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Quebec tax concerns when play for the CH: myth or reality


alfredoh2009

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re-reading this article on The Athletic (pay wall):

https://theathletic.com/1050270/2019/06/27/yes-quebec-has-high-taxes-but-heres-how-the-canadiens-can-level-the-playing-field/

 

 

Made me want to post it here for the benefit of our discussions. I do not want to post too much of the article here, but here are some great points they explained/made:

  • In Quebec, players are taxed at the maximum Federal + Provicial tax bracket (> 53%), but signing bonuses at 15%
  • In USA places like Florida, there is a 0% state tax and the federal income tax is 37%)
  • To be considered an USA resident, a players has to aither: (i) be born in the USA; (ii) have a green card; or (iii) reside more than 183 days in teh USA (and other criteria).
  • An example in the article is Matt Duchene: on a 5year x $7M contract, he would have lost $5M if he had signed in Montreal instead of Nashville

 

Now, how that affects trades, UFA signing, contract negotiations and cap management... that may be a good conversation to have in this thread?

 

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Myth

if we are a cup contender players who want to win the cup will come play here.

 

When you're a bubble team no one wants to play here.

 

In order to get players to come ownership needs to show they want to win.

 

Players that don't care about wining sign with teams with warmer  weather.

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16 minutes ago, Habsfan89 said:

Myth

When you're a bubble team no one wants to play here.

Even if Rangers, Vegas, Leafs, Kings, Ducks, SJ are average to shitty team, they will still attract free agents, wont they?

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28 minutes ago, DON said:

Even if Rangers, Vegas, Leafs, Kings, Ducks, SJ are average to shitty team, they will still attract free agents, wont they?

 

I don't doubt that the taxes are a significant consideration. Look at that Duchene example - would you really leave $5 mil on the table?

 

On the other hand, that may be an extreme example. I'm sure lots of other jurisdictions do have higher taxes than Tennessee. So $5 mil may be something of an outlier.

 

And money is not everything. Even as a multi-millionaire, i wouldn't leave significant dough on the table to come to the kind of POS team Montreal has consistently been since 1997. Why would you? If, however, the Canadiens develop a reputation as a Cadillac franchise, a great place to be, with a realistic chance of winning, great internal supports, admirable management and coaching, strong linemates who will help you to succeed, etc. - that's when a few extra mil become less important.

 

There will always be soulless turds like Lecavalier who don't want the limelight and don't want to be part of the extraordinary experience that being a Hab in Montreal can represent. F**k them. But if you're a guy like Koivu or Gallagher or Price or Subban, a guy who is open to embracing everything that that means, the money won't be determinant - provided the franchise is strong.

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MB seems to have been getting team friendly contracts from a couple of players not named Price.

 

Patches and Radulov, just to name a few, left in part because they wanted to get paid what they felt they deserved

 

Others like Gallagher and Edmundson, to name another example, seem to be leaning towards team friendly contracts

 

It is interesting to see what individual players value and how the fans and posters in this forum react: Drouin's contract vs. Domi's next one, overpaying for Allen vs not renewing Lindgren or McNiven, ...

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1 hour ago, DON said:

Even if Rangers, Vegas, Leafs, Kings, Ducks, SJ are average to shitty team, they will still attract free agents, wont they?

Not really only big name that has signed with Toronto through free agency is tavares and that's because he's from Toronto.  But I don't remember any big names that weren't from Ontario sign with Toronto.  Vegas, kings, ducks, SJ has more to do with weather and rangers will has more to do with the night life of New York.

 

Also how we present our contracts has a lot to do with it too.  I think we need to change our strategy on how we come up with terms and money on our contracts.  Players now a days like more money up front. We always seem to offer even money for example 5 years 5mil each year. Only contract we ever got creative with was the Aho offer sheet.

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51 minutes ago, alfredoh2009 said:

MB seems to have been getting team friendly contracts from a couple of players not named Price.

 

Patches and Radulov, just to name a few, left in part because they wanted to get paid what they felt they deserved

 

Others like Gallagher and Edmundson, to name another example, seem to be leaning towards team friendly contracts

 

It is interesting to see what individual players value and how the fans and posters in this forum react: Drouin's contract vs. Domi's next one, overpaying for Allen vs not renewing Lindgren or McNiven, ...

 

Drouin's contract LOOKED not bad but has not yet really proven to be worth it (IMO) ... expect Domi (if he stays) ends up with a short (1-2 years, maybe 3) contract because he has no particular leverage ... pretty much has to move to the wing (unless Danault dealt) and regressed to closer to his pre-Montreal numbers than his 18/19 season ... 

 

Gallagher signed after his ELC and opted for some security ... as he turned 27 in may 2019, his current deal covered 3 RFA years and 2 UFA years ... and ... he was at that time the contract was signed scoring at a 23g/82 gm pace ... it became quite a deal for the Habs when he started scoring 30 ... looking at 28-35 goal scorers last season there was only one on a contract signed as a UFA, the lowest was Brad Marchand with an AAV of $6.125 ... balancing that against the flat cap and I would GUESS that BG ends up with at least a contract with a $5M AAV ... time will tell ... I am in the "love BG but how long will his body hold up" camp and would not be shocked to see him dealt in the right trade (***NOT*** traded for sake of trading)

 

Edmundson's contract is not likely far below market value in the current cap situation, and Joel was smart enough to take the bird in the hand and not hope to catch the two in the bush.

 

Allen's $4.35M is certainly high for a backup (unless it is a 30-40 game role) ... but IMO Lindgren and McNiven were never viable options for a proper backup ... read RUMOURS that the NHL ***may*** be looking at a compressed 48 game season and ***perhaps*** even exploring doubleheaders (games in the late morning and then at night) ... in either case the backup will be very important, even more so if both.

 

Tartar and Danault will also be tests for MB ... Tomas has been a 25/26 goal scorer for the Habs but turns 30 in December; term may be challenging ... Danault's role has been much discussed; if he is looking for term the impact that KK and Suzuki will have on PD's role in the next couple of years will have to factor into what MB offers (e.g., TOI; how soon do KK and Suzuki get the scoring wingers).

 

 

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Where has Gallagher indicated he's going to take a team friendly deal? That would be a silly thing to publicly state as a player, other than boilerplate "Love the team, hope to stay here" kind of crap. Just because he's a hard working honest player doesn't mean he's not looking to get paid.

 

The fact of the matter regarding the "mystique" of the Habs franchise, most of these players weren't even born the last time the Habs won the Cup. Heck, our old man Weber was a whopping 8 years old. The fact is this hasn't been a strong team in a long time. Other than being a hockey history buff, there is no magical draw for players to come to Montreal. Oh sure, it's special, great crowd, blah, blah, blah. "So let's see, you want me to come to Montreal, get eliminated in maybe the first round, if the team qualifies, get harassed where ever I go in public, get skewered in the media in two languages..." Why would a player leave money on the table to play here when the team hasn't been productive in their entire lifetime?

 

Yes, we as fans love the team, and would love talented players to want to be here and take on the challenge of playing for the team. Heck, the Habs wouldn't even overpay a talented RFA, there's not a shot in hell they're going to overpay a UFA.

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14 minutes ago, Habsfan89 said:

... Players now a days like more money up front. We always seem to offer even money for example 5 years 5mil each year. Only contract we ever got creative with was the Aho offer sheet.

 True ... and/or more in signing bonuses early on and in potential lockout seasons ... but if I were Molson and found out that a significant player refused to sign a contract solely because of how the salary was distributed (i.e., same total value) I would boot MB out so fast

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3 hours ago, alfredoh2009 said:

Made me want to post it here for the benefit of our discussions. I do not want to post too much of the article here, but here are some great points they explained/made:

  • In Quebec, players are taxed at the maximum Federal + Provicial tax bracket (> 53%), but signing bonuses at 15%
  • In USA places like Florida, there is a 0% state tax and the federal income tax is 37%)
  • To be considered an USA resident, a players has to aither: (i) be born in the USA; (ii) have a green card; or (iii) reside more than 183 days in teh USA (and other criteria).
  • An example in the article is Matt Duchene: on a 5year x $7M contract, he would have lost $5M if he had signed in Montreal instead of Nashville

Now, how that affects trades, UFA signing, contract negotiations and cap management... that may be a good conversation to have in this thread?

 

 

The difference is actually smaller than that, due to jock taxes, imposed by states and/or cities on visiting pro athletes.

7640603.png?798

If you assume two days for each road game, which is likely on the low side, it means that for up to 54 days per year (excluding the 10 teams whose locales do not charge this, times the potential 40 game x 2 days) out of about 200, the player is being charged at the same rate regardless of which team he's playing for. That's roughly 15% of his annual income. That changes the max 16% difference to about 12%. And, in practice, most US teams have greater than 0% state tax.

 

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1 hour ago, alfredoh2009 said:

MB seems to have been getting team friendly contracts from a couple of players not named Price.

 

Patches and Radulov, just to name a few, left in part because they wanted to get paid what they felt they deserved

 

Others like Gallagher and Edmundson, to name another example, seem to be leaning towards team friendly contracts

 

It is interesting to see what individual players value and how the fans and posters in this forum react: Drouin's contract vs. Domi's next one, overpaying for Allen vs not renewing Lindgren or McNiven, ...

Pactioretty signed the same very team friendly deal like Gallagher did. He’s just a lot older and was underpaid based on performance the way Gallagher is now. He wanted to get paid what he was worth.  It also didn’t seem like MB wanted him and I think as captain (poor choice by MB/MT) he was wearing too much of the blame for the crap team we had.  He also didn’t really hit a home run term deal like the French media reported he was demanding.

 

When Gallagher signed his contract he has no leverage and didn’t have the same production.  I can guarantee you that Gallagher is going to want to get paid like a 30 goal scorer when his contract is up.

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1 hour ago, tomh009 said:

 

The difference is actually smaller than that, due to jock taxes, imposed by states and/or cities on visiting pro athletes.

7640603.png?798

If you assume two days for each road game, which is likely on the low side, it means that for up to 54 days per year (excluding the 10 teams whose locales do not charge this, times the potential 40 game x 2 days) out of about 200, the player is being charged at the same rate regardless of which team he's playing for. That's roughly 15% of his annual income. That changes the max 16% difference to about 12%. And, in practice, most US teams have greater than 0% state tax.

 

 

This is interesting, 12% of $1M is not pocket change. Looking at this website sheds some light:

   https://hockey-graphs.com/2019/01/08/how-much-do-nhl-players-really-make-part-2-taxes/

image.png

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3 hours ago, Habsfan89 said:

Also how we present our contracts has a lot to do with it too.  I think we need to change our strategy on how we come up with terms and money on our contracts.  Players now a days like more money up front. We always seem to offer even money for example 5 years 5mil each year. Only contract we ever got creative with was the Aho offer sheet.

 

The Habs have front-loaded some contracts in recent years.  Look at Price in the above picture, for example.  Other recent examples include Petry, Alzner, Armia, and even Byron.  Most of the contracts they've handed out were to RFAs and there are limitations to front-loading those because the final-year salary is used as the qualifying offer.  They don't do it every time but they front-load deals more frequently than a lot of teams.

 

Worth noting, Edmundson's deal isn't front-loaded and that's by design.  With salary deferrals for next season and a declining fixed escrow percentage, there are going to be more deals than usual that are back-loaded as a result in the next few weeks.

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2 hours ago, dlbalr said:

 

The Habs have front-loaded some contracts in recent years.  Look at Price in the above picture, for example.  Other recent examples include Petry, Alzner, Armia, and even Byron.  Most of the contracts they've handed out were to RFAs and there are limitations to front-loading those because the final-year salary is used as the qualifying offer.  They don't do it every time but they front-load deals more frequently than a lot of teams.

 

Worth noting, Edmundson's deal isn't front-loaded and that's by design.  With salary deferrals for next season and a declining fixed escrow percentage, there are going to be more deals than usual that are back-loaded as a result in the next few weeks.

I am talking actually cap hit not bonus.

 

Price's contract is 10.5mil right through nothing is front loaded.

Byron is 3.40mil right through 

Petry was 5.50mil right through 

Front loaded contracts are ones that the first few years they make more money then the last few years they make less to make it more of a cap friendly contract toward the end of it.

 

If you're talking about signing bonus that's different.

 

They're are some contracts where lets say they sign 8mil over 8 years but it's front loaded. Which means the last few years cap hit maybe like 5 or 6 mil instead of 8. Because the first few years were more.

 

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12 minutes ago, Habsfan89 said:

I am talking actually cap hit not bonus.

 

Price's contract is 10.5mil right through nothing is front loaded.

Byron is 3.40mil right through 

Petry was 5.50mil right through 

Front loaded contracts are ones that the first few years they make more money then the last few years they make less to make it more of a cap friendly contract toward the end of it.

 

If you're talking about signing bonus that's different.

 

They're are some contracts where lets say they sign 8mil over 8 years but it's front loaded. Which means the last few years cap hit maybe like 5 or 6 mil instead of 8. Because the first few years were more.

 

 

AAV is always the same throughout the contract ... that is why sometimes a big contract can be dealt near the end as the team receiving it gets "free cap hit" (i.e., more AAV than actual dollars owed in salary) ... using Price as an example
image.png
 

AAV (cap hit) always $10.5 but salary goes as high as $15M and as low as $7.5M ... in Carey's case most of his "total salary" is in bonuses.

 

https://www.capfriendly.com/players/carey-price 

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Let's also not forget that a state like Florida makes up for the no income tax in other ways. Property taxes are high and even though they claim only 6-8% sales taxes, I see bills all the time with taxes over 12.5% in total taxes. Sure, they have more income, but much of that gets chewed up by living and spending there.

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6 hours ago, alfredoh2009 said:

Patches and Radulov, just to name a few, left in part because they wanted to get paid what they felt they deserved

 

Others like Gallagher and Edmundson, to name another example, seem to be leaning towards team friendly contracts

 

Max played for years on an EXTREMELY team friendly contract. He made just 750k more per year on his 6 year contract than Gallagher is making on his. When he signed, he was already a 30 goal and 60 point player. He easily could have demanded much more money for that term. Gallagher, on the other hand, was coming off a 19 goal and 41 point season. He was not yet a proven top 6 forward, so it made total sense for him to sign long term when it was offered. 

 

Let's also not forget that Max didn't leave in free agency to seek a huge deal. We traded him and he signed another team friendly contract in Vegas. One of the most consistent goal scorers in the league over the course of his career, yet he is not among the top 40 AAV forwards in the league. He didn't leave Montreal to go get what he is worth, because he is still not getting what he is worth.

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2 minutes ago, Fanpuck33 said:

 

Max played for years on an EXTREMELY team friendly contract. He made just 750k more per year on his 6 year contract than Gallagher is making on his. When he signed, he was already a 30 goal and 60 point player. He easily could have demanded much more money for that term. Gallagher, on the other hand, was coming off a 19 goal and 41 point season. He was not yet a proven top 6 forward, so it made total sense for him to sign long term when it was offered. 

 

Let's also not forget that Max didn't leave in free agency to seek a huge deal. We traded him and he signed another team friendly contract in Vegas. One of the most consistent goal scorers in the league over the course of his career, yet he is not among the top 40 AAV forwards in the league. He didn't leave Montreal to go get what he is worth, because he is still not getting what he is worth.

Yep. I’d rather be paying what Vegas is paying Max, than pay that idiotic contract Buffalo signed Skinner to.

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4 minutes ago, hab29RETIRED said:

Yep. I’d rather be paying what Vegas is paying Max, than pay that idiotic contract Buffalo signed Skinner to.


Good point

 

In going through each team trying to find a top 6 winger and a bad contract to take, I saw some very bad contracts Ineould not want to touch: Lucic, Kessler, etc.

 

that old dumpster-diving old devil, MB, should get some credit (*forget Alzner, forget Kincaid, ...)

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17 hours ago, Fanpuck33 said:

Let's also not forget that a state like Florida makes up for the no income tax in other ways. Property taxes are high and even though they claim only 6-8% sales taxes, I see bills all the time with taxes over 12.5% in total taxes. Sure, they have more income, but much of that gets chewed up by living and spending there.

Even if in some instances the taxes on purchases is near the GST+HST total, that is just a "wash" not a disadvantage ... and property taxes are not cheap in Canada ... besides, any property tax difference is more than offset by being able to deduct mortgage interest ... only real financial advantage Canadian teams have is that players get paid in US$ but they live on CAD, at least during the season.

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23 minutes ago, GHT120 said:

Even if in some instances the taxes on purchases is near the GST+HST total, that is just a "wash" not a disadvantage ... and property taxes are not cheap in Canada ... besides, any property tax difference is more than offset by being able to deduct mortgage interest ... only real financial advantage Canadian teams have is that players get paid in US$ but they live on CAD, at least during the season.

 

Oh, the property taxes are high if you're buying a new house. 2.1% in Miami-Dade, for example, which is substantially more than in Canada.

http://www.miamidade.gov/Apps/PA/PAOnlineTools/Taxes/TaxEstimator.aspx

 

That said, paying an extra $10K in property tax is not a major issue for the typical NHL player, let alone a UFA. For that matter, a UFA would not likely need to have a mortgage, either.

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6 minutes ago, tomh009 said:

... For that matter, a UFA would not likely need to have a mortgage, either.

 

But given the benefits of mortgage interest deductibility it may make financial sense to have one anyway ... 

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56 minutes ago, GHT120 said:

But given the benefits of mortgage interest deductibility it may make financial sense to have one anyway ... 

 

Possibly, yes, although I am not familiar with financial planning at the NHL salary levels. :) But, even so, the tax-deductability of 2.5% of $1M at a 40% federal tax rate also only works out to about $10K ... immaterial for a UFA, I think.

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8 minutes ago, tomh009 said:

 

Possibly, yes, although I am not familiar with financial planning at the NHL salary levels. :) But, even so, the tax-deductability of 2.5% of $1M at a 40% federal tax rate also only works out to about $10K ... immaterial for a UFA, I think.

Perhaps ... but the psychology of all things taxes/financial may play as big a role as the actual numbers ... if a UFA "feels" screwed by taxes rational explanations may mean little.

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21 hours ago, Habsfan89 said:

I am talking actually cap hit not bonus.

 

Price's contract is 10.5mil right through nothing is front loaded.

Byron is 3.40mil right through 

Petry was 5.50mil right through 

Front loaded contracts are ones that the first few years they make more money then the last few years they make less to make it more of a cap friendly contract toward the end of it.

 

If you're talking about signing bonus that's different.

 

They're are some contracts where lets say they sign 8mil over 8 years but it's front loaded. Which means the last few years cap hit maybe like 5 or 6 mil instead of 8. Because the first few years were more.

 

That's not how those work.  The cap hit equals the Average Annual Value (AAV) of the contract.  That is the same for the entire term of the deal, regardless of how it's structured - front-loaded, back-loaded, evenly distributed, with or without signing bonuses.  Price's deal is front-loaded.  As GHT120 pointed out above with the screenshot, $52.75M of the $84M in the contract is paid out in the first half of the year.  That's literally the definition of front-loading a deal, paying more money in the first half than the second half.  It's not quite to the extent that Toronto has done theirs (I'm guessing that's what you were getting at with your original post?) but they pay out more money up front than quite a few teams.  And even the Maple Leafs will have full cap hits for Matthews/Marner/Tavares when they're paying them the league minimum salary at the end of it. 

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