst the four traditional “major” sports in North America².

So the NHL isn’t the NBA or the NFL or MLB.

What about these RCAs, if people keep posting about them, there must be some mechanism for players to protect their tax bill in Canada, right?

Without getting too deep into exactly how it works, and to not lose readership, RCAs are accounts players can have setup through their employer that allows them to limit their tax bill. It’s a retirement account where the player can have a “reasonable” amount of their salary put into a trust that pays out once they retire.

The biggest claim on this has come from NHL agent Allan Walsh, who tweeted in 2020 that “With sound tax advisors, a NHL player can actually pay the same or less tax in Canada than he will Florida or Vegas.”

Stich said he couldn’t co-sign the full point and promise “same or less tax in Canada,” but he did say it’s a tool that really allows players to smooth their tax bill. And for Americans playing in Canada, Stich said, there’s a real opportunity to save some money.

“It’s really like a souped up 401K that they can touch before a certain age,” Stich said.

There have been some lawsuits recently when it comes to RCAs and tax bills for Toronto Blue Jays players, which is notable, but it’s also an important thing to remember there are “reasonable” tools for Canadian teams when we have these black-and-white claims of full tax advantage.

Sticking with Toronto, and my Tanev example from before, I wanted to ask Stich another question, which was inspired by Shap Shots reader Dylan.

So could Marner, one of most notable UFAs for this class be looking at a large “exit tax” if he were to sign with an American team?

“I think what exactly what was talked about with Chris Tanev could come up with Mitch Marner. This is more of a question for his direct financial advisor, but it’s how things are setup and how he’s handled his however tens of millions he’s made,” Stich said. “It would depend on how those things are sitting in Canadian investments and if he were to cease being a Canadian resident, he would have pay on the level of gains and be hit with an exit tax that would be signifigant.”

While I brought up Marner, Stich said it’s something that could also come into play with John Tavares who is also a UFA.

Just because Tanev used the tax situation to stay in Canada, doesn’t mean Marner or Tavares will. But it’s important thing to at least remember, because if we are going to blindly talk about about how “Marner will sign in a no-tax state” on Twitter, we should at least bring in some more context.

In the end a positive tax situation is a tool for player recruitment, we can’t deny that, but it’s also not this magic wand that makes teams good and supersedes everything else.

I hope this conversation brought some more clarity or at least conversation points to this discussion. If it did, thank you to Kyle over at AFP Analytics. If it made things more confusing and cumbersome, or you just hated reading this, you can blame me.

1. He’s right, by the way. I don’t agree with Gary Bettman on many things, but this is one of the things where he’s spot on.

2. Please note this is not to say NHL players are poor, far from it. But we have to realize what we are comparing when thinking why this state tax conversation comes up and how anyone complaining about California taking a money from Stephen Curren’s $56 million would likely be mocked for a lack of proper sense.