Charities and sports teams wary of effects from new Ontario tax

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Ontario's plan to tax the rich is aimed at cutting the provincial deficit, but worries about a drop in charitable donations and headaches for professional sports teams are among the move's unintended consequences.

The minority Liberal government plans to increase the top tax bracket by two percentage points for all income above $500,000. The move, which is supposed to be temporary, came in a deal struck with the NDP to pass the provincial budget and avoid an election. The government says the measure will raise $470-million annually, but some say there will be a cost.

Charities in particular could see donations drop since many rely on gifts from wealthy donors, said Bill Holland, executive chairman of CI Financial Corp. The tax changes are "just such a direct assault on the people [charities]are trying to get money from that they will just say 'You know what? I'll go to another province, I'll go to another country,' " Mr. Holland said. "The more you make it unattractive for wealthy Ontarians, the worse it is for charities." Mr. Holland has donated more than $40-million to Toronto-area hospitals but he said the new tax will make him think twice.

Businessman Seymour Schulich, who has made several large donations including $100-million for university scholarships, said the measure is already having an impact. "The fundraisers are scared to death," he said in an e-mail. "I have heard from two so far." However, Mr. Schulich added that the new tax won't affect his giving.

But not everyone is as worried. Many people in the charity sector say large donations are rarely driven by tax issues. They also point out that the tax credit for charitable donations is increasing as well because it is tied to tax rates. And, while the new surtax only applies to income over $500,000, the higher tax credit will give the rich a larger tax break on all donations above $200.

"I fundamentally believe that donors at high income levels give because they believe in a cause," said Ted Garrard, chief executive officer of Toronto's SickKids Foundation. The new measure "also creates an incentive to donate – the more you give, the less tax you will have to pay."

Toronto businessman Jim Fleck, a major donor to various arts organizations, said he hasn't heard much concern from wealthy donors. "I've heard disappointment [from wealthy donors]more than an outcry and certainly not as it affects giving," he said.

Professional sports teams are a different matter.

One of the NHL's most prominent player agents said the new tax will be a factor when players are considering whether to sign with the Toronto Maple Leafs or the Ottawa Senators. Anton Thun of Toronto, the co-managing director of MFive Sports, which represents 38 NHL players, thinks the issue could be a significant factor since players could have a choice of playing in a U.S. state like Florida, which has no state income tax. "That difference on your income could be as much as 10 per cent," Mr. Thun said, although he added that income taxes in states like California and New York can be higher than Ontario. Mr. Thun noted that the handful of superstars in the NHL can earn as much as $10-million a year, which means the new tax would add about $300,000 to their tax bill.

Paul Beeston, the Blue Jays' CEO, said the new surtax is a new worry that he doesn't need. "I will say this about taxes, you have to look jurisdiction to jurisdiction," said Mr. Beeston, who is a chartered accountant. "If you go to a state without a tax, that's one thing. If you're in Ontario, it's another thing. If you're in New York City, you have a state tax, a federal tax and you also have a city tax. Same as Detroit and places like Milwaukee. So you have to compare apples to apples."

Don Meehan, whose Newport Sports Management Inc. represents more than 100 NHL players, said he didn't see the new tax as a major concern. He said free-agent players consider many factors aside from money before deciding where to play, including the success of the team and how their families will like the city.