The NHL: Taxed Into Losing
Mike Leitao ~ 07/01/2025
The Florida Panthers are your 2025 Stanley Cup Champions. They beat Edmonton in 6 games, outplaying them in every game and winning back-to-back championships over the Oilers. The Panthers are on a generational run, making the Stanley Cup Finals 3 years in a row and winning the last two. Before that, the Tampa Bay Lightning made it to 3 straight Stanley Cup finals also winning two in a row. So, if you can do simple math you can tell that means the East has been represented by Florida 6 years in a row and Florida has been crowned champs 4 of those years. While on this generational run, many people have wondered if Florida has an advantage due to their state taxes. Florida is one of the states that has no income tax, meaning if you work in Florida you do not lose part of your paycheck to the government. Compare that to a state like California with a gradual tax rate that goes up to 13%, and all the sudden Florida seems to have an advantage. This has gotten people talking about if the NHL needs to change their salary cap to scale based on taxes so that all teams have an equal chance. It’s an interesting proposal, and one where both sides seem to have logical points. Today however, I’m going to discuss the argument for a sliding salary cap.
Because of these insane tax differences, this allows the teams in Florida to offer smaller contracts to players that will still result in them having a higher take home pay compared to other locations. This allows the teams in Florida to gather more talent than the rest of the league since they basically have more money to spend. While other teams need to give out 12 million, Florida might only need to give out 10 million to land that player. Every extra cent counts, and when you start taking into consideration we are talking about millions of dollars that gives Florida a lot of extra room to bring in talented players which helps them stay competitive. By the way, this isn’t just an issue in Florida, but all states that have no income tax. Nevada does not have a state income tax, and they are one of the teams that beat a Florida team to win a Stanley Cup, meaning 5 of the last 6 winners come from no state income tax states. Texas is another no state income tax state, and Dallas has made it to the Western Conference Finals 3 years in a row and was the team Tampa Bay beat to win their championship 6 years ago. So, that means the eastern conference has been represented by a state with no state income tax 6 years in a row and the west has been represented by a no state income tax state 2 teams over that same span, but if we ignore 2021 due to the weird alignments due to COVID, it would be 2 of the last 5. So that means 7 of the last 10, or 70% of the teams playing in the finals are no state income tax states. Of those 5 finals, a no state income tax state has won 4 of the 5, or 80%. The lone winner who had state income tax was Colorado, who still only has a tiny 4.5% meaning all winners are in low or no state income tax areas.
Now, you might be wondering why this only seems to be a problem in hockey when the same would apply to the other major sports in America. If this is true in hockey, why is it that the NBA, NFL, and MLB don’t seem to have this issue? Teams like the Lakers, Celtics, and Dodgers are all successful with recent championships. There are two reasons, one is that those leagues either have huge salaries and salary caps, or simply no salary cap. By having such large salaries, the tax difference ends up matter a lot less since it’s even more generational wealth compared to the NHL. The lack of a salary cap also allows teams to spend wildly like the Dodgers have been doing. The other reason is that those leagues have much more importance in history than the NHL. Sure, the taxes to play for the Celtics or Lakers might suck, but being a part of those franchises is a big deal. Compared to the NHL, and no one really cares about being a part of an original 6 team or one with great history, it just simply matters a whole lot less in the NHL.
So the problem has been identified, but what is the solution? The proposal is simple, the salary cap either becomes a sliding range or it becomes based on take home pay. So instead of teams having $92 million in salary cap, they would have say $45 million in take home pay salary cap. This would allow for teams in harsher tax markets like New York, California, and Canada to have more spending power on a salary front, but the take home pay would match what other teams have as well. This would lead to more balancing in the league, as teams would compete on a level playing field for who can offer players the best take home pay without having to worry about the salary cap. Making the playing field level should in theory remove a distinct advantage for teams from a cap perspective, it will be all about who can offer the best situation, environment, or position for the players now that it’s all based on the same basis of take home pay.
This is of course one outlook on the entire situation. One that certain fans (cough, cough, Canadians) are very high on. But that’s only one side of the coin, and it’s only fair that the counter argument be made as to why the salary cap works perfectly fine, but that’s an argument to be made another day.
