Are Taxes Driving Top Athletes Away From Massachusetts?

Boston is the City of Champions, winning 13 championships across major league sports in the last 24 years. But could Massachusetts’ tax policies threaten future Duck Boat parades?

A closer look at the 2023-2024 National Hockey League (NHL) playoff outcomes suggests taxes are playing a role in the success of NHL teams. In fact, four of the past five Stanley Cup championship teams have been from states without state income tax. The same is true of seven of the last 10 teams to make it to the finals. When it comes to recruiting talent during free agency, teams in no income tax states have an advantage. The NHL has taken notice, and is now monitoring teams’ income-tax advantages.

A recent poll by The Athletic found that 84.6 percent of fans surveyed believe state tax policy advantages certain teams. Players and managers agree. “At the end of the day,” said Filip Forsberg of the Nashville Predators, “that does play quite a bit of difference on our salary.” As Florida Panthers general manager Bill Zito explained to the Wall Street Journal, “[Florida’s] low tax allows us to be most efficient with our cap. The more efficient you can be the better.”

Although the salary cap is the same across all teams, different taxes may allow players in certain states to take home more of their promised compensation. That means certain contract offers may be more attractive in these less-to-no-income-tax states. That also means potentially lower contract offers may stretch farther in terms of take home pay for players in these states, allowing teams more leeway for their salary cap requirements.

Last Year’s Top Bruins Could Have Made More In No Income Tax States

This past weekend, rumors spread of a possible three-year contract extension for Boston Bruins’ captain Brad Marchand who has spent all sixteen seasons of his NHL career with the Bruins. Eight years ago, Marchand signed a contract with an annual average salary cap hit of $6.13 million. But, after taxes, how much does Marchand really take home?

Every player’s contract is organized differently with varying amounts being allocated toward “signing bonuses” and “base salary.” The amount a player gets paid each year can also vary within the contract. In the 2023-2024 NHL season, it is estimated that Marchand was paid a total compensation of $5 million ($2 million in signing bonuses and $3 million in base salary).

Notably, this compensation is an estimate and does not account for endorsement deals, money he makes from his small business, March and Mill Co, or the amount held in escrow each season. 

Yet based on these rough estimates, our calculations suggest that Marchand’s total compensation would go a lot farther if he were to play for teams in states without an income tax (i.e., Tampa Bay Lightning, Nashville Predators, Vegas Golden Knights, Dallas Stars, Seattle Kraken). 

After regular income taxes, at a rate of 5 percent, and the new surtax, at a rate of 4 percent, in Massachusetts, Brad Marchand took home roughly $2,934,300 in the 2023-2024 season from his $5,000,000 contract compensation. If he played in states like Florida, Texas, or Nevada with no regular income taxes or surtaxes, he'd be taking home an estimated $3,300,000 – a $365,700 difference. 

The same goes for take home pay of other top players, such as Charlie McAvoy and right-winger David Pastrnak. Last season, Pastrnak made $1,085,700 less and McAvoy made $905,700 less than they would have playing for one of the aforementioned no income tax teams under the same contract terms.

The New Surtax Costs More in Bruins' Take Home Pay

Bruins players are even further disadvantaged when it comes to income tax as a result of the new income surtax. Even in states that have a regular income tax like North Carolina, which had a tax rate of 4.5 percent in 2024, players would still take home more than they do after factoring in Massachusetts’ surtax.

For example, if David Pastrnak played for the Carolina Hurricanes, he would have taken home roughly $496,200 more than he did playing for Boston last season. Charlie McAvoy would have taken home $407,450 more in North Carolina, and Marchand would have taken home $138,700 more. North Carolina has income tax, but notably no surtax.

The Surtax Could Repel Talent Away from Mass

Massachusetts hasn’t released the surtax threshold for 2025, since the Bay State adjusts the threshold annually based on IRS inflation data. But we estimate the 2025 threshold will be around $1,083,255, based on federal adjustments to 2025 income tax brackets.

This fall, one of the most talked about contract negotiations across the league was between the Bruins and star goalie Jeremy Swayman. Based on his new contract that starts in tax year 2024, we analyzed Swayman’s take home pay using 2025 tax rates. Here is how the Massachusetts income surtax might affect Jeremy Swayman’s new contract:

Marchand is willing to take a team-friendly contract and accept a lower salary to stay on the Bruins, but many younger players, like Swayman, are willing to demand the money they deem they are worth. 

While retaining young players like Swayman is more difficult in Boston, the issue comes to head when the Bruins look to recruit new talent at the trade deadline ahead of playoffs. Agents like J.P. Barry, managing director of CAA Hockey, claim that high tax rates can lead to some players reconsidering their decision to play for a team and results in tougher negotiations for higher tax-rate franchises.

Conclusion

People say that the Stanley Cup is the hardest trophy to win in professional sports. Since the Boston Bruins’ last Stanley Cup was over a decade ago, fans are itching for another championship. It looks like we might have to wait if Massachusetts income taxes remain at their high rate.

The professional sports industry is near and dear to many Massachusetts citizens, but it is not the only industry that is hurting under Massachusetts’ harsh tax policy. Massachusetts’ surtax and high cost of living has resulted in a surge in outmigration, meaning countless industries are losing top performers as more people choose to move out of state.

If Massachusetts wants to remain a Commonwealth of Champions, we need to incentivize the best talent – in sports and beyond – to grow their careers here.