While top teams in the National Hockey League distinguish themselves with winning records and an all-star bench, there’s one more overlooked but obvious factor that gives them an edge in attracting free agents.
In the last five years, four Stanley Cup champions were based in states without state income tax, according to a report by the Associated Press.
“There is a distinct advantage for those teams that are in states with no tax — always,” Alan Pogroszewski, founder, president, and CEO of AFP Consulting, who has extensive experience working with athletes on tax issues, said in the AP report.
Sam Reinhart’s $69 million contract with the Florida Panthers is a case in point. By signing with the Panthers, the report said, Reinhart benefits from the Sunshine State’s tax policies. There, his annual salary of $8.625 million triggers $3.15 million in taxes.
If he had signed in California, he would be paying $1.1 million more in taxes. The income tax tripwire is even steeper in New York, where he’d have to fork over an additional $1.5 million. Over the length of Reinhart’s contract, these savings could amount to as much as $12 million, as the Associated Press report has it.
“I think it is an advantage for those teams: They can obviously pay guys a little bit less, and guys are happy to go there,” San Jose Sharks general manager Mike Grier said, commenting on the impact of state-level income taxes.
Teams in income tax-free states, including Nashville, Florida, Tampa Bay, Dallas, Vegas, and Seattle, collectively accounted for nearly a quarter of the over $1 billion in salaries committed when free agency opened recently. This significant investment underscores the appeal of these locations to players seeking to maximize their earnings.
Pogroszewski illustrates the financial implications further by comparing the New York market with Reinhart’s chosen home region. For the New York Rangers or Islanders to offer a contract that matches the net value of Reinhart’s $69 million with the Panthers, they would need to pay north of $88 million.
Players and their agents are acutely aware of these tax differences and often seek strategies to mitigate higher taxes. “That definitely figures into everything,” Grier noted.
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