The Death of the Canadian Pro Hockey Team - Who's to Blame?

During the recent All-Star festivities in Toronto, hockey legend Wayne Gretzky explained the psyche of Canadians who, upon recently hearing that the Canadian government would be distributing financial aid, erupted in a sea of outrage and protest.

"It's pretty simple," Gretzky said. "I mean, the whole country is based on hard-working, nine-to-five parents who do the best they can to provide for their families. A small percentage of the country is people who are making over a million dollars a year. The average person can't understand why people who are making five and six million a year need tax benefits. So it's pretty simple why they rallied against it, and how can you blame them? It's too hard for people to comprehend. If you are making $30,000 or $35,000 a year and working your rear end off, the last thing that I would vote for is giving a guy making $5 million tax benefits." Of course, that's the way it usually has gone in professional sports. Owners say they can't compete on the field of play without new arenas and new revenue streams. They hold up local governments for aforementioned tax breaks and contributions and, failing that, move the team to another market that is willing to fulfill their wishes. Fans, upon seeing this, grow to disdain the owners and their apparent greed.

This is why Canada figures to lose three or four of its franchises to U.S. markets. All of this makes sense until one realizes that the American market is all but tapped out. Where are these teams to go? The hockey market is saturated enough as it is, especially with teams in Minnesota and Columbus starting play next season. But that's an entirely different problem altogether.

The sometimes emotionally warped Canadian media has skewered Gary Bettman, the NHL Commisioner under whose auspices the recent expansionary explosion has taken place. Newspaper columnists have blamed Bettman for not doing more for financially wrecked franchises in Ottawa, Calgary, Edmonton and Vancouver. Bettman was similarly lambasted when the Quebec Nordiques moved to Colorado and the Winnipeg Jets transmogrified into the Phoenix Coyotes.

The problem does not lie in Bettman's inabilities. The problem lies in the average Canadian's failure in paying attention to Economics 101. It's not Bettman's fault the Canadian dollar has been devalued. It's not his fault that the city council of Colorado made it more financially viable to operate a team within its city limits than the Quebec City council did. The Montreal Canadiens pay more in municipal and provincial taxes than all the American teams combined!

Look at the facts. Toronto and Montreal - who are at practically no risk of whipping out the suntan lotion - aside, the four other Canadian franchises pay over $100 million in salaries. Under the axed plan, the government was to give the six teams $13 million for three years. Without regard to the cyclical economical effects and the sociological advantages of a city having a professional sports team, let's look at the raw financial numbers. The highest tax bracket in Canada is 58%. That means that over the next three years (assuming the teams stay put), the Canadian government will be collecting over $150 in taxes from the player's salaries alone! Now, I'm not in SSSB but it seems to me, that a $150 million dollars return on a $36 million dollar investment isn't bad.

But that's not all. Add into the mix the notion that the teams themselves pay an enormous amount of tax. Figure that all other employees (ushers, personnel, etc…) all contribute to the Canadian tax base. Realize that every time a fan buys a jersey in a sporting goods store, he pays, on average, 13% in federal and provincial taxes.

Wayne Gretzky may have become a multi-millionaire through hockey, making more in a year than anyone else in his family pulled down in their lives. But you cannot ignore the facts. Government subsidies may not stop the teams from bolting south but, even if they delayed it for two years, it's an economically beneficial situation for Canadians. As Don Cherry said late last month, "Look for Ottawa to move next and then you'll see Vancouver moving to Seattle."

Don't blame Bettman. Don't blame the greedy players or the even greedier owners. Canadians need only blame themselves and their ignorance in modern economics. Finally, don't complain to me when cash for vital government services can't be found because the tax money once provided by the professional sports teams is now in the hands of the State Comptroller of Washington.