Hockey fans across the country often like to make excuses for their teams.
They’ll blame injuries, the referees, their schedule, bad bounces and even the Zamboni driver for their teams’ poor record.
Well here’s another excuse: taxes.
The Canadian Taxpayers Federation has teamed-up with Americans for Tax Reform to release a comprehensive report on the personal tax burdens of National Hockey League players based on which city they play in.
Their thesis is that low tax jurisdiction teams have an advantage in signing free agents; 57 per cent of of unrestricted free agents this past off-season moved to teams with lower taxes.
In 2013/14 players for the Montreal Canadiens paid the highest taxes with a combined federal/provincial tax rate of 53.9 per cent.
Players for the Calgary Flames and Edmonton Oilers had the lowest tax rate of just 38.2 per cent.
The actual dollar figures — the amount of money an individual player gains or loses based on where he plays — are most striking.
"Having a no trade clause give players the power to avoid being sent to high tax jurisdictions. Jason Spezza’s tax savings by moving from Ottawa to Dallas are $394,732," notes the report.
"Player’s without no-trade clauses could get a big take home pay cut when traded to a high tax jurisdiction. PA Parenteau will have to pay $349,535 more taxes after moving from Colorado to Montreal.
"Benoit Pouliot will save the most taxes moving from the New York Rangers to the Edmonton Oilers. If he had signed the same deal in New York he would have had to pay $575,752 more in taxes."
Interestingly, however, the tax rates didn’t seem to affect the 2013/14 NHL standings.
The Montreal Canadiens (whose players were burdened with the highest tax rate) were the top Canadian NHL club last season. The Kings — whose city was 29th in terms of tax rate — won the Stanley Cup.
Meanwhile, the Flames and Oilers were cellar dwellers — once again.
While the hockey statistics are interesting, the CTF claims that their analysis also has wider political and economic implications.
"NHL players are just one example of highly skilled workers who have a choice of where to work” says CTF Federal Director Aaron Wudrick in a press release accompanying the report.
“The same principles apply far beyond professional athletes, but also for doctors, engineers and CEOs of major companies. If high tax rates make it more difficult to attract free-agents in the NHL, it’s not a stretch to believe it’s also be hard to attract other highly skilled workers. Governments need to keep that in mind when they’re considering the impact of tax rates on attracting top talent.”
Indeed, the Canadian government, corporations and organizations spend a lot of money trying to attract the world’s top doctors, scientists, researchers, engineers etc.. from other parts of the world.
Moreover, right-leaning governments on both sides of the border are fond of the mantra ‘no new taxes’ while the progressives continuously advocate for higher taxes for the highest income earners.
It’s an interesting debate: Do personal income taxes influence migration decisions of highly skilled individuals?
The research suggests there is at least a link.
An OECD study involving 49 countries — looking at just taxes — suggests that there is a correlation between tax rates and migration between countries.
"The progressivity of the tax system at high income brackets is quantitatively the most important component for expatriates or migration," notes the report which looked at migration data from 2002.
"The second most important indicator are employee-borne personal income tax rates for average personal incomes."
Where the academic literature falls short, however, is with regard to ranking the factors a migrant considers before moving from one jurisdiction to another.
As in the hockey world, one would expect that high-earning foreign nationals in other industries will also examine expected wages, costs of living, local amenities, and overall quality of life.
U.S. and Canadian immigration lawyer Michael Niren has front line experience working with skilled workers who want to immigrate to North America: He says that while taxes are a factor, they’re not the most important one.
“I do not think comparable tax rates as between Canada and the US have much of an impact on an individuals choice to relocate as it does for corporations,” he told Yahoo Canada News.
"Given the economic conditions in the US since 2008, Canada as been regarded by many as a better choice for skilled workers world wide,
"The US dollar is now outperforming the Canadian dollar and that could have an impact."
Trish Hennessy of the left-leaning Canadian Centre for Policy Alternatives suggests that CTF’s conclusions are contrary to Canadian values.
"If the American model of income inequality is what the Canadian Taxpayers Federation is advocating, I’d be cautious about that: income inequality in the United States is among the worst in the developed world," she told Yahoo Canada News.
"There is a historical precedent in Canada for asking those who earn more to contribute more in the form of taxes that help pay for things Americans don’t have: universal public health care, better public pension supports for seniors, and a range of public services that everyone enjoys – even rich hockey players.
"So if the choice is between the American model of income inequality or the Canadian model of using the tax and transfer system to reduce some of the worst effects of inequality, I’m rooting for the home team. Go Canada go!"
(Photo courtesy of the Canadian Press)
(Charts courtesy of the Canadian Taxpayers Federation)
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