The Toronto Raptors will start the 2020-21 NBA season playing home games more than 1,300 miles from Scotiabank Arena. The team’s president, Masai Ujiri, announced in a statement on Friday that the franchise will begin the season by playing in Tampa, Fla., at Amalie Arena, which has hosted NCAA basketball games and is home to the NHL’s Tampa Bay Lightning.
The Raptors aren’t the first Canadian pro team to relocate to the U.S. on account of the coronavirus pandemic and its impact on public health and immigration regulations. This past season, the Toronto Blue Jays played their home games at Sahlen Field in Buffalo.
The Raptors’ decision reflects ongoing requirements imposed by the Canadian government to curb the spread of COVID-19. Under Canadian law, those entering the country must provide a quarantine plan that shows how they’ll quarantine for 14 days. They are then legally obligated to adhere to that plan.
The quarantine requirement would make it impossible for Raptors players and coaches to travel to and from the United States in a manner in which they could play an NBA schedule. NBA games are spaced within a few days; multiple 14-day breaks wouldn’t comport. The quarantine requirement would also prevent players (and coaches) from other NBA teams from playing games in Toronto.
It’s unclear how long the Raptors will call Tampa home, but it will come with financial benefit to American franchise employees who are relocated. This is especially true of the American players. When they play their schedule in Toronto, Raptors players are subject to a combined federal and provincial income tax rate of 53.53%—substantially higher than any combined rate in the U.S.
The impact of this rate is mollified to some degree by U.S. tax law. Specifically, American players receive a “foreign tax credit” in the U.S. for a portion of taxes paid to Canada. The portion is limited, however, to the top U.S. federal income tax rate, 37%.
In Florida the players will be subject to the 37% federal income tax rate. They will avoid state income taxes from Florida, which is one of nine states without an income tax on wages. The players will still be subject to any state income taxes from the states in which they reside. Also, whether Raptors players play in Toronto or Tampa, they would be subject to “jock taxes” on most road games.
The Canadian and Ontario government will lose out on tax revenue by virtue of the Raptors’ time abroad. In 2019-20, the team’s player payroll was $123.1 million. Much of that amount would not be taxable to Canada, including portions attributable to games played in the U.S. Various credits and deductions could also apply. Still, a substantial amount of revenue will be lost to Canada as the Raptors play in Tampa.
