# combined luxury tax/cap system

Discussion in 'The Business of Hockey' started by regehr, Jan 15, 2005.

Not open for further replies.
1. ### regehrRegistered User

Joined:
Feb 28, 2002
Messages:
747
0
Trophy Points:
109
Location:
Mars
A combined luxury tax/cap system: use linkage/cost-certainty to determine 'soft' and 'hard' floors and ceilings for team payrolls. No set % of overall revenues dedicated to players.

Here's how it works:
1) Soft floor at 50% of revenues. Soft ceiling at 60% of revenues.
2) Hard floor at 45% of revenues. Hard ceiling at 65% of revenues.
3) Teams spending > their 1/30th share of 60% pay 150% luxury tax on overage amount.
4) Teams spending < their 1/30th share of 50% do not collect a share of the luxury taxes.
5) Teams spending between 50%-60% share luxury taxes equally.
6) Teams cannot spend more than their 1/30th share of 65% hard ceiling.
7) Teams cannot spend less than their 1/30th share of 45% hard floor.

Using projected revenues of \$2.032 billion, these means:
1) Soft floor at \$33.9 million. Soft ceiling at \$40.7 million.
2) Hard floor at \$30.5 million. Hard ceiling at \$44.0 million.
3) Teams spending between \$40.7 and \$44.0 pay luxury tax (max tax per team = \$5.0m)
4) Teams spendiing between \$30.5 and \$33.9 don't share luxury tax.
5) Teams spending between \$33.9-\$40.7 share luxury taxes.
6) Maximum payroll difference is 1/3: \$30.5m (min); \$44.0m (max).

Basic probability suggests the following outcome:
1) Max. player share is 65%, but only if every team has a payroll of \$44.0m (highly unlikely)
2) Min. player share is 45%, but only if every team has a payroll of \$30.5m (highly unlikely)
3) 95% probability that player share will be between 48.3% and 61.7% of revenues.
4) 90% probability that player share will be between 50% and 60%.
5) 68% probability that player share will be between 51.7% and 58.3% (most likely scenario).

Thoughts?

Last edited: Jan 15, 2005
2. ### nyr7andcountingRegistered User

Joined:
Feb 24, 2004
Messages:
1,919
0
Trophy Points:
0
I certainly think it could work. I myself have talked about the same kind of system, with a floor, a soft cap or luxury tax threshold and a hard cap beyond that. You pretty much have the same thing here but layed it out a little different. A system like this puts the overall price level at the right spot and guarantees it will stay there, but at the same time allows teams space to move. There needs to be a difference between the top spenders and the bottom spenders because for the sake of rebuilding or going for the cup teams can't all be placed at the same payroll.

I think this is the best bet for both sides. The PA has to realize revenue-salary link is certain and the NHL has to realize that a hard cap is not the best nor the only system that could work. If that ever happens this is the deal we are going to see put in because it works best for both sides.

3. ### Go Flames Go*Guest

What the points the players will never accept this deal. It does look like a good one though.

Bob Goodenow can be credited to ruining Canada's game. What a idiot.

4. ### Slapshot17Registered User

Joined:
Aug 29, 2004
Messages:
2,055
0
Trophy Points:
0
Location:
Prince George
I disagree. Gary Bettman will be remembered as the man who ruined the NHL.

Then again. Both probably will be.

5. ### LeadzedderRegistered User

Joined:
Jan 2, 2005
Messages:
783
41
Trophy Points:
81
Looks like a good plan. Regardless of the outcome both Bettman and Goodenow should be replaced when this is done. This lack of progress is ridiculous. Ideally they do a deal like this and then after we get our hockey back, the NHL needs to 1. can Bettman 2. grow revenues (if revenues go up then everyone is happy) and 3. improve the product.

6. ### Motown BeatdownNeed a slump buster

Joined:
Mar 5, 2002
Messages:
8,572
0
Trophy Points:
0
Location:
Indianapolis