The topic of Johnny Gaudreau has been discussed at length over the past few days. From the Calgary Flames themselves, professional news outlets, fans around the world, every Flames site, podcast, Twitter account, Facebook group, and more, Johnny Gaudreau has simply dominated the headlines.
The dust has yet to fully settle from the news that he chose to sign with the Columbus Blue Jackets instead of re-signing with the Calgary Flames. People are mixed between wanting to move on completely and focusing on the Flames beyond the Gaudreau era, or are still very early in their stages of grief.
No matter where people are along their spectrums, the fact of the matter is that Gaudreau left significant money on the table to be “closer to home.”
Now of course not all of the money in any contract makes it to the player. The biggest factor that subtracts from the total banked amount is obviously taxes. For a national sports league operating out of numerous Canadian provinces and American states, varying tax rates change the total take-home value for players depending on the team they play for.
Beyond taxes, there are other costs that impact a player’s income—escrow being a big one, and other costs like agent fees, insurance, training regimens, nutrition, and more—but for the sake of comparison from picking one team over another, we’ll only look at the tax implications. Escrow is complicated and will uniquely impact the NHL over the coming seasons.
Knowing this, let’s see how Calgary’s offer differed from the contract that Gaudreau ultimately signed from the Columbus Blue Jackets.
Calgary’s final offer for Gaudreau
The Flames reportedly had a final offer giving Gaudreau a massive eight-year, $10.5M AAV contract. A total contract value of $84M would have made him a top-10 paid player in the league. To walk away from that truly does indicate that although money matters, it wasn’t a top priority for Gaudreau.
Here are some rough breakdowns using tax calculators from Gavin Group and CapFriendly for an annual salary of $10.5M playing out of Calgary, Alberta. In the case of CapFriendly, signing bonuses were ignored for simplicity’s sake, especially since those details weren’t clear with Calgary’s contract offer.
Note that different tax calculators have different settings applied, and for NHL players who work out of two countries, tax rates vary in different jurisdictions too. The purpose of looking at various calculators is to get a better sense of the finances involved in Gaudreau’s contract offers.
| Calculator | Effective Tax Rate | Annual Taxes Paid | Annual Net Income | Contract Net Income |
|---|---|---|---|---|
| Gavin Group | 47.67% | $5,005,350 | $5,494,650 | $43,957,200 |
| CapFriendly | 47.75% | $5,014,140 | $5,485,860 | $43,886,880 |
Gaudreau’s contract with Columbus
When Gaudreau signed with Columbus, he took a significant reduction in pay, but just how much was it? Again using the tax calculators, here’s how the seven-year, $9.75M AAV contract works out in Columbus, Ohio.
| Calculator | Effective Tax Rate | Annual Taxes Paid | Annual Net Income | Contract Net Income |
|---|---|---|---|---|
| Gavin Group | 43.91% | $4,281,225 | $5,468,775 | $38,281,425 |
| CapFriendly | 46.38% | $4,522,518 | $5,227,482 | $36,592,374 |
Comparing the contracts
So looking at these calculations, the tax implications are indeed quite significant, and Gaudreau leaves money in the range of millions of dollars on the table by signing with the Blue Jackets.
Gavin Group seems to show Gaudreau having quite comparable net incomes between Calgary and Columbus, with only a $25,875 difference per year. CapFriendly showed a more significant difference of $258,378 per year.
We can assume that Gaudreau will likely find a suitor to sign with when his seven years are up in Columbus, and for a player of his calibre, his would easily be signing anywhere in the $5M–7M range for his 35+ contract. That extra money made in what would be the eighth year from today would definitely make up some of the money left unearned from his current seven-year contract compared to Calgary’s offer.
Again, these comparisons only look at tax implications. In reality, it is a much more deeply complicated financial comparison when factors like escrow and agent fees are included, not to mention cost of living and quality of life differences between Calgary and Columbus. At the end of the day, Gaudreau’s overall take-home value of his salary is for him to know, but the tax breakdown does provide an objective measure to compare.
Player priorities matter
While comparing the overall differences in contracts being a $84M contract from Calgary versus a $68.25M contract in Columbus, the money forgone by Gaudreau looks like a massive financial blunder.
However, when looking at how taxes come into play—and assuming Gaudreau doesn’t retire at the expiration of his new contract and plays for at least one year to make it a true eight year comparison—the difference in money earned in the two paths he could have taken isn’t as drastic.
Furthermore, hockey players become multimillionaires over the course of their relatively short athletic careers, often making more than enough to be very well off if they are financially responsible. On top of that, they also have opportunities for new careers once they hang up their skates.
When it all boils down, the priorities of a player definitely come into play and leaving money on the table during their playing career to satisfy said priorities isn’t all that bad.
The hockey world has discussed at length that Gaudreau’s mistake isn’t necessarily that he chose to go closer to home, but more so how he and his agent Lewis Gross handled the contract negotiation with the Flames. In that case, mistakes were definitely made, but that’s another discussion.
