Canada’s high tax rates are putting NHL teams north of the border at a growing competitive disadvantage compared to American franchises in low-tax states, according to a new report from the Montreal Economic Institute.The report argues that tax policy directly affects a team’s ability to attract and retain top players, with athletes increasingly drawn to jurisdictions where they can keep more of their salaries.“Professional athletes have short careers and therefore a limited window in which to earn income through their salaries,” said Vincent Geloso, senior economist at the MEI and author of the report. “This creates a strong incentive to play where taxes are lowest.”The report notes the NHL salary cap is based on gross income rather than after-tax earnings, giving teams in states without personal income taxes a significant advantage.Under the current system, a team in Florida or Texas can offer the same contract as a Canadian franchise while allowing players to take home far more money.According to the MEI, a player earning $750,000 with the Montreal Canadiens would pay $364,312 in taxes, representing an effective tax rate of 48.5%.A player earning the same salary with the Florida Panthers or Dallas Stars would pay $234,520, for an effective rate of 31.2%.That amounts to a difference of more than $129,000 annually on the same contract.“The salary cap is supposed to level the playing field among teams,” said Geloso. “But when it’s calculated based on gross salary, it increases the advantage for teams in low-tax markets.”.The report also points to recent Stanley Cup results as evidence of the trend.Five of the last six Stanley Cup champions came from states without personal income taxes.Researchers cited studies suggesting tax rates have a measurable impact on team performance.One study covering NHL seasons from 1980 to 2017 found every 1% increase in the local tax rate reduced a team’s win rate by between 1.55% and 1.57%.The report argues the effect is especially important in professional sports, where only a handful of wins can determine playoff positions or championships.“In professional leagues, a handful of wins or losses can make a huge difference,” Geloso said. “When tax policies force Canadian teams to work harder to attract the same players, that’s no small matter.”The MEI said the same economic pressures extend far beyond professional hockey.The report argues highly skilled workers such as doctors, engineers, entrepreneurs and researchers also gravitate toward lower-tax jurisdictions where they can retain more income.“When Canada becomes less attractive from a tax perspective, the entire economy pays the price,” the report stated.The institute said hockey provides a high-profile example of how tax competitiveness can shape economic decisions and talent migration.
