NHL Expansion: Tax Law was the Deciding Factor

There were several bids for NHL expansion, but ultimately Las Vegas has won out. Among many things, the difference in tax laws between Nevada and Quebec may have tipped the scales in favor of Sin City.

NHL Expansion: Tax Law was the Deciding Factor

Nevada has no state income tax, making Las Vegas attractive for several reasons. Players for the new team in Las Vegas won’t have to pay state income tax on their salaries, and the same goes for other franchise and NHL staff. Additionally, dividends paid to investors in Nevada won’t be diminished because of a state income tax, either.

How big is the difference? Using the average player salary as an example demonstrates it clearly.

The average NHL player salary right now is $2.4 million. That annual salary places these players in the highest United States federal tax bracket, carrying a rate of 39.6 percent.

A player making the NHL average in Quebec would similarly fall in the highest tax brackets for both the Canadian federal and Quebec provincial income tax. The rate for that top bracket in Canada is 27.5 percent, and Quebec would take another 25.75 percent.

Without any exemptions, a player making the NHL average in Las Vegas will pay $950,400 in income tax. Again not figuring in any deductions, that same player in Quebec City would fork over $1,279,440. That’s a difference of over $329,000.

Canadian-U.S. tax treaty

It’s not just the difference in the income taxes that worked in Las Vegas’ favor, however. The┬átax treaty between Canada and the United States also plays a part.

The treaty bars double-taxation on income for people who cross the border between the two countries, like NHL media, players and staff. Canada taxes income based on residency, not citizenship like the United States. Expanding in a U.S. market will allow Canadian players and other staff to acquire work visas and reside in the United States. That creates another way for the highest earners to save 14 percent on every dollar in comparison to Quebec. It also allows Canadian personnel to take advantage of the higher number of deductions in the United States.

The jock tax

Technically there is a downside to making a state without income tax – like Nevada – home, however. The “jock tax,” or a tax levied on visiting players by many states, can be most costly in these states. Most states allow state income tax paid to other states to be deducted from the income tax due in the athlete’s state of residency.

Without a state income tax in Nevada, players who reside in Nevada won’t be able to claim any credits and still end up paying some income tax in several other states. That can be alleviated, however, by players keeping legal residences for tax purposes in other states. For league and team personnel who don’t fall under the jurisdiction of these “jock taxes,” that isn’t an issue.

While the strength of the Canadian dollar and the size of the Quebec City market certainly played significant parts in making this decision, the difference in tax savings between the two venues was too important for the NHL Expansion Committee to ignore.

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