Florida Panthers: The real reason Sergei Bobrovsky signed with them

SergeiBobrovsky is going to be cashing in the next seven years with the Florida Panthers. Was there more to his decision than meets the eye?

One of the biggest contracts handed out in this year’s free agency frenzy so far was when unrestricted free agent goaltender Sergei Bobrovsky signed with the Florida Panthers. It is a seven-year deal worth $70 million, one that the Panthers might regret in the future.

What exactly drew Bobrovsky to the sunny shores of South Beach? Well, there may be a few factors that hockey fans would never think of.

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The first and most obvious reason is that the Florida Panthers were in a position where they were desperate for a goaltender. Franchise legend Roberto Luongo retired earlier in the offseason, although he hasn’t been effective for quite some time.

Goaltending was the thing holding the Panthers back from making the playoffs. With plenty of cap space, the Panthers were bound to overpay for Bobrovsky’s services. Let’s be honest, he doesn’t mind that part.

Once the contract is signed and checks start to be cut by the Panthers accounting department another factor comes into play – taxes. That’s something NHL fans almost never take into consideration.

Imagine that you are a bright-eyed 18-year-old prospect. You’re waiting to hear their name called on draft day. You’re about to realize your lifelong dream of playing in the NHL. The last thing you’re thinking about is the income tax rate for a bunch of cities. Seasoned NHL veterans and their financial advisers think differently.

Florida is one of the few states that has no state-wide income tax rate. While we’re not going to fool around with numbers, that means that Bobrovsky will end up taking home more money from his paycheck than former Columbus Blue Jackets teammate Artemi Panarin, who signed with the New York Rangers.

When Steven Stamkos signed a contract extension with the Tampa Bay Lightning, also conveniently located in the tax-friendly sunshine states, the Tampa Bay Times reported on how the alleged hometown discount deal ended up with a higher payday (subscription required).

Hockey Graphs excellent article “How Much Do NHL Players Really Make? Part 2: Taxes” is an excellent, in-depth explanation of all things taxation in the world of professional hockey. You don’t need to be a CPA to know that that $10 million Bobrovsky’s getting in Florida is a lot better looking than the $11.6 million Panarin is getting in the Big Apple. Hockey Graphs takes a look at how taxes can help teams with their salary cap, as well.

Some states do not have income tax; those with NHL teams are Texas (Dallas Stars), Florida (Florida Panthers, Tampa Bay Lightning), and Nevada (Vegas Golden Knights). These teams have the most salary cap flexibility as a player receives more of their contract salary as take-home pay; a higher cap hit that is subject to state income tax could be equivalent to an untaxed lower cap hit. Washington state, where the NHL is expanding to 32 teams with a team in Seattle, does not have a state income tax either.

Don’t worry, those Canadian NHL-ers aren’t being left out of the taxpaying fun! Canadian Provinces levy their own taxes, much like state taxes. Players that live in one country that play in another (Canadian players playing for American franchises and vice versa) are subject to a tax treaty between the two nations, avoiding double taxation.

Forbes suggested that John Tavares get creative after signing his deal with the Toronto Maple Leafs and stay as an “American resident” to avoid higher Canadian taxes. Obviously, with Bobrovsky being in Florida, these problems don’t really apply to him.

Another issue at play is the currency difference between the United States and Canada, which might have led to Bobrovsky’s decision to sign with an American based franchise. The devaluation of the Canadian looney versus the American dollar has been a problem for the NHL, and seemingly one of the reasons they passed on sending an expansion franchise to Quebec.

The NHL tries to solve this problem in the form of escrow payments withheld from player paychecks, but that’s a topic of hot discussion within the NHLPA.

While Bobrovsky will still be subject to escrow payments, his salary will be paid in American dollars, and he will be able to live and have purchasing power in his community in American dollars. For him, the problem of currency difference is all but avoided.

Of course, if he travels or lives in his native Russia during the off-season that’s a different story, but when it comes to money, all the advantages of the Florida Panthers are working in Bobrovsky’s favor.

Following Bobrovsky’s example, can we see an exodus of hockey players to tax-friendly states? There’s some evidence to support that. Americans For Tax Reforms did an interesting study in late 2015 and found the following.

54 percent of the 116 Unrestricted Free Agents (UFA) and 60 percent of players with no-trade clauses who changed teams picked teams with lower taxes, saving a combined $4 million this past offseason.

Still, we have to remember that players have no control over where they chose to sign until they hit unrestricted free agency. Most players are locked in and signed to team-friendly deals keeping them in a destination not of their choice.

As players get older and hit restricted free agency, the market for them can also decrease, and they most likely end up signed wherever there’s available offers. Until unrestricted free agency is changed, if ever, to be more player-friendly, this most likely won’t happen.

Bobrovsky is certainly cashing in. Florida may be a tax haven for the superstar goaltender, but for those who love the sport, there’s more than money. If he can’t deliver a Stanley Cup championship to South Florida, will it all be worth it? Guess we have seven years to wait and see.