A Proposed Cap Credit Could Help NHL’s High-Tax Teams

With NHL Commissioner Gary Bettman confirming that CBA negotiations will take place with the NHLPA, one of the most contentious issues—tax disparity—may finally be addressed. As Elliotte Friedman highlighted in his latest 32 Thoughts report, teams based in states with no income tax, such as Florida, Nevada, Tennessee, Texas, and Washington, hold a distinct advantage in contract negotiations. Players signing with teams in high-tax locations like California or Canada often take home significantly less money for the same cap hit, making it harder for those franchises to retain talent.

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Friedman proposes a potential solution: a tax-based salary cap relief system tied to unrestricted free agency (UFA) contracts. Under this model, teams in high-tax locations would receive a cap credit when signing players to contracts that include UFA seasons.

For example, when Auston Matthews signed his five-year extension with the Toronto Maple Leafs, Toronto would not have received relief for the first four years of the deal, but in the final year—when he was eligible to leave as a UFA—the team would have received some form of compensation. Friedman also used Connor McDavid as an example. He noted that the Edmonton Oilers wouldn’t get any break for the first four years of his current eight-year contract. However, the last four seasons would get the credit.

The idea is to help level the playing field when it’s become clear that some players are choosing only to sign in tax-free states.

Is There A Way for the NHL to Even Out Tax Inequalities?

Friedman admits there might be no perfect solution. A way would have to be found to find a number that all teams could live with. He also acknowledged a potential hurdle remains: how the extra cap space in the system would upset people if it didn’t count against the cap ceiling. He writes:

“There have been times (2005 and 2013) when teams were given the opportunity to buy out players and not have it count against their cap totals. It hasn’t happened since because teams didn’t want to pay salaries that aren’t part of the 50/50 revenue share.”

Friedman doesn’t say the NHL is looking to make changes to this, but he didn’t note that the issue is becoming a bit more of a problem, particularly for Canadian teams.

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