No need for a cap if NHLPA accepts three things.

Discussion in 'The Business of Hockey' started by Peter, Feb 3, 2005.

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  1. Peter

    Peter Registered User

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    Three of the factors for increased salaries have all been eliminated in this latest NHL proposal.

    1) Salary arbitration has its teeth kicked in and made, IMO, fairer to both sides.

    2) No more hold-outs. The "hold out" or "holding of breath" as I like to call it was one of the major reasons salaries have sky-rocketed. It is easy for the agents and players to say: "well you didn't have to pay me all that money" but that is baloney. The owners and GM's would be creamed in their local town if they were not able to keep their star players - it always is a PR nightmare for teams who let their star players go to other teams.

    3) Nice hard cap on entry level salaries.

    IMO, with these three things in place there is no need for a cap or a luxury cap. If I were the NHLPA I would agree to these three points, toss in the 24% roll backs and we have a deal.
     
  2. mudcrutch79

    mudcrutch79 Registered User

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    I agree with the essence of what you're saying Peter-there is a way to resolve this situation without imposing a hard cap. You can create an environment where every owner can make money, without removing the need for him to make his own decisions, and behave in a responsible manner.

    This is where I thought this was going originally-the NHL would get the players so riled up in opposition to the cap that they'd look at anything else as a victory. It makes sense given the lack of feasibility associated with the impasse route. It makes sense given that the intricacies of a cap could not be sorted out in time for a season at this point. Apparently Bettman and Daly are determined not to pursue this though.

    What can I say, they're crazy.
     
  3. wazee

    wazee Registered User

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    Whereas all three of the things you propose will help curb the automatic escalation of salaries, I see nothing that prevent the big market teams from carrying payrolls double or triple that of the small market teams. One of the main reasons I favor a cap is that it levels the playing field. Your proposals are bandaids. The NHL has severed limbs.
     
    Last edited: Feb 3, 2005
  4. speeds

    speeds Registered User

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    if the implemented a tiered luxury tax they could set the tiers at certain league wise percentages of revenue, divided by 30 teams. Maybe out of that the NHL could claim there is linkage, and the players could claim no linkage(althogh there would be a hard cap, it wouldn't be at a point particularly low.)

    Set the tiers at points so as to make the tax onerous, to prevent the massive payroll disparities we currently have, with perhaps a hard cap at something exorbitant like 100% of one team's share of the league wide revenues.

    ie. if the league's 2 billion in revenue is used as the benchmark, that would mean each team's 100% share would be something like 66.7 mil.

    So set the LT floor at 40% (26.6 mil), the first LT payment tier starts at 58% (38.7 mil) with a 60% tax rate on each dollar spent until the next tier begins at 63% (42 mil). At that point the LT switches to 100%, until the next tier at 70%, where the LT switches to 200% until the hard cap at 100% of each team's share of league wide revenues (66.7 mil)

    So you've essentially created the following LT scenario:

    No luxury tax until 38.7 mil
    38.7 mil - 42 mil = 60%
    42 mil - 46.7 mil = 100%
    46.7 mil - 66.7 nmil = 200%


    BUT, if league revenues increase, then so will the tax thresholds (in terms of actual dollars, the percentages don't change). And if the revenues decrease, the tax thresholds, in terms of actual dollars, would go down as well.

    Under the above scenario, a team MUST spend 26.6 mil to qualify for revenue sharing generated from the tax, which team's VOLUNTARILY contribute if it's in their best interests by exceeding the cap. All teams below the first level of taxation receive equal shares of the pie, provided they reach the tax floor AND meet whatever qualifications there are (if any).

    LT money goes to the teams who spent up to at least the floor, and meet other certain conditions (if necessary for whatever reason, froma league or player standpoint)

    Of course the percentages would be up for negotiation, but this way the owners can say they have their linkage, and the players can claim little in the way of a hard cap (since it's set so high anyways)
     
    Last edited: Feb 3, 2005
  5. CarlRacki

    CarlRacki Registered User

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    There's a lot to like about your suggestion except the item above. Giving luxury tax money from one team to another, kind of a forced distribution of wealth, is inherently inflationary. It adds dollars to the labor pool that otherwise would not exist. Since we're not adding jobs to the labor pool, that money will only serve to escalate salaries.

    Now, some might say those teams receiving tax money don't necessarily have to spend it on players. While that's true, I can't imagine fans of teams like Edmonton and Carolina will be thrilled to see Cal Nichols and Peter Karmanos pocketing luxury tax money.

    Perhaps a fairer distribution of the luxury tax money would be to place some of it in a player pension fund, some in a league marketing fund and some in an NHL Charities fund. Just a thought.
     
  6. speeds

    speeds Registered User

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    My take on it would be that it's voluntary revenue sharing. The teams can do whatever they want with it. Some might put it back into players, some might not.

    But your point is well taken, they can negotiate whatever they want to do with that money. If what you say is true, then the union won't mind that it goes back to the teams because they'll see a good chunk of that money anyways. The big payroll teams won't care because it was worth it for them to pay the tax, or they wouldn't have. And to the teams with payroll below the first tax level, it's free money to either help them compete with the bigger payroll team in acquiring players, or to help them through troubled times in the bank statements.

    win/win/win
     
  7. John Flyers Fan

    John Flyers Fan Registered User

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    I'd love to see luxury tax money split the following ways:

    50% would go to National marketing of the NHL and the game of hockey

    50% would go to the 10 lowest revenue generating teams provided that they met the following criteria:

    Spent $30 million on payroll
    Drew an average of 15,000 fans
    Were not among one of the 10 biggest TV markets (excluded, Flyers, Rangers, Isles, Devils, Bruins, Leafs, Blackhawks, Kings, Ducks, Red Wings, Montreal, Phoenix and Dallas)
     
  8. mudcrutch79

    mudcrutch79 Registered User

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    Nope. It redistributes team spending. If there's (for example) a 100% luxury tax on spending over $50 MM, a team that's willing to spend $60MM would actually only buy $55MM worth of players. They'd have to account for the dollars that they're paying in luxury tax by reducing what they actually spend on players.

    The reason that Bettman is so opposed to this is that there's nothing in it for the large market teams. Consider Toronto, if there was a luxury tax like I proposed. Economically speaking, it still makes sense for them to have a (example) $70MM US payroll. The only problem is, now, that only gets them $60MM US worth of players. The rest of the money is redistributed to other clubs, which may well mean that there $60MM US that they actually spend on players gets them even less than it would today. To make it worse for them, these dollars go to less well off clubs, allowing them to better compete for players which means their budget probably buys them less than it otherwise would.

    The big teams, for them, it's hard cap with limited revenue sharing, or nothing. A luxury tax makes no sense for them.
     
  9. speeds

    speeds Registered User

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    It makes less sense, but it basically would work the same for the big market teams as now, except they get less for the money they spend. They still hold an advantage in terms of what they can afford to (and freely choose to) spend, but as you point out they get less for their money than they did before. Still better off than being a team that can only spend 28 mil though.
     
  10. CarlRacki

    CarlRacki Registered User

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    That may be true, but it makes a lot of assumptions. You're assuming, for example, that the Leafs (or other large-market clubs) are only willing to have the payroll they have now. Take your example with the Leafs and the hypothetical $70 million payroll. You're assuming they're unwilling to go over that amount, thus limiting them to spending no more than $60 million on players. But given that they'd still make money hand-over-fist with a $70 million payroll, why do you think they'd cut back on player salaries to $60 million? Why wouldn't they simply pay a larger tax? The money the Leafs would generate from a appearance in the Finals would be well worth it economically. Ditto for Detroit, New York, Philly, etc.

    Your thinking is the same that went into the MLB tax, that even the big-market clubs would have a ceiling and the tax would now be figured into that amount. It hasn't happened that way.
     
  11. speeds

    speeds Registered User

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    where is the 200% luxury tax, or even 100% luxury tax, in the MLB?
     
  12. Double-Shift Lasse

    Double-Shift Lasse Just post better

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    Redistributing revenue allows for additional total money in the salary pool, but doesn't guarantee it will go to unreasonably inflate salaries. Teams that receive revenue sharing $$ are subject to the same taxation levels. Think they're gonna overspend so suddenly they're paying in instead of getting out? This is what I like about mudcrutch's proposal.

    Hard cap and limited revenue sharing benefits large revenue teams. They get to pocket more dough without having to defend their low-end spending to fans who expect a winner.
     
  13. Motown Beatdown

    Motown Beatdown Need a slump buster

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    I dont know Carl. I'd assume if Mike Ilitch lost 17 million dollars with a 77 million dollar payroll he wouldn't want to increase that money loss with a tuge tax penalty. Take even dollar for dollar penalty over 45 million dollars (just an example) He'd owe 32 million in tax penalty. So in reality he would have lost 49 million dollars in one year of business. I can tell you, he wouldn't put himself in that type of situation. Sure i'd bet he's go over a luxury tqax, but a harsh tax would curb his spending and some other teams.
     
  14. mudcrutch79

    mudcrutch79 Registered User

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    Not if the dollars are going to pour in the door anyway. Can you imagine what Toronto, Philly and Detroit will make with a $28MM US payroll? It'd be nuts. Ticket prices aren't going down in any of those cities.
     
  15. CarlRacki

    CarlRacki Registered User

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    It's not quite that simple. A team receiving tax dollars doesn't have to overspend for it to inflate the labor pool. They just have to spend. As much as it may act as a salary deflator for the higher-spending teams, it acts as a salary inflator for the lower-spending teams.

    And, realistically, the tax revenue generated is never going to be enough for a small-revenue team to boost their payroll so much that they're now approaching tax status.
     
  16. CarlRacki

    CarlRacki Registered User

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    Regardless of the numbers, the principle and economic theory is the same. Adding money to the labor pool without adding jobs is inflationary.

    The only way that doesn't happen is if the bigger spending teams start cutting salary as a result of the luxury tax. While that's possible, it's far from a sure thing. And, right or wrong, that's what the owners are demanding.

    Just so we're clear, I have no problem with a luxury tax system. But if the owners are looking for cost certainty, it's not going to provide them with it.
     
  17. mudcrutch79

    mudcrutch79 Registered User

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    The math works the same no matter what payroll the Leafs are willing to have. While I agree that they'd make a big pile of money off a Cup winner or finalist, the problem with that strategy is that you can't guarantee you'll get there, even with an $80MM US payroll. TOR and PHI have had huge payrolls for a long time-when's the last time they made the Finals? 1967 and 1997 respectively. If the risk is that great, you aren't going to be willing to take the chance of a massive loss because you got a bad bounce. I assume that the Leafs aren't willing to spend more than $XX because they aren't doing it now-if they're operating rationally, they're taking as much risk as they feel is prudent right now. Adding $10 MM in luxury tax would skew the equation.

    I think that only three teams have broken the MLB cap so far, and it looks like only two teams will next year. How do you know it hasn't worked? The Yankees are a revenue machine; imagine what their payroll would be without the tax. They've acknowledged that the tax cost them a shot at Beltran this winter-they're tapped out.
     
  18. mudcrutch79

    mudcrutch79 Registered User

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    As OJ could tell you, repeating something doesn't make it true. I've explained what's wrong with your theory, economically speaking. You're choosing to ignore it.
     
  19. HckyFght*

    HckyFght* Guest

    Perhaps if you raise UFA to 35...
     
  20. CarlRacki

    CarlRacki Registered User

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    And I've explained what's wrong with your theory, which is based on a host of assumptions that may or may not be true. Taking shots at a poster with whom you disagree doesn't make your argument any better.
     
  21. Peter

    Peter Registered User

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    Not sure I agree with your line of reasoning.

    If rookies are capped....if there are no more hold-outs...if teams can walk away from arbitration awards...why would this be a problem for owners??

    I understand your level playing field concept but really that is not the players problem. That is something the owners need to fix within their own system. The owners need to agree to split revenue to solve that problem. Don't put it on the backs of the players.

    That said, the players must agree with at least the above three items in order to get salaries fixed...not just a 24% roll back...that would just be the start.

    The problem with the owners is that the rich owners do not want to share their wealth with the smaller market teams...again...this is not the player's fault - it's a leauge issue that Bettman must address.
     
  22. LGSens

    LGSens Guest

    bottom line the owners want to take out comparibles. and putting in a hard cap pretty much does that. so if the rangers or leafs overpay to get a free agent or one of their own back into the lineup it won't force the oilers or florida to overpay their players. which escalates salaries. which is why they are in the spot they are in today.
     
  23. MasterD

    MasterD Registered User

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    I really don,t like that. Clubs with big TV contracts got them because they spend A LOT in marketing. Montreal does not have such a huge fan base for nothing: they have it because of their rich history, and because of their marketing. Everyone in town knows them, everyone hears about them all the time, that,S how they got and maintain their popularity.

    Now if a team, let's say nashville, does not want to invest in marketing, they won't be as known and as popular, and wont get a big TV contract. Does that make them a better target for money giving? I don't think so. You manage your environment to help out your club,s popularity, you should not be penalised for it.
     
  24. speeds

    speeds Registered User

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    So you think that if DET has to pay a 200% tax on the payroll from 50 to 70 mil, they'll remain a team spending 70 mil on player payroll, plus the luxury tax.

    They'll go from spending 70 mil (with no LT) to spending 110 mil, and they won't even stop and think "Hey, maybe this doesn't make sense?"
     
  25. mudcrutch79

    mudcrutch79 Registered User

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    Clearly, Racki has decided that the laws of economics don't apply here.
     
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