New York Rangers lose major free agency advantage under new NHL CBA

The NHL and NHLPA have ratified a four-year Collective Bargaining Agreement, and although the continuation of labor peace is great overall for the sport, one new change is something that New York Rangers fans won't be happy with.

Under the existing CBA there are no limits on how much a player can earn via signing bonuses over the life of their contract, and there are many existing deals in which a player earns the minimum salary or just over it during the regular season and is paid a lump sum on July 1 at the beginning of each new league year. Once the new CBA goes into effect, that will no longer be the case, and the Rangers will lose a major advantage they have previously used to land top free agents.

The new CBA goes into effect for the 2026-27 season, and at that point signing bonuses are capped at 60 percent of a player's full salary. Essentially what that means is if a player's compensation for a season is $10 million, $6 million can be a July signing bonus, and the remaining $4 million would be in base salary.

The current signing bonus setup was one of the advantages the Rangers could use to compete against a team that plays in an income tax free state like the Florida Panthers, Tampa Bay Lightning, and Vegas Golden Knights, and will be no more in just under a year's time. Not many teams are as rich as the Rangers and willing to commit that type of money upfront, and it was an advantage they have used to both sign new talent and retain their own. While the 60 percent threshold is something that will be universal across the board and the Rangers will still be able to offer the max allowed, it won't be the same as the unlimited pool they currently wield.

For example, Artemi Panarin signed a seven-year deal worth $81.5 million in July of 2019. He earned $13 million as soon as he signed the contract, and he took home another $1 million throughout the course of his first season. For each remaining year he earned $1 million in base salary, and the rest was in July 1 signing bonuses. In total, he took home $74.5 million in signing bonuses and $7 million in base salary.

Igor Shesterkin's new extension kicked in on July 1st and he received $15,050,000 in a signing bonus. He will earn $775,000 for the rest of the regular season. Throughout the life of his contract he will earn $85 million in signing bonuses and just $7 million in base salary.

Vladislav Gavrikov was the Rangers' top free agent target this summer and this season he's earning $9 million in total salary of which $8 million was a signing bonus. His contract was for $49 million over seven years, and $35.2 million of it is in signing bonuses.

The Rangers also have Mika Zibanejad under a contract that is signing bonus heavy, and that gives the team the 3rd, 4th, and 11th largest contracts in terms of signing bonuses in the entire league. In terms of number of contracts, the Panthers have nine contracts with signing bonuses, Tampa Bay and Vegas have eight, and both the Rangers and Capitals have seven. Other notable active players with signing bonus heavy deals include Leon Draisaitl, Nathan MacKinnon, William Nylander, Matthew Tkachuk, Sam Reinhart, and Mitch Marner.

You might be asking yourself, "OK, but won't teams like the Rangers still have the ability to offer the same big contracts, just have them paid out a little differently?" Yes, if a team wants to sign a hot shot free agent to a six-year deal that pays them $15 million a season, they still will be able to do that. However, the structure in how they are paid going forward changes, and does so in a way that takes away an advantage the Rangers were using.

Signing bonus heavy contracts offer the security of being buyout proof, as bonuses are still paid out each year even if the team cuts ties with a player. It also was a way for players to make more money upfront as getting a large lump sum each July would yield significantly more money if invested than a player who was paid in equal shares throughout the course of a season.

Right now a player earning $15 million per season to play for the Golden Knights would pay $5,507,020 in taxes. If that deal were made with the Rangers, that player would pay $7,568,224 in taxes. That's a difference of $2,061,204 per year, and if extrapolated over the length of the contract equates to $12,367,224 which represents almost forfeiting one entire year's worth of salary earned during the life of the contract.

Under the current structure, a player for the Rangers is still paying their taxes, but receiving a significant amount of money upfront and subsequently investing it with a money manager who specializes in working with high net worth individuals would allow their money to grow at a rate that essentially negates what they are losing by not playing in an income tax free state. Players from teams in income tax free states are still subject to the "jock tax", but the current structure offered a way for teams like the Rangers to offer deals that could compete with teams from those states.

That said, from an optics perspective it is very interesting that this change comes at a time in which Gary Bettman has been adamant that any perception of income tax free state teams getting a benefit when it comes to signing players is ridiculous.

On one hand he says there's no issue with the current system certain teams use to their benefit, and on the other he's making a change to close an unofficial loophole certain teams use to their benefit. Which one is it Mr. Commissioner?

Ultimately there's nothing the Rangers can do, and they will still have a good chance of landing free agents by using the new maximum threshold. But if they want to be able to leverage the current system to the absolute max before the changes go into effect... Chris Drury should start thinking about what it would cost to trade for Connor McDavid if it looks like he isn't signing long term with the Edmonton Oilers.