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Free-agent player sources for future Raptors

By Brian Boake

Mar 19, 2015; Toronto, Ontario, CAN; The logos of the four franchises, the Marlies and the Maple Leafs and the Raptors and the FC, owned and managed by MLSE on the Air Canada Centre before the Toronto Maple Leafs game against the San Jose Sharks at Air Canada Centre. Mandatory Credit: Tom Szczerbowski-USA TODAY Sports
Mar 19, 2015; Toronto, Ontario, CAN; The logos of the four franchises, the Marlies and the Maple Leafs and the Raptors and the FC, owned and managed by MLSE on the Air Canada Centre before the Toronto Maple Leafs game against the San Jose Sharks at Air Canada Centre. Mandatory Credit: Tom Szczerbowski-USA TODAY Sports /
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Playing in Canada for the Raptors creates an additional income tax burden for American players we need to be aware of.

Perhaps I should have taken up this topic prior to free agency, but better late than never.

We always write about money in the context of the Collective Bargaining Agreement (CBA), but seldom in terms of how of their fantastic salaries today’s players actually see in their bank account.

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The fact is that with taxes, professional fees (agent, lawyer, etc.), escrow account and other clawbacks, DeMar DeRozan will see less than 50% of his stipend. Obviously we shouldn’t feel sorry for him, but we should be aware there is a problem unique to Toronto’s NBA team.

Jul 28, 2016; Chicago, IL, USA; USA guard DeMar DeRozan (9) during practice at the United Center. Mandatory Credit: David Banks-USA TODAY Sports
Jul 28, 2016; Chicago, IL, USA; USA guard DeMar DeRozan (9) during practice at the United Center. Mandatory Credit: David Banks-USA TODAY Sports /

A working person must pay federal taxes to the country in which he earns his income. In the case of DeRozan, he works for MLSE, a Canadian company with the vast majority of its revenue being earned in Canada. Ergo, DeMar should pay Canadian income taxes, and he does. However, because the U.S. is the only jurisdiction which compels its citizens to pay income tax regardless of place of residence, DeMar and every other U.S. citizen on the Raptors has an additional tax burden.

Some Americans who live abroad are resorting to the extreme step of renouncing their citizenship in order to get out from under the thumb of the IRS (Internal Revenue Service, the Americans’ tax-collectors). The article I’ve linked to quotes a lawyer who suggests Toronto may be the renunciation capital of the world – a peculiar distinction if true. There are tens of thousands of Americans who call Toronto home, so the “renunciation capital” idea is not outlandish.

Let’s consider the passports of Raptors players.

Americans: DeRozan, K. Lowry, T. Ross, D. Carroll, P. Patterson, D. Wright, J. Sullinger, N. Powell

non-Americans: J. Valanciunas, J. Poeltl, P. Siakam, C. Joseph, B. Caboclo, L. Nogueira

In every case, the American player has a larger tax bite than his non-American teammate. That puts Masai Ujiri’s record of bringing back every free agent (Lowry, Patterson, DeRozan – Americans all) even more impressive.

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The Raptors need to give serious consideration to becoming as international a team as possible. In a close decision between two teams, a player’s agent is duty-bound to point out that his player will keep more money by staying with a U.S. team than having to pony up Canadian taxes (a situation which is blamed on Canada, to my endless fury, although our government has played footsie with the IRS).

I’m not arguing in favour of limiting free-agent pitches to non-Americans; that’s absurd. But watch for Toronto to be even more welcoming in the future to the Spaniards, Congolese, Cameroonians, Canadians(!) and Frenchmen who are increasingly populating the NBA.

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