Blame high taxes when your favourite NHL team loses

High taxes make Toronto, Ottawa and Montreal three of the least financially-attractive destinations for NHL players, finds a new paper by the Canadian Taxpayers Federation.

“The numbers don’t lie—NHL players take a financial hit to play in Ontario, Quebec, California, New York and New Jersey,” said CTF research director Nick Bergamini.

“Does this give successive Leafs GMs an excuse for poor trades and sloppy draft choices? No. But it does mean that these teams are all at a major disadvantage because of punitive provincial income tax rates.”

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The CTF looked at the top 30 NHL free agents from this past off-season, comparing the amount of income tax they will pay wherever their new team resides to the amount of income tax they would pay if they had signed with the Leafs, Senators, Canadiens or Jets.

Phoenix Coyotes goalie Mike Smith would pay an extra $2.8 million in taxes over the life of his six-year, $34 million, contract if he had signed the same deal with the Montreal Canadiens. He would pay an extra $2.6 million if he signed with the Leafs or Sens and $1.6 million more if he signed with the Jets.

The NHL caps how much money each team can spend on players’ salaries. The Toronto Maple Leafs would have $12.6 million more to spend on their team if their players paid Alberta income tax rates. At British Columbia’s tax levels, they would have $8.2 million more to spend.

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Meanwhile, Calgary, Edmonton and Vancouver are among the best places to play from an income tax standpoint.

Canada’s eastern teams will be at a major disadvantage in the 2014 unrestricted free agency market. Signing with the Sens, Leafs or Habs will mean millions in lost wages for upcoming unsigned free agents like Henrik Lundqvist and Joe Thornton. Recent tax hikes on high income earners in Quebec and Ontario will only make playing in these provinces a tougher decision.

“All jokes aside, this paper also shows that highly-skilled, highly-mobile employees have huge advantages or disadvantages thrown at them based on the local income tax rate,” said Bergamini.

“This goes for more than just NHL players, but for doctors, engineers, CEOs of major companies. If it’s hard to attract free-agents in the NHL because of your tax rates, it’s probably also be hard to attract other highly skilled workers. Governments need to keep that in mind when they’re passing their next budget.”