The Montreal Tax

Montreal Forum 1989, Getty Images
Montreal Forum 1989, Getty Images

My brother sent me this article to read posted on TSN by Rick Westhead, “Westhead: Why Montreal is the worst NHL city…when it’s tax time”. Well the title of the article is not shocking to anyone, what is shocking is that nobody seems to be talking about one the main reason why Montreal has difficulty attracting top talent.

Combine the rich history of the Montreal Canadiens, the pressure, the media, the over-zealous fans, the French environment, and the beautiful complicated province of Quebec, it’s not a surprise that there are many reasons why a free agent would or wouldn’t sign for the Montreal Canadiens. When a player signs a contract to play in Montreal, he’s well aware that once he wears the Habs jersey it’s a different beast than let say playing in Raleigh, North Carolina.

Taxes is one the main reason why a lot of free agents doesn’t not to play in Montreal. As the article points out, the players’ paycheck is cut in half because of taxes. When 50% of your money is gone, it’s definitely a motivator to play elsewhere.

I believe to attract top talent in Montreal, the Habs have to pay a premium, or something I call the “Montreal Tax”. Not only it’s more “complicated” to play on Montreal, the “Montreal Tax” would also compensate for the extra income tax the player has to fork over.

As an example, let’s assume that fictional player Zdeno Pacioretty gets two offers, one in Montreal and one in Dallas. Well a $5 million payout in Dallas is a $5 million pay cheque because Texas doesn’t have income taxes. In Montreal, a $5 million pay cheque is $2.5 million. To compensate for the “loss” income, the Habs might have to offer more money to sign Mr. Zdeno Pacioretty so he doesn’t feel penalized. This example gets more complicated when you have a salary cap and other restrictions to follow.

Actually the only time I remember sport media having a “serious” discussion about income taxes is when Ilya Kovalchuk ditched Jersey to go play in Russia. Russia doesn’t have income taxes, so his gross salary was actually lower than Jersey, but his net was much higher. There are several reasons on why I think it’s not really discussed when it comes free agent season.

First, it’s taxes. There’s nothing sexy about taxes. Bring up the word and people will switch channels or turn off the radio. A sports fan wants to talk about sports, not f*ing taxes.

Second, taxes are a complicated subject. Each province, state, country, district has their own code and rules. It’s an absolute mess that confuses everyone because the law is subject to interpretation. That’s why we have tax lawyers.

Third, taxes are outside everyone’s control. Everyone has to pay their fair share. The topic is beyond sports. It’s not like they can change the tax rate to accommodate certain players. In general, the whole tax code needs to review and adjusted to today’s reality.

Fourth, try talking about taxes without getting into a messy political fight. It’s not worth going there.

Below is a quote from the article that resumes well this post:
” In 2006, former Canadiens defenceman-turned-player agent Gilles Lupien told The National Post that Montreal was a great place to play hockey, but that its high taxes worry some players. His client Martin Lapointe for instance, had $25 million offers from Montreal and Boston in 2001 when he became a free agent. Lapointe (now the Director of Player Development for the Canadiens) opted for Boston, avoiding high taxes and the intense Montreal media.”

NHL SALARIES 1

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Data Source: TSN

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