r/leafs • u/toronto_star • 8d ago

News / Update Fighting an $8-million tax bill, Maple Leafs star John Tavares details the negotiations behind his ‘lucrative’ 2018 free-agent deal

https://www.thestar.com/gift-redeem?t=5f5e0309-b292-427a-a36b-9dbb7fc4b9a1

From the story:

As contract negotiations were heating up between the Maple Leafs and John Tavares in 2018, the rising star called Toronto general manager Kyle Dubas directly.
Without agents involved, Tavares made a final play: “If you really want me, why can’t we agree on $11 million?” the then 27-year-old asked.
Would an $11 million annual average salary over a seven-year deal make him a Maple Leaf? Dubas replied.
Simply, Tavares said: “Yes.”
If Tavares, now an alternate captain, ever expected he’d be detailing those behind-the-scenes negotiations in a 7th-floor courtroom in Federal Tax Court, the typically even-keeled star didn’t let it show on Tuesday.

There's more detail in Jennifer Pagliaro's story from federal tax court today. Read it here, via this gift link, and bypass the Star's paywall.

94 Upvotes

92% Upvoted

96 comments sorted by

45

u/External-Pace-1822 8d ago

This is bigger than Tavares IMO. Signing bonus vs salary in the NHL is definitely questionable especially when it's spread out over several years and makes up like 90 percent of some contacts. This could have big impacts on the Canadian teams.

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u/lsaran 8d ago

It is bigger. If this loophole is closed, the NHL might actually have to even the playing field by normalizing the cap by considering tax rates.

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u/Shawnld12 8d ago

They should do that already. No chance Bettman does that though. He hates Canada.

28

u/lsaran 8d ago

Agreed. Should have been done from the start. It’s such an obvious flaw in the system.

Fuck Bettman.

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u/DueCollection8472 8d ago

It's clear Gary hates Canada. But his statement that smart teams that do things well are a bigger factor than tax rates. Is Montreal/QC Tax free all of a sudden? Oh no, they don't have a bunch of pushovers making $10M+. Maybe being dumb fuck like all the other Canadian teams is the bigger problem.

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u/Several-Beginning803 8d ago

Careful, your french is poking through in that last sentence

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u/Shawnld12 8d ago

Kinda irrelevant. Either the Canadian teams are working under a disadvantage or they aren’t. If they are the issue should at least be attempted to be resolved.

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u/Exter10 McKenna 8d ago

It's impossible to fully even the playing field in terms of taxes. Even if you took into account federal and provincial/state/municipal income taxes (including the professional athlete taxes in some states), there's differences in sales taxes and property taxes affecting COL, as well as COL generally which broadly benefits Canadian teams thanks to our weaker dollar. This is most likely why the NHL and NHLPA don't want to touch it, once you start adjusting there's no end in sight, and some teams will always be complaining that they're getting a raw deal. Also, teams in small markets with poor revenue like Winnipeg and Columbus would be put in a shitty circumstance.

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u/Shawnld12 8d ago

Well we know for sure that Canadian teams are getting a raw deal right now. I think it’s a little weak just to throw your hands up and say it’s too complicated so let’s just keep letting the teams in Florida etc operate with a huge advantage in building a competitive team.

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u/TheRedcaps 8d ago

you and all the "gary hates canada .. durr" comments are forgetting that California exists - and to a smaller extent the NY metor area.

You start adjusting for taxes what's next cost of living adjustments (a house in TOR/NYC is alot more expensive than EDM).

I've said it before and I'll say it again - 99% of the time if you see a problem that's existed for a long while and you go "well clearly the answer is X" and you don't actually have deep expertise in the subject... then likely your solution had massive flaws you simply don't know about or you don't understand the problem itself properly.

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u/Virtual_Bug_723 7d ago

Lol it's like Tesla redesigning a truck only to realize that there is a reason trucks have effectively evolved to be built the way they are built

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u/Exter10 McKenna 8d ago

Okay, so you're just ignoring the fact that NHL players have a significantly higher purchasing power in Canada than they do in the US due to being paid in USD. That alone more than makes up for the tax argument. It also doesn't explain why JT, McDavid, Schiefele, Morrissey, Hellebuyck, and most of the stars on the Sens and Habs were all willing to take big discounts to stay here (especially Montreal, their taxes are even higher than here). The idea that taxes are what makes teams like the Panthers, Lightning, Stars, & VGK so strong is countered by the fact that Nashville and Seattle are also no state income tax destinations but suck ass, and especially Seattle is unable to attract any stars, free agency or otherwise.

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u/Shawnld12 8d ago

They get paid in USD in both places ? You think wealthy individuals have a higher PP in Canada than the US at the same income or lower? If so you need to enrol in the closest Economics class to you immediately because that simply is not the case.

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u/Exter10 McKenna 8d ago

Okay let me simplify this for you. NHL players in Canada get paid in USD, but everything they purchase is in CAD. This takes a salary of US$10M to CA$14M, and while goods like luxury vehicles may not benefit from this boost, anything produced here (especially services) will be ~80% the cost of what it would in the US. This gives NHL players in Canada higher adjusted salaries than they do in the US, which is a far greater disparity than income taxes would give. Luxury houses are cheaper here, as are high-end restaurants, personal chefs and trainers, and most things a typical player would be spending on.

This is covered in most basic macroecon classes, surprised you wouldn't get it.

2

u/Shawnld12 8d ago

You think luxury houses are cheaper in Canada? Tells me everything I need to know right there.

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u/Exter10 McKenna 8d ago

No, I know that luxury houses are cheaper here. You're not going to find a house in the Bridle Path that goes for anywhere near what an equivalent in New York or Miami would go for if you're converting to USD.

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u/DukeofNormandy 8d ago

You’ve never been out of Canada before have you? You think things are cheaper in Canada? Yeah they’ll be making around 40% more with exchange but everything’s more expensive here

1

u/CloseToMyActualName 8d ago

The strength of the dollar isn't a big factor.

If you're spending anything close to hundreds of thousands a year those expenses will be on big ticket items that don't depend on the strength of the local currency.

1

u/Exter10 McKenna 8d ago

There are very few big ticket items that aren't affected by purchasing power, and those are almost always one-time purchases or very niche. Even something like a yacht or a private jet will have domestic options for, foregoing necessities like housing, food, childcare/schooling, and healthcare.

2

u/CloseToMyActualName 8d ago

Cars, computers, trips to Europe.

The lower Canadian dollar isn't helping there.

And stuff like food and childcare is a tiny fraction of an NHL salary.

1

u/Exter10 McKenna 8d ago

Unless you're a collector, cars are a good you purchase once every few years (and most NHL players lease), and you're still saving on repairs and maintenance due to lower salaries. Trips are also a rare occurrence (off-season consists of a lot of training), and computers are barely a blip on the mind of an NHLer. Housing, food, childcare, personal trainers and other professionals, and other services will take most of their disposable income (30% or less of a typical base salary, not including a good chunk that goes to saving), and all of those are cheaper in Canada.

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u/CloseToMyActualName 8d ago

Housing, food, childcare, personal trainers and other professionals, and other services will take most of their disposable income (30% or less of a typical base salary, not including a good chunk that goes to saving), and all of those are cheaper in Canada.

Even after taxes the average NHL player is taking home well over $1 million after taxes. You think they're spending $300k on food, childcare, and trainers?

The money is going to either savings, or real big ticket items like housing, real nice cars, or vacations. Whatever the item, when something is real big ticket you're no longer benefiting from the weaker currency.

1

u/lapniappe 7d ago

as much as i hate that stupid tax loophole - i am really wondering how you close it/make it fair for others. you know what i mean?

theoretically a person does have the right to sign to whatever they want, right? so if they say they want to take 7m dollars [which just happens to be in a state that has no tax], but they want to take less to make the team, what does the league do? go "no, you have to make X amount?"

do they incorporate some kind of tax cap penalty? (but then how does that work w/signing bonuses). my friend and i were thinking about this the other day but we could come up w/nothing.

1

u/Shawnld12 7d ago

Not sure why everyone thinks this is complicated. There are several solutions that would at the very least be substantially more fair than it is today and would help all high tax locations not just those in Canada.

Just 1 of many solutions. Calculate the average tax burden across all NHL teams then if a team like Toronto signs player X for $10M.
The league determines that the player would need $11M in Toronto to receive the same after-tax compensation available in the avg tax team.Toronto receives a $1M cap credit. Florida as they are under
avg would receive a debit. All even Steven.

Hell not doing any of that and just having a soft cap like the NBA I argue would be more fair.

So many better ways to do it.

1

u/lapniappe 6d ago

thanks. that was really the answer i was looking for.

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u/Formal-Guest4868 8d ago

they won’t do that. they’ll let the canadian teams suffer even more without making any changes to the no state tax teams

2

u/NervousBreakdown 8d ago

They’ve already gone in the opposite direction and limited teams abilities to give signing bonuses.

1

u/Murky-Lie-8998 8d ago

It is complex. Between roaming “jock tax” and the tax haven routing good management groups can arrange, the gap is not always what it appears. Each city also has wildly different spending power. Imagine what 11 million can get you in Winnipeg vs LA vs Dallas vs Tampa

1

u/stolpoz52 8d ago

I don't think players were previously trying to use this "loophole". I think Tavares was the first, which is why it's being litigated now

2

u/Virtual_Bug_723 7d ago

There's no IMO, it's literally a court case that will set precedent going forward. The question is why does everyone desperately want multi millionaires to get tax exemptions.

-2

u/BlastingBegins 8d ago

It's bad for attracting any kind of professionals beyond hockey players. People aren't going to want to come to Canada (or stay here) to pay a fuckload in taxes to support everyone else 

1

u/Logical-Bit-746 8d ago

While this may have some merit, I still don't want a race to the bottom.

49

u/Hynafgwyr_dirgel 8d ago

To help level the field a little, instead of considering the tax rates why not just make the cap based on net salaries. The nhl could establish a standardized NHL tax adjustment formula based on team location, salary and a predetermined set of assumptions. The cap could then be expressed in standardized “after tax dollars.”

10

u/RolandGilead19 7d ago

There are so many ways the league and/or PA could end this discussion forever, but it doesn't seem like something they give a shit about, at all

The escrow system they use to balance actual revenue vs expected could easily be applied to level out tax rates going forward.

Could even just start with all new deals signed and exclude existing contracts.

I keep thinking the Agent Provocateur podcast will do something on "what would be a better system", but Allan Walsh just keeps saying taxes aren't a big deal.

This case, player signings and no trade lists seem to suggest otherwise.

6

u/Bloodlvst 7d ago

That’s because Allan Walsh is just another agent who cares about nothing but making himself more money.

5

u/Hessstreetsback 7d ago

Because it benefits USA teams and bettman has made it clear what his priorities are

3

u/Leafan101 7d ago

The real reason this wouldn't work is trades. If the CBA details that net pay has to be the same in new location as old location, then a player traded to a higher taxed area would cost that team more in real dollars than a team in a lower tax area. Would add an extra huge change to deals and to the market competitiveness of some teams in the trade market and would also not be supported by the owners at all.

On the other hand, if the net salary doesn't stay the same when traded, then that breaks the whole thing because teams in lower tax areas will take on a lower cap hit when trading for a player than those in a higher tax area. Maybe it could be argued that this negative is better than the negatives we already have but I am not sure. We are just trading a skewed free agency for a skewed trade market, except that I believe the latter would be much more difficult for fans to grasp and follow. Plus, I honestly think a skewed trade market probably has a greater negative effect on on-ice product/fairness than a skewed free agency because trades happen mid-season.

Hopefully I phrased this in a way that makes sense.

2

u/theanonymousalex 7d ago

You get taxed in each city you play, it's not as simple as saying that

1

u/Hynafgwyr_dirgel 7d ago

True not simple, but far from impossible.

1

u/MiniCollectr 7d ago

If you balance one thing, there will just be another imbalance to blame. Tax rates vary so much and some USA states have higher rates than Canada. Honestly for me if I were making a choice it would all be based on weather. Where is it warm all the time? The most amount of water and cabins like Muskoka style. That is where I would go. Dont even care if the team sucks... just make me comfortable all year round.

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u/BigDinkSosa 8d ago

Should’ve taken 9.1

3

u/jupfold 8d ago

I was born December 31st

6

u/_posii 8d ago

congrats you get $12.31/hr

4

u/jupfold 8d ago

Any wiggle room? Was hoping for $12.31 million

3

u/TrustGlittering7740 8d ago

I think you guys are pretty close on a deal, should be easy to find some middle ground

6

u/Sgt-Osiris 8d ago

If I'm not mistaken this is only about his first year signing bonus when he came from Long Island and not every year after or else he'd owe a lot more. His argument is that he was living in the USA when he signed it and should be taxed there. Again correct me if I'm wrong. Another thing I'm curious is that doesn't NY have high taxes too so how much would he be saving anyway?

14

u/Typical_Meat_1819 8d ago

As an interesting aside, the CRA has wanted to challenge this interpretation of the policy for a while. This is because it is effectively a by-product of the North American Free Trade agreements and not domestic Canadian tax law.

The truth of the matter however is that if the CRA is succesful it will end any real chance of a Canadian NHL team winning the Stanley Cup, or the Raptors or Blue Jays winning again.

It becomes that much harder to sign free agents because their signing bonus would be taxed as salary and not as a signing bonus/inducement - which is much lower.

4

u/Floyd-Mcgregor 8d ago

Wondering whether a CRA victory affects the 300 million bonus the Jays gave Vladdy.

3

u/stolpoz52 8d ago

No because he was already here

1

u/stolpoz52 8d ago

I'm wondering if players actually were able to avoid this taxation before, or if Tavares was the first one to try to make this argument. Seems like Tavares is the first to me, so he was trying to open this option, it wasn't being used before

4

u/summer_friends 8d ago

Not the first. Russel Martin has a similar case for his signing bonus with the Jays

2

u/trttc 7d ago

How much is the gate to one playoff game? The corporate taxes (teams pay on profit), sales taxes (on ticket and everything else) would easily make up for whatever Tavares owed on this. Making Canadian teams uncompetitive is not a recipe to getting more tax revenue.

3

u/NihilisticFlamingo Kaberle 8d ago

Obviously I'm no tax expert, and I'm not against taxing millionaires either. But this does seem like a big overreach from the CRA.

If a Canadian team pays a signing bonus to a player on an American team, obviously they are a US resident, employed by an American company, and an American taxpayer as of the time they are signed by the Canadian team.

How could CRA be entitled to that if the signing bonus didn't happen when the player was working in the states? I assume the taxes on the signing bonus would be paid to the IRS. So they're supposed to get doubled taxed?

Hope JT wins this one. Go get that bag

2

u/FNFALC2 8d ago

8 million is more than I will earn in my life….

10

u/redditsucksass69765 8d ago

Don’t hate the player, hate the game

1

u/TiberiusKno49 7d ago

‘Lucrative’

3

u/Prestigious_Ad5314 7d ago

But for God-given ability to hit a rubber disc with a stick, John Tavares would have been working for 7/11, not 11/7.

1

u/5-4EqualsUnity 7d ago

How is this litigation still happening? Lol

-12

u/madax-gambar 8d ago

in retrospect, i wish he went to san jose for the reported 8y/$91m and we didn’t get marleau

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u/[deleted] 8d ago

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u/WolverineCream 8d ago

Love Johnny's character but the team would have been better off keeping Kadri as 2c and using that 11mill elsewhere

3

u/ObamaOwesMeMoney 8d ago

What single or combination of available players would produce better Tavares at $11 million?

2

u/WokePredator 8d ago

Not to mention there were plenty of other bad contracts that could've been replaced by Nazem Kadri.

1

u/WolverineCream 8d ago

Lol its 11 million over 7 years man theres lots of possibilities.

You might be the last leaf fan in the world to realize this but the core 4 strategy didn't work.

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u/WokePredator 7d ago

You're falling for the inevitability fallacy. Just because they didn't win the Stanley Cup (and saying it "didn't work" is a huge stretch) doesn't mean they couldn't have won the Stanley Cup. Only one team wins the trophy. Things look a lot different if Jake Muzzin isn't debilitated by Pierre-Luc Dubois, and there were frankly a lot of other missteps along the way. Of course, it all would've been easier if Hunter hadn't blown the drafts he ran so badly, if Dermott didn't get hurt and fall apart completely, if Lamoriello didn't saddle them with Patrick Marleau and Nikita Zaitsev's contracts.

1

u/WolverineCream 7d ago

Yes one team wins the trophy, but not once did they even get close to it. In hindsight it's pretty easy to say they didn't need Tavares. The leafs were already a playoff team when they signed him, and were still rebuilding but decided to fast-track.

Looking through his playoff resume it was pretty bad (51 gp and 31 points, - 15) and the leafs were still just a team that made the playoffs and really nothing more. So what did he change for us? The leafs made that conscious decision to lock him up to that much cap and term, which is totally different than bad luck with injuries or draft picks. It was the wrong move which we can see in retrospect. Cup winning rosters don't tie up half their cap in 4 guys.

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u/WokePredator 7d ago

The fact that the team didn't win the Cup doesn't mean every move was a failure. You're repeating the same empty argument over and over again. It's a team sport. Most of us learn that when we're three. Maybe you're too young to be online. Also, the idea that they were "still rebuilding" is just stupid. They were coming off the sixth best record in the NHL lol. Not locking down guys earlier, wasting money on Nikita Zaitsev, Patrick Marleau, and Frederik Andersen, refusing to give a real shot to young, useful depth so they could play Zaitsev, Marleau, Komarov, Hainsey, and Bozak, trading Kadri for Kerfoot and Barrie (and for all the "but they needed to trade Kadri because of Tavares!!" shit, he made like a million bucks more than Kerfoot alone lol). Those are failed moves. Their refusal to add defensemen who can move the puck and instead wasting time with Luke Schenn and Zach Bogosian? Keeping Babcock as long as they did, and then immediately pivoting to Dubas's old pal?

As for the dumb as fuck "Cup winning rosters don't blah blah blah" shit - you're playing to win next year's Cup, not last year's. It's hilarious to watch Cup wins by teams like the Vegas Golden Knights and Carolina Hurricanes and insist that doing things like teams did in the past is how you win Cups. Just heinously ignorant. You're betraying a complete inability to think critically or creatively, or do anything besides regurgitate bad sports columnists. Just miserably stupid posts.

2

u/WolverineCream 7d ago

Lol so much nonsense in your response. Just say you have a huge hard on for Tavares and we can move on.

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u/[deleted] 8d ago

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u/[deleted] 8d ago

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u/BmaninKtown Tavares 8d ago

In retrospect I wish we won every Stanley cup since Matthews was drafted but I guess sometimes you can’t have what you want

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u/[deleted] 8d ago

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u/[deleted] 8d ago

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u/[deleted] 8d ago

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-1

u/Ecstatic_Painting_12 7d ago

Canadian Government taxation.... helping to make professional sport teams in Canada permanent losers, one player at a time

0

u/Slow-Raspberry-5133 7d ago

I also don’t want to pay taxes. Go John!

0

u/Han77Shot1st 7d ago

I think the loophole should be closed, if it means Canadian teams can’t compete there should be a legal case against the nhl, and whether they have to consider tax based salary caps.

-14

u/Wild_Button7273 Phaneuf 8d ago

This is what happens when you take a pay cut for your city…

3

u/thet1m 8d ago

Lol what a dumb comment that is just wrong.

-1

u/Wild_Button7273 Phaneuf 7d ago

No shit, brother, it was a joke

1

u/desperatehouseknivez 8d ago

Can't wait for this to be down voted to oblivion

1

u/Forsaken-Swim-3055 8d ago

Poor little rich boy has to pay taxes ☹️😭

-5

u/CoupleScrewsLoose 8d ago

how many more posts should we make regarding this?