On tax neutrality

via NBA Salary Cap FAQ:

65. Are teams really competing on a level playing field? Since the tax rate is different in the different states and Canada, don’t the teams in a more “tax friendly” state have an advantage over the other teams?

Yes they do. For example, since Florida has no state income tax, an offer from Orlando will offer a higher net income than the same offer from Los Angeles. However, the league added a regulation to help neutralize the tax disadvantage of Canadian teams. All teams are permitted to offer a signing bonus of up to 20% (see question number 64). For U.S. residents in Canada, this bonus is taxed at just 15%. Using this bonus, Canadian teams can nearly achieve tax neutrality.

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