Are Tax Rate Differentials Giving Some NHL Teams an Edge?

Hockey is about skill, strategy, and teamwork—but in today’s NHL, tax policies might play a surprising role in shaping team success. Teams based in U.S. states with no state income tax, such as Florida and Nevada, have claimed four of the past five Stanley Cups. Meanwhile, Canadian teams haven’t hoisted the trophy since 1993. Could tax differences between Canada and the U.S.—and among U.S. states—be tilting the playing field?

“We’re not a destination city…we have taxes in New York. Those are real.” – Buffalo Sabres General Manager Kevyn Adams commenting on the different challenges he faces trying to build a Stanley Cup hockey team, December 7, 2024.

How Taxes Impact Player Earnings 

To understand this, it’s important to know how athletes’ earnings are taxed. While their income is taxed based on where they reside, they are also taxed by each jurisdiction where they play games, often referred to as the “jock tax.” For instance, a player on a Florida-based team—where there is no state income tax — still pays state taxes for games played in higher-tax states or provinces. However, because roughly half of their games are played at home, they benefit from the absence of state income tax for those contests.    

This contrasts with players on teams in high-tax jurisdictions, like California or Ontario, who pay elevated taxes on both their home games and many of their away games. Over the course of an NHL season, these differences can translate into substantial disparities in players’ take-home pay.  

The Salary Cap and After-Tax Spending Power 

The NHL salary cap is the same for all teams, but taxes create disparities in what that cap can buy in after-tax dollars. For example, two teams spending to the $83.5 million cap will offer players very different take-home pay depending on local tax rates. A team in a low-tax state effectively gets more “bang for their buck,” allowing them to assemble stronger rosters within the same spending limit. 

For teams in high-tax jurisdictions, this disparity creates a financial squeeze. They may struggle to build equally strong rosters, as a larger share of their salary cap goes toward compensating for tax burdens rather than directly funding player talent. 

This tax advantage doesn’t just help attract star players—it also allows teams in low-tax states to stretch their salary cap further, building greater depth and balance. The result? A financial edge that can translate into competitive success. 

Looking at a Real-World Example

To illustrate, let’s compare a hypothetical US$4 million annual salary offered by teams in Florida (no state income tax), Ontario, and California (Whyno, S., 2024):

1. Florida (e.g., Florida Panthers or Tampa Bay Lightning):

• With no state income tax, players keep more of their earnings. Factoring in federal taxes and other deductions, a player might take home roughly $2.4 million from their $4 million salary.

2. Ontario (e.g., Toronto Maple Leafs or Ottawa Senators):

• In Canada, both federal and provincial taxes are applied. In Ontario, players face some of the highest tax rates in the league. After taxes, the same $4 million contract could leave a player with around $2.0 million in take-home pay—a significant reduction compared to Florida.

3. California (e.g., Los Angeles Kings, San Jose Sharks or Anaheim Ducks):

• California imposes the highest state income tax rate in the U.S., at 13.3% for high earners. Combined with federal taxes, this means a player’s take-home pay on a $4 million contract could drop to approximately $1.9 million — the lowest among these three examples.

The Financial Squeeze on High-Tax Teams  

While Canadian NHL teams don’t face the same federal tax structure as their U.S. counterparts, they contend with a unique combination of higher federal and provincial tax rates. Players on Canadian teams lose more of their salaries to taxes compared to many U.S.-based teams. Though Canadian franchises often have higher revenues thanks to dedicated fan bases, these advantages are reduced by revenue sharing and neutralized by the salary cap, which limits spending regardless of local revenue strength.  

The tax advantage doesn’t just help low-tax teams attract star players—it allows them to stretch their salary cap further, enhancing depth and roster balance. By maximizing after-tax salaries, these teams can secure high-performing players across all roster tiers. This financial edge often translates into on-ice success, widening the gap between low-tax and high-tax teams in the NHL. 

Another ripple effect of this tax disparity is evident in players’ no-trade clauses. Some players strategically list Canadian teams, or teams in high-tax states like California, as no-trade destinations to avoid losing a significant portion of their earnings. This further complicates talent acquisition for teams in these markets. 

Ultimately, while Canadian teams continue to thrive in terms of fan engagement and revenue generation, the tax burden remains a persistent obstacle in attracting and retaining top talent.  

The Broader Impact on Team Success 

The correlation between tax policies and recent Stanley Cup winners raises questions about competitive equity. While taxes aren’t the sole factor in determining team success, they add an important layer to the NHL’s financial landscape. Teams in no-tax states have a built-in advantage in assembling competitive rosters while staying within league-mandated spending limits. Canadian teams, on the other hand, face uphill battles to attract top talent while working within the same constraints. 

While tax policy is far from the only factor determining team success— smart management, strategic trades, and player development remain essential — it is an increasingly important piece of the puzzle in the modern NHL. Florida’s rise, for example, may be as much about shrewd moves by their general manager, strong coaching and excellent team play as it is about favorable tax laws. Still, when a team can offer a lower-tax environment and excellent management, it’s a tough combination to beat. As the league continues to evolve, these financial dynamics may prompt further debate about whether the NHL’s current system achieves its intended goal of ensuring parity across all markets.  

The Numbers Speak for Themselves 

The success of tax-advantaged teams in recent years underscores this imbalance. The Tampa Bay Lightning, Florida Panthers and Vegas Golden Knights have all won Stanley Cups, while they appeared in three straight finals, winning two. Together, these teams have dominated the playoffs, while Canadian teams struggle to make deep postseason runs. 

This tax disparity doesn’t just affect individual contracts—it impacts team dynamics and long-term planning. Teams in high-tax regions often need to spend more to maintain competitiveness, leaving less room to build depth and flexibility in their rosters. 

A Problem Without a Clear Solution 

The NHL has acknowledged these disparities, but finding a solution is tricky. Adjusting salary cap rules to account for taxes sounds simple but could create logistical headaches, especially with trades and call-ups. For now, teams in higher-tax regions will need to focus on building strong cultures to offset the financial disadvantage. 

Balancing the Scales 

Tax policies are an often-overlooked factor in NHL competitiveness. While they don’t tell the whole story, it’s hard to ignore their impact on where players choose to sign and how teams build their rosters. For Canadian franchises, overcoming this challenge requires innovation, creativity, and careful planning. 

At Zeifmans, we specialize in cross-border tax strategies to help individuals and businesses navigate complex financial landscapes. As proud Canadians, we are all hockey fans. Our partners even include a former Alternate Governor of the National Hockey League. Whether you’re managing a professional contract or your company’s bottom line, we can help you maximize your opportunities.