The Canada athlete tax is very simple: baseball player wages are taxed the same or similar to other people.
However, I believe every MLB player should protect themselves by negotiating what I call the “Canada Tax Clause“.
Yes, even players who have either a long-term contract or a no trade clause should be aware of ways to protect themselves from the unknown.
Thus, because a veteran player was recently traded from a domestic team to a Club in Canada, I think this issue is relevant to your career.
Why you care about the Canada Athlete Tax
I call any tax a baseball player is required to pay in Canada the Canada Athlete Tax.
In my experience, every pro baseball player should care about their taxes. Likely, you understand this reasoning very easily. In case you don’t, compare the Canada Athlete Tax with taxes for players earning the same wage in a state with no income tax.
The name of the game is paying the minimum and keeping the maximum, right?
Consider this tax scenario
Chew on this for a second. Players earning more than $200,000 in wages from the Club in Toronto will likely pay a 33% federal tax. Plus, the player will pay an additional 13.16% tax exclusive to workers in Ontario.
Compare this to a player in Georgia. Yes, a baseball player in Georgia earning more than $200,000 will likely pay a 33% federal tax. Plus, an additional 6.0% tax exclusive to workers in Georgia, US.
Without outlining a bunch of assumptions, this means the baseball player in Canada might end up paying nearly $15,000 more in taxes than the player in Georgia.
Predicting the future for the Canada Athlete Tax
Together, let’s make the tax scenario more complicated. As you know, Major League Baseball and the Major League Players Association are negotiating a new collective bargaining agreement.
Ok, hear me out. What if…baseball gets expanded into Montreal or Vancouver. What if your Club is relocated? The local income tax in Montreal is nearly 25.75%. If this happens, a baseball player in Montreal would likely pay nearly $40,000 more in taxes than a player in Georgia.
Baseball players can prevent a Canada Athlete Tax?
In my opinion, every player should consider adding a clause to their next contract that prevents or reduces their tax risk.
Ideally, the clause would mandate a wage increase to account for a tax imbalance. For example, your “Canada Tax Clause” might look like this:
If Player’s contract is assigned, delegated, transferred, traded or otherwise moved to any Club in Canada or foreign territory, Player’s wages will increase by xy%.
Your no trade clause does not help
Wait, you have a no trade clause? What if you get the chance of a life time and a championship is immanent? Would you waive your no-trade clause?
Unfortunately, waiving a no-trade clause without having the “Canada Tax Clause” already expressed inside your contract does not prevent the tax problems identified above.
For this reason, players with zero intentions of playing for a Club in Canada are encouraged to negotiate the “Canada Tax Clause” into their next contract.
Questions about the Canada Athlete Tax?
Yes, if you are a professional baseball player, please contact me for help.