Luxury Tax, some questions

Discussion in 'The Business of Hockey' started by TehDoak, Dec 8, 2004.

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  1. TehDoak

    TehDoak He sure has a

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    With the new NHLPA proposal coming up with the big change being a signifigant luxury tax, there are some questions:

    #1. Who exactly gets the $.75 on the dollar in the luxury tax system? Is it only distributed to teams who are under the 'soft cap' or to all 30 teams?

    #2. What determines the 'soft cap' year to year? The 40 million seems to come back from the average NHL salary of $44 million with a 10% unilateral roll back.

    #3. WHEN is the luxury tax determined? Is it the total bankroll payed out by that team at the end of the season? For instance, lets say Player X has a bonus that triggers if he scores so many goals. If he scores that many goals, is that figure added to the cap? Also, if player Y with a monster salary is added at the trade deadline, is the salary added to the team taxed? Or is it just the amount the team pays him added to the tax.

    And Some suggestions:

    #1. The cap money should be distributed to every NHL team. Here is why: Lets say a team has a veteran who has been with the team 10 years. They need to resign him, however, his salary would put him over the cap. So, resigning him would: Add 75% on every dollar over the cap AND cause them to miss out the Luxury Tax benefits.

    #2. Instead of doing the average NHL salary of all 30 teams, why not do the average salary of all the playoff teams. This would hurt teams spending but living in medocrity, and help teams who make the playoffs on a shoestring budget.
     
  2. First of all this is not a soft cap, if it is a soft cap it would have special causes for teams to be over the cap. The luxury tax is just a number the NHLPA came up with, it has nothing do with revenues or salaries. Teams that are not taxed are the ones who will receive money., and if all 30 teams get the money equally there is no point to the luxury tax then. A luxury tax will still cause inflation in salaries. I am pretty sure bonuses would be included in the total payroll, otherwise teams like Detroit and New York can still cause inflation in salaries due to easy bonuses for players, and not have to pay tax for it. The NFL includes bonuses and if you cut a player your team takes a cap hit for cuttin him which usally is the bonus money.
     
  3. iagreewithidiots

    iagreewithidiots Registered User

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    Here is all you need to know.

    A luxury tax will do nothing to change the current situation. It is usless and pointless.

    Why do you think people who are dead set against a cap are quick to suggest a luxury tax as an alternative? They know it doesnt change a thing they just want to trick you into thinking it does.
     
  4. Motown Beatdown

    Motown Beatdown Need a slump buster

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    With the new NHLPA proposal coming up with the big change being a signifigant luxury tax, there are some questions:

    That depends on the CBA, you could set it up where all teams get a share or just for teams under the 40 million dollar mark. You could also set it up where teams under 40 million get all the tax revenue from 40-60 million dollar mark. Then the tax revenue from teams over 60 million dollars goes to all teams under 60 million.


    It's not really a soft cap but a tax threshold number. I guess they could base it on revenues in the CBA.


    In MLB teams are sent a bill at the end of the year, based on the end of the year payroll. So if the Yanks add a player at the dead line a proration of his salary is added to the teams salary.
     
  5. SENSible1*

    SENSible1* Guest

    And if the PA was just smart enough to agree to this simple proposition we'd have a deal in a matter of days.

    They won't because they want the owners to take all the risk.
     
  6. tantalum

    tantalum Registered User

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    Which is all the ownres want to start serious discussions on this new CBA. And probably what the NHL will come back with as part of a counter offer including an elevated hard cap also tied to revenues.
     
  7. Motown Beatdown

    Motown Beatdown Need a slump buster

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    I to think the owners will also want to put a hard cap in, somewhere like 50-60 million, luxury tax below that. With the tax starting around 38 million or so. (basically 55% of revenues)

    That way the Owners can say they are tying salaries to revenues and the players say there is a free market system. Neither sides wins nor neither side loses.
     
  8. tantalum

    tantalum Registered User

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    That's exactly what I was thinking. A tax starting at 35-40 mil with a couple of different rates and a hard cap at 50-55 mil. All tied to revenues to provide a mechanism for these numbers to increase and decrease.

    BUt it isn't neither side wins neither side loses...players lose but just not as much as a hard 35 mil cap.
     
  9. Motown Beatdown

    Motown Beatdown Need a slump buster

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    But the owners dont get that specific hard cap they talked about. But i think we all would have known neither side is gonna get exactly what they want.

    Both sides lose, one side loses a little more, but we the fans are the biggest losers
     
  10. tantalum

    tantalum Registered User

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    The opening position of the league was of course a very low hard cap but as you say they knew they weren't going to get it (unless the league disbands and starts up again). The thing the owners have been consistent on is some sort of linkage and Daly has mentioned a soft cap system with that linkage is very much worth discussing. The linkage is the main thing as it provides that mechanism and atleast some safety net. The actual system...soft cap, hard cap, or tax threshold/elevated hard cap is up for negotiation.

    I personally think that we the fans are the biggest winners in this if the owners stick to their guns. Stabilizing the sport is the most important thing IMO. It sucks not having hockey but atleast in town here I can watch some very entertaining Moosehead QMJHL action.
     
  11. MarkZackKarl

    MarkZackKarl Registered User

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    joke

    huh? The owners are depriving us of hockey, they will NOT lower ticket prices (sorry to break it to you) and if they get their way with a hard cap , it will destroy the league, both in prestige and quality. If you still think the NFL is a quality league just cause of their big TV contract, well, no one can save you.

    How does a salary cap do anything but make the owners more profits? How does that stabilize the product? There will still be losing teams no matter what. There will still be teams that cry about losing money.

    There will still be arena problems, still be season ticket drives, and all at the expense of the q uality of the game.
     
  12. GKJ

    GKJ Global Moderator

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    Wow are you misinformed.


    A luxury tax will take the taxes paid by team and distribute them to the teams under the cap. As a rough estimate at least. I'm sure there would be a whole bunch of other reasons.
     
  13. tantalum

    tantalum Registered User

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    I don't care if they lower ticket prices. I care about having the best hockey in the world played, have it to watch a few nights a week but NOT just for this year but for the long term. Something that isn't going to happen under the current system or what the players propose IMO.

    The NFL is very much a quality league but that is neither here nor there in this issue.

    A cap while it may bring some owners more profits it will bring other owners atleast some return on investment and keep teams in the league (note I haven't run across too many owner "supporters" that don't think revenue sharing shouldn't also be overhauled and a major part of the new CBA). It will shrink the financial imbalance currently present in the league. It will force the owners to stop being so damn stupid. And yes that stupidity is a major cause of this and needs to be essentially stopped and the owners have recognized this. And yes it is going to come at a major cost to workforce as it pretty much always does when management has been stupid.

    As far as ticket prices...I can all but guarantee that prices will drop even if it is temporary. It's bound to happen to get fairweather fans back into the buildings. But as well I've never been associated with a company that doesn't figure in costs as part of the price determination. It isn't the sole factor just like simple supply and demand isn't the sole factor....but given salaries would drop and demand will have dropped because of post-lockout backlash it doesn't matter which way you look at it ticket prices will most likely drop.
     
  14. pei fan

    pei fan Registered User

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    DITTO!
     
  15. tantalum

    tantalum Registered User

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    yes but the money still goes to player salaries so the total money devoted to salaries post-luxury tax doesn't change from pre-luxury tax. Equal money in the system means no change in average salaries. It merely reduces some of the financial disparity between teams. but with the current disparity it would have ot be a huge tax rate to shrink it substantially.
     
  16. Motown Beatdown

    Motown Beatdown Need a slump buster

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    I think a 75 cent tax plus a "harsh" penalty (rumor 200 % tax) is a huge tax rate.

    I dont see why people would have a problem with extra revenue going to the smaller market teams. I hear small market clubs saying they cant afford to keep their star players because they dont have the revenue to pay their players. Well **** if the big market teams dont lower their payrolls those teams will be getting extra revenue on a silver platter. Now what happens if those big market teams start trimming their payroll so they dont have top pay a huge tax penalty? Well isn't that what people want? To lower salaries.

    Anyone with basic math skills can figure out how much revenue a luxury tax like which is rumored will bring it. It's not chump change, it could be as much as 10 million dollars per team under a 40 million dollar payroll.
     
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