Nikita Kucherov Signed An Extension With The Lightning

The big news in the hockey world today (so far) is Nikita Kucherov's extension with the Tampa Bay Lightning. Homeboy got PAID:

KUUUUUUUUUCH!!!

We have signed Nikita Kucherov to an eight-year contract extension worth an average of $9.5 million.

📝: https://t.co/mteggHnm8D pic.twitter.com/id4aAFZIWu

— Tampa Bay Lightning (@TBLightning) July 10, 2018

I was curious about the contract specifics, because you know law school and whatnot, so I headed on over to the best website in the world, CapFriendly.  Kucherov's teammate and linemate, Steven Stamkos, famously accepted his contract extension two summers ago with the following construction:

• $1 million per year in annual salary, split between the 180 total days in the league year
• $7.5 million per year in a signing bonus, paid at the start of the season

We'll see if Kucherov opts for a similar structure, and to be honest that will probably be announced before I'm done writing this. 

But why set up a contract like this? I think there are two reasons:

1. Getting a check for $7.5 million (or $8.5 million in Kucherov's case) has to be the greatest fucking feeling in the history of the world. These guys are living their childhood dreams, playing the sport they love every day, and they get to cash a check big enough to give Jose Gaspar a heart attack. 
2. Taxes

Florida, of course, does not have a state income tax. So any money that Kucherov 'earns' in Florida would only be subject to federal taxes. 

Michael McCann broke this down in a similar fashion for recent-free-agent-but-current-Toronto-Maple-Leaf John Tavares here. The short version is Tavares cost himself almost $10 million over the life of his contract by signing in Toronto (Canada/socialist) instead of Florida (no state income tax/no laws). 

But that's really just for the salary component of the contract. There is another piece of the pie that would lead Stamkos (and I'm betting Kucherov too) to see a signing-bonus-heavy contract. Any money that he 'earns' in other states (read: road games) is subject to those states' taxes under what's commonly referred to as the Jock Tax. 

Of the 180-day NHL season, each team plays (checks Google) 41 road games in the regular season and 3 road games in the preseason. For Tampa this season, that breaks down like this (with state/city tax rates):

*Please note that I reached this point and realized that I don't really understand Jock Tax rates. I think it's just a percentage of the player's income that is taxable in that state/city, so we can just plug the rates from my list below in as tax that would have to be paid in addition to his US Federal taxes. Each game day that the player's team has in the 'away' state will be taxed at the following rates:

• Florida (3x) - 0%
• Montreal (2x) - 25.75%
• Ottawa (2x) - 13.16%
• Buffalo (2x) - 8.8%
• Detroit (2x) - 6.65%
• Boston (2x) - 5.1%
• Toronto (2x) - 13.16%
• Philadelphia (2x) - 6.99%
• NY Rangers (2x) - 12.7%
• Carolina (2x) - 5.49%
• Nashville (2x) - 0.0%
• Minnesota - 9.85%
• Chicago - 4.95%
• Colorado - 4.63%
• Las Vegas - 0.0%
• Arizona - 4.54%
• Pittsburgh - 4.07%
• New Jersey - 8.97%
• Winnipeg - 17.4%
• Vancouver - 14.7%
• Calgary - 15%
• Edmonton - 15%
• Anaheim - 13.3%
• Los Angeles - 13.3%
• San Jose - 13.3% 
• NY Islanders - 12.7%
• Columbus - 7.63%
• Washington - 8.85%
• St. Louis - 7.0%

Now, if you multiply those tax rates by 1/180th of Kucherov's two potential 'salary numbers' ($1 million, or $5,556 per league day, and $8.5 million, or $47,222 per league day), here's what you get. 

• $1m salary: additional $20,599 (2.1%) paid in jock taxes
• $8.5m salary: additional $175,095 (2.1%) paid in jock taxes

As it turns out, it's really just a drop in the bucket either way. Obviously, to the average person, that difference of $150k would be a lot, but when your yearly earnings are almost $10 million who the hell cares. That's like me paying an extra (pulls out calculator) thousand bucks a year. Would I prefer to have that money in my pocket? Obviously. Am I going to starve to death without it? Maybe but I'll probably live. 

This exercise proved to be mostly futile, except I now have state/local tax rates for every NHL team. It really sheds a light on how much the variation in tax rates across the continent benefit teams who play their home games (and practices, and everything else) in tax havens. Yeah, Kucherov is going to get dinged for almost half a day's pay for his two trips to Montreal. But he's also not going to get dinged at all for like a hundred and forty days of the season. Jock Tax - not actually that big of a deal. It's much better to play your home games in a tax-free zone, and maybe that's why the Lightning are able to keep their talent all locked up together. 

Well, because it's the NHL and nothing really makes sense, the Florida Panthers play three hours away from Tampa with the same tax laws and their organization is a god damn mess. Eat at Arby's.