NHL players flee from teams located in high tax jurisdictions to teams located in low tax jurisdictions, according to a new report. The study, Major Penalty for High Taxes, released by the Canadian Taxpayers Federation (CTF) and Americans for Tax Reform (ATR) and compiled by CTF Research Director Jeff Bowles, examines competition between NHL teams to attract players and the tax rates where teams are located.
54 percent of the 116 Unrestricted Free Agents (UFA) and 60 percent of players with no-trade clauses who changed teams picked teams with lower taxes, saving a combined $4 million this past offseason.
Players who are high skilled and bring more value to teams are paid more money than players who are not. Taxes are structured in the United States and Canada so that “the more income you make, the higher tax rate you pay.” Therefore, an NHL free agent who makes the league maximum $13.8 million will lose a greater percentage of his salary to taxes than a free agent making the league minimum $550,000. As a result, there is an incentive for high skilled players to seek out which of the 30 NHL teams have the lowest tax burdens.
Attracting skilled players to win the Stanley Cup is certainly a hope of many taxpayers, but the implications of this study transcend the hockey rink. If high taxes chase away high skilled hockey players there is a good chance the same holds true for other professions. High skilled professions, like doctors and engineers will similarly flee from high tax jurisdictions to low tax jurisdictions.
Understanding the dynamic between high skilled labor and taxes is important for local towns, provinces, states and federal governments when considering their own tax structure. NHL players only have 30 locations to choose from, but doctors, engineers and other skilled laborers are free to bring their talents wherever they choose.