By: Jonathan Turcotte | Follow me on Twitter / X @akaJonnyT
Since the 2005-06 season, the National Hockey League (NHL) has used a hard salary cap to promote competitive balance. The goal was to prevent wealthier franchises from simply spending more than smaller-market teams to build championship rosters. For years, that system largely achieved its purpose.
Today, however, differences in state and provincial tax rates have created an unintended advantage for certain teams. Because the salary cap is based on a player’s gross salary rather than what they actually take home after taxes, teams in low-tax markets can often offer more attractive contracts without using as much cap space. To combat this, an after-tax salary cap would better reflect the NHL’s original intent of competitive fairness.
The issue becomes most noticeable during unrestricted free agency. Entry-level contracts are tightly regulated, leaving young players with little negotiating power. Once players reach free agency, though, they can choose where to sign, and taxes become a massive factor in those decisions. Teams located in states without a state income tax, such as the Florida Panthers or the Vegas Golden Knights, can often offer contracts that leave players with more take-home pay than similar deals from teams in higher-tax markets.
It is a massive competitive edge. A player may accept a contract with a lower annual salary because the lower tax burden results in comparable (or even greater) net earnings. At the same time, the team benefits by committing less salary-cap space, leaving the remainder to sign additional players. While every franchise operates under the same cap, not every dollar of cap space provides the same value. Not even close.
Look no further than the Boston Bruins to see how this plays out in reality. When general manager Don Sweeney negotiates with free agents or current players, he must compete not only with other organizations but also with Massachusetts’ tax structure (I’m sure “Taxachusetts” is a term familiar to many readers). To match the after-tax income a player could receive from a team like the Tampa Bay Lightning, Boston often has to offer a higher gross salary. That larger contract consumes more of the Bruins’ salary cap, leaving Sweeney with less financial flexibility to round out the bottom six forwards or defensive pairings.
One possible solution would be to calculate cap charges using estimated after-tax income instead of gross salary. Under this system, contracts would count differently against the cap depending on the tax environment in which the player earns the money. Although the actual salary paid to the player would remain unchanged, each team’s cap charge would better reflect the player’s real compensation. This would reduce the financial advantage created solely by geography rather than by effective roster management.
Critics argue that such a system would be too complicated because of varying tax rates, escrow, and other financial considerations. Furthermore, NHL commissioner Gary Bettman has frequently pushed back on the idea that tax disparities create an unfair advantage, famously dismissing it as a “ridiculous issue”. Bettman argues that players are motivated by organizational culture, facilities, and a chance to win, noting that no one complained about tax advantages when Florida’s teams struggled for nearly two decades.
However, the players themselves tell a different story. Former Bruins Captain Brad Marchand noted that the tax gap between teams like Montreal and Dallas can create a “15% difference”. He added, “When you add that up, it’s a tremendous amount of money”. While the calculations would certainly be more complex, NHL teams already employ accountants, salary-cap specialists, and legal experts who manage sophisticated financial issues every day. Yes, implementing an after-tax model would require additional administration, but it is far from impossible.
Ultimately, the NHL’s salary cap was designed to create competitive balance, not to reward teams based on their local tax laws. An after-tax salary cap would not eliminate every advantage one franchise has over another, but it would reduce a significant inequity that affects free agency and roster construction. If Bettman and the league want competitive balance to remain their primary objective, they should consider updating the salary-cap system to reflect what players actually earn rather than what they are paid before taxes.
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