Monday, December 1, 2014

Canadian Provinces Becoming More Tax Friendly Than U.S. States

Americans For Tax Reform (ATR) and the Canadian Taxpayers Federation (CTF) jointly released a very intriguing study showing that of the 123 unrestricted free agents who changed teams during the 2014 off-season, 57% of went to teams with lower taxes.  While this is a study of National Hockey League (NHL) players, the ramifications for corporate HR executives recruiting efforts are similar.  Your jurisdiction makes a difference when seeking top talent. High tax jurisdictions, like California have to pay a higher price for their largess. 

The study, titled Home Ice Tax Disadvantage compares team salaries, personal income tax rates in the relevant locale, and the "true" salary cap, which takes into consideration these rates. The report shows the impact that taxes – personal income taxes in particular – have on labor mobility.

"Interestingly, Alberta’s combined federal and provincial taxes are now lower than the states that have no state income taxes. Of the 23 American teams, 21 of them fell in the rankings of best places to play between 2012 and 2014. Florida, Tampa Bay, Dallas, and Nashville fell from the top spot in 2012 to third best locations in 2014 to play from an income tax standpoint," the study provides.

Coming as no surprise to Californians, Los Angeles Kings players paid the highest total of $27.8 million to the federal government and $8.5 million to the state.  The study also shows that, "[h]aving a no trade clause gives the power to avoid being sent to high tax jurisdictions. Jason Spezza’s tax savings by moving from Ottawa to Dallas are $394,732."

“NHL players are just one example of highly skilled workers who have a choice of where to work” added CTF Federal Director Aaron Wudrick. “The same principles apply far beyond professional athletes, but also for doctors, engineers and CEOs of major companies. If high tax rates make it more difficult to attract free-agents in the NHL, it’s not a stretch to believe it’s also be hard to attract other highly skilled workers. Governments need to keep that in mind when they’re considering the impact of tax rates on attracting top talent.”

The CTF and ATR study on the taxes of NHL players can be found Here. Below are some highlights from the study.  Click on an image to see a larger size version. 

   Free Agent Savings: