Lockout solution that pleases both sides.

[SuperUnknown]

I had trouble finding sleep, so I decided to think about a possible lockout solution. After thinking about the different parameters for a while, a very creative solution came to me. If both parties are going to agree, they will have to make compromises. As well, what seems to be preventing a resolution is each party holding onto different philosophical views. The owners want cost certainty and the players don't want a cap. Well, I think there's a way for both parties to get what they want.

How? I think the answer lies in a luxury tax that would assure the owners cost certainty. Possible? Indeed.

Difficulties regarding such a solution:
- The players have to agree to put a link between salaries and revenues.
- The owners have to go for a solution that isn't a hard cap.
I think that's a compromise that both parties could do, and still claim to be the winners. The owners will say they got cost certainty, the players will say they got away from a cap.

But how can a luxury tax assure the owners of a relative cost certainty? To achieve this, we need to create a luxury tax that will adjust to the salaries paid in % of league revenues. The adjusting luxury tax would tend to stop (or encourage) the spendings.

How can this be done?
1- The league and the players will have to agree on a paid salaries % based on revenues as an objective to attain. Using the players last proposal, let's put this at 56% player salaries.
2- The initial tax has to be implemented in a way that would keep the total player salaries close to the initial %. Since the luxury tax will be self adjusting, then the initial luxury tax doesn't have to be ultra precise. Let's use 10% at $40M, 20% at $45M, 30% at $50M+.
3- At the end of the year, independent auditors verify the salaries paid vs the league revenues. At this point, we know the % of salaries paid.
4- Adjust the luxury tax for the following year. For each point of % between the real salaries paid and the agreed % in 1, each level of the luxury tax will increase by 10%. Ie: The auditors find that salaries for the 1st (full) year were 58% of the total revenues. The luxury tax for the next year will be 30% at $40M, 40% at $45M, 50% at $50M+. If the salaries paid were to fall below the objective, the luxury tax level would decrease by the same margin, up to a 0% luxury tax for each level.
5- All the luxury tax revenues are distributed evenly to the teams that didn't pay a luxury tax during the year. The reason for the even distribution of funds is that payroll isn't necessarily based on lack of revenues, and that each team has a different situation. As long as the teams can't afford to pay a luxury tax on their payroll, they could benefit from this tax, which would tend to increase the overall payroll of these teams.

Advantages of this method: There is no cap at all on payroll. It's just that teams having a bigger payroll will have to plan for possible raises in luxury tax they'd have to pay. However, since the luxury tax would increase if the total player salaries went over the objective (or the target), then it should keep the richer teams payroll from being too far from the lower payroll teams. It should help control the salaries while still keeping a degree of freedom over individual team actions.

Feel free to add your comments.

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[Crazy Lunatic]

I had trouble finding sleep, so I decided to think about a possible lockout solution. After thinking about the different parameters for a while, a very creative solution came to me. If both parties are going to agree, they will have to make compromises. As well, what seems to be preventing a resolution is each party holding onto different philosophical views. The owners want cost certainty and the players don't want a cap. Well, I think there's a way for both parties to get what they want.

How? I think the answer lies in a luxury tax that would assure the owners cost certainty. Possible? Indeed.

Difficulties regarding such a solution:
- The players have to agree to put a link between salaries and revenues.
- The owners have to go for a solution that isn't a hard cap.
I think that's a compromise that both parties could do, and still claim to be the winners. The owners will say they got cost certainty, the players will say they got away from a cap.

But how can a luxury tax assure the owners of a relative cost certainty? To achieve this, we need to create a luxury tax that will adjust to the salaries paid in % of league revenues. The adjusting luxury tax would tend to stop (or encourage) the spendings.

How can this be done?
1- The league and the players will have to agree on a paid salaries % based on revenues as an objective to attain. Using the players last proposal, let's put this at 56% player salaries.
2- The initial tax has to be implemented in a way that would keep the total player salaries close to the initial %. Since the luxury tax will be self adjusting, then the initial luxury tax doesn't have to be ultra precise. Let's use 10% at $40M, 20% at $45M, 30% at $50M+.

10% tax at 40 million dollars???????????? 30% at 50 million dollars??????????? Maybe come back with 200% at 30 million and the owners *might* consider it. Those are some real pie in the sky figures, man. The days of the 50 million dollar payroll are over for quite a while in the NHL.

 

[Cloned]

In principle it is a workable compromise (the numbers can be changed to satisfy both sides). However, the PA has to this point steadfastly refused to accept the idea of any link between revenues and salaries. In their minds this would infringe upon the "free-market" concept, and that POV has some merit (economically speaking).

I would imagine that if and/or when they get past that one point that a whole whack of creative solutions could be feasible.

 

[SuperUnknown]

In principle it is a workable compromise (the numbers can be changed to satisfy both sides). However, the PA has to this point steadfastly refused to accept the idea of any link between revenues and salaries. In their minds this would infringe upon the "free-market" concept, and that POV has some merit (economically speaking).

I would imagine that if and/or when they get past that one point that a whole whack of creative solutions could be feasible.

The PA has been against a hard cap all along. Also, it seems that the PA wanted to "guarantee" the savings by going three years with their system and then they would accept a cap if salaries weren't kept to decent levels. This solution has a soft luxury tax to start with. It ain't a hard cap, so they don't lose face accepting it. Also, in principle, the tax will remain soft if the salaries don't go out of whack again, something the players have said they were willing to address. To me, this deal looks fine for them. As to the owners, well they get their cost certainty and the richer franchise get to still be able to spend more than the other teams, which will make them happy. Basically, since it's a simple mechanism that doesn't put hardcoded limits, it leaves room for everyone to find what they're looking for in the proposal.

Also, the "free market" concept doesn't really apply to the NHL. The league as a whole only competes on the ice, not in the financial numbers (otherwise the league would extinguish itself slowly until there was just one team remaining). Also, unions are a deterrent to free market, because they tend to draw the salaries above what is a fair salary in a free market (they make the offer pay more than the optimal point offer-demand on the employment market). It is ludicrous for the union to be talking about the right to "free market" for those two reasons.

 

[MarkZackKarl]

They quote the term " marketplace" far more than "free market".

Also, Crazy Lunatic: Welcome to my ignore list!

 

[SuperUnknown]

10% tax at 40 million dollars???????????? 30% at 50 million dollars??????????? Maybe come back with 200% at 30 million and the owners *might* consider it. Those are some real pie in the sky figures, man. The days of the 50 million dollar payroll are over for quite a while in the NHL.

The numbers I put are just an example. The point would be to find % that would help get to the "target". Over time, it will be able to help control salaries.

With the tax numbers I put, if the salaries paid during the first year are 65% of the total revenues, then the next year the tax becomes 90% at 40M, 100% at 45M and 110% at 50M. At that point, the teams with a higher payroll WILL diminish their payroll, which will bring the % of revenues paid to salaries down closer to the "target". As well, the richer teams will have to be careful not to lock too many players in the long term, unless they are ready to pay extravagant taxes.

 

[txpd]

"Difficulties regarding such a solution:
- The players have to agree to put a link between salaries and revenues.
- The owners have to go for a solution that isn't a hard cap.
I think that's a compromise that both parties could do"

the players say that a link between salaries and revenue is a hard cap. do you mean a link or a sort of a link? or not really a link? or an actual link?

a link is a salary cap. what you have listed there is what one side or the other has to do. its not possible for both of those lines to accure simultaniously.

 

[Biggest Canuck Fan]

I had trouble finding sleep, so I decided to think about a possible lockout solution. After thinking about the different parameters for a while, a very creative solution came to me. If both parties are going to agree, they will have to make compromises. As well, what seems to be preventing a resolution is each party holding onto different philosophical views. The owners want cost certainty and the players don't want a cap. Well, I think there's a way for both parties to get what they want.

How? I think the answer lies in a luxury tax that would assure the owners cost certainty. Possible? Indeed.

Difficulties regarding such a solution:
- The players have to agree to put a link between salaries and revenues.
- The owners have to go for a solution that isn't a hard cap.
I think that's a compromise that both parties could do, and still claim to be the winners. The owners will say they got cost certainty, the players will say they got away from a cap.

But how can a luxury tax assure the owners of a relative cost certainty? To achieve this, we need to create a luxury tax that will adjust to the salaries paid in % of league revenues. The adjusting luxury tax would tend to stop (or encourage) the spendings.

How can this be done?
1- The league and the players will have to agree on a paid salaries % based on revenues as an objective to attain. Using the players last proposal, let's put this at 56% player salaries.
2- The initial tax has to be implemented in a way that would keep the total player salaries close to the initial %. Since the luxury tax will be self adjusting, then the initial luxury tax doesn't have to be ultra precise. Let's use 10% at $40M, 20% at $45M, 30% at $50M+.
3- At the end of the year, independent auditors verify the salaries paid vs the league revenues. At this point, we know the % of salaries paid.
4- Adjust the luxury tax for the following year. For each point of % between the real salaries paid and the agreed % in 1, each level of the luxury tax will increase by 10%. Ie: The auditors find that salaries for the 1st (full) year were 58% of the total revenues. The luxury tax for the next year will be 30% at $40M, 40% at $45M, 50% at $50M+. If the salaries paid were to fall below the objective, the luxury tax level would decrease by the same margin, up to a 0% luxury tax for each level.
5- All the luxury tax revenues are distributed evenly to the teams that didn't pay a luxury tax during the year. The reason for the even distribution of funds is that payroll isn't necessarily based on lack of revenues, and that each team has a different situation. As long as the teams can't afford to pay a luxury tax on their payroll, they could benefit from this tax, which would tend to increase the overall payroll of these teams.

Advantages of this method: There is no cap at all on payroll. It's just that teams having a bigger payroll will have to plan for possible raises in luxury tax they'd have to pay. However, since the luxury tax would increase if the total player salaries went over the objective (or the target), then it should keep the richer teams payroll from being too far from the lower payroll teams. It should help control the salaries while still keeping a degree of freedom over individual team actions.

Feel free to add your comments.

the percentage has to be $1 for $1 after 40 million and $2 after 50 million. This will give the tax a bite and prevent teams like the rangers from totally overspending... but the owners will cause think...

the Rangers, Flyers, Leafs, Blues and Wings all have a 60+ payroll. Their mrkets can sustain this. So they will pay the tax to have great teams just like the Yankees.

 

[txpd]

The numbers I put are just an example. The point would be to find % that would help get to the "target". Over time, it will be able to help control salaries.

With the tax numbers I put, if the salaries paid during the first year are 65% of the total revenues, then the next year the tax becomes 90% at 40M, 100% at 45M and 110% at 50M. At that point, the teams with a higher payroll WILL diminish their payroll, which will bring the % of revenues paid to salaries down closer to the "target". As well, the richer teams will have to be careful not to lock too many players in the long term, unless they are ready to pay extravagant taxes.

That is a pipedream. you are forgetting that Detroit, Toronto, Colorado, Philadelphia, NYR, and Dallas will just pay the tax and keep signing the players.
Particularly after the long lockout. They will need to generate excitement in marketplaces used to big name players being added to the team.

the rich teams will just laugh at the luxury tax and the tax dollars heading to the other teams will not be nearly enough to make a difference in the competitiveness of their product.

 

[SuperUnknown]

"Difficulties regarding such a solution:
- The players have to agree to put a link between salaries and revenues.
- The owners have to go for a solution that isn't a hard cap.
I think that's a compromise that both parties could do"

the players say that a link between salaries and revenue is a hard cap. do you mean a link or a sort of a link? or not really a link? or an actual link?

a link is a salary cap. what you have listed there is what one side or the other has to do. its not possible for both of those lines to accure simultaniously.

It's not a hardcoded link. Under such a system, the salaries paid for a year could be greater than the "target" number. On the other hand, the salaries paid couldn't get too far off the "target" number and would tend to go back towards it in time due to the punitive factors put in place.

Under such a system, the salaries paid could be:
year 1: 65%
year 2: 58%
year 3: 60%
year 4: 61%
year 5: 59%
etc...

It's not a hard cap (as you see, salaries paid change), and there's a link to revenues paid (the punitive aspect brings the salaries back towards the "target"). As well, the exceeding salaries paid over the "target" will be mostly money coming from the richer teams and partly distributed to the teams with less money. In other words, there won't be some owners making big money year after year like in a hard cap situation. Also, since it won't allow for salaries to get out of whack with revenues, then the payroll disparity won't be that huge. For anti cap fans, it will be possible to keep a team together if the market can support it (rather than if the cap will support it). For pro cap people, salaries won't go out of whack, there will still be a "check" and there will be share revenues for the poorer teams. It is middle ground imo.

 

[SuperUnknown]

That is a pipedream. you are forgetting that Detroit, Toronto, Colorado, Philadelphia, NYR, and Dallas will just pay the tax and keep signing the players.
Particularly after the long lockout. They will need to generate excitement in marketplaces used to big name players being added to the team.

the rich teams will just laugh at the luxury tax and the tax dollars heading to the other teams will not be nearly enough to make a difference in the competitiveness of their product.

Since the tax gets more bite as the total salaries paid to players increase, I don't see how teams could keep excessive payrolls without feeling a definite bite to their bottom line. The numbers I've posted for the tax rates are just there to give an example of the mechanism. After thinking about it, it would be better at these levels: 20% at $40M, 40% at $50M, 80% at $60M, with a target of about 56% of revenues.

If the owners would spend like this year (salaries paid say at 70%), then the tax becomes 160% at $40M, 180% at $50M and 240% at $60M. I don't think the teams you listed would be able to offset this kind of luxury tax and keep the same payroll as before (actually, I'm sure of it). Also, if their administration didn't "plan" it and they lose big bucks, their admin is going to get fired by the shareholders, pure and simple. Which means that teams, even with a "low" initial tax, will have to be careful for increases, which would kill them. It would keep payrolls in tow and guarantee the players a "fair" share of the pie (since there wouldn't be some owners stuffing their pockets with cap money).

 

[txpd]

Since the tax gets more bite as the total salaries paid to players increase, I don't see how teams could keep excessive payrolls without feeling a definite bite to their bottom line. The numbers I've posted for the tax rates are just there to give an example of the mechanism. After thinking about it, it would be better at these levels: 20% at $40M, 40% at $50M, 80% at $60M, with a target of about 56% of revenues.

If the owners would spend like this year (salaries paid say at 70%), then the tax becomes 160% at $40M, 180% at $50M and 240% at $60M. I don't think the teams you listed would be able to offset this kind of luxury tax and keep the same payroll as before (actually, I'm sure of it). Also, if their administration didn't "plan" it and they lose big bucks, their admin is going to get fired by the shareholders, pure and simple. Which means that teams, even with a "low" initial tax, will have to be careful for increases, which would kill them. It would keep payrolls in tow and guarantee the players a "fair" share of the pie (since there wouldn't be some owners stuffing their pockets with cap money).

two problems with your theory.

1. there are already teams willing to pay $80m per season. that is $60m plus a $1 for $1 tax above $40m. you are not starting at $1 for $1. all that tax will do is curtail spending in the 2nd tier group of teams and seed a greater competitive advantage to the rich teams.

2. your plan calls for increases in the tax as seasons go by. there are 18-20 teams that need relief NOW!!!. They are not going to sit idly by while they take the pipe for another couple of years while waiting for the system to work.

one of the things that has been very clear from the owners side is that they can't afford a "lets see if it works.." attempt to fix the financial problems of the league.
they want something concrete or as close to concrete as they can get. you do not offer that.

 

[SuperUnknown]

the percentage has to be $1 for $1 after 40 million and $2 after 50 million. This will give the tax a bite and prevent teams like the rangers from totally overspending... but the owners will cause think...

the Rangers, Flyers, Leafs, Blues and Wings all have a 60+ payroll. Their mrkets can sustain this. So they will pay the tax to have great teams just like the Yankees.

The problem is that if those teams have 60+ payroll, it will drive the % of revenues going to players up, which in turn will drive the luxury tax way up. With a significantly higher luxury tax (see my other posts examples), those teams will either have to bleed red ink or lower their payrolls. If they all kept 60+ payroll, they would quickly pay a luxury tax of $20M+ (for each team at that level). This would in turn increase the poorer team spending (due to higher individual player cost and money received from the luxury tax), which would increase % of revenues going to players up, which would in turn increase the luxury tax again. The next year, those teams don't pay $20M+, they pay $30M+ each, etc. It isn't sustainable. So sooner or later they would have to lower their payroll.

If the owners can't achieve a cap, this is the 2nd best solution for them, as it at least puts a link between revenues and salaries.

If the players can't achieve a completely free "marketplace" (although I'd argue this system is a free marketplace, since there aren't any hardcoded cap numbers and the players already proposed a luxury tax), then this is the 2nd best solution for them, as at least it doesn't put them under a cap.

In other words, if they can't agree on compromising completely to the other, this is a workable solution for both sides instead of skipping 1-2-3-etc years of hockey.

 

[SuperUnknown]

two problems with your theory.

1. there are already teams willing to pay $80m per season. that is $60m plus a $1 for $1 tax above $40m. you are not starting at $1 for $1. all that tax will do is curtail spending in the 2nd tier group of teams and seed a greater competitive advantage to the rich teams.

2. your plan calls for increases in the tax as seasons go by. there are 18-20 teams that need relief NOW!!!. They are not going to sit idly by while they take the pipe for another couple of years while waiting for the system to work.

one of the things that has been very clear from the owners side is that they can't afford a "lets see if it works.." attempt to fix the financial problems of the league.
they want something concrete or as close to concrete as they can get. you do not offer that.

The issue with salaries is a systemic one. If there's only 1 or 2 teams at $60M and the majority of other teams are at a level closer to $40M, then the individual salaries will reflect just that and be affordable for teams around the $40M mark. The point is that the tax reacts to the total salaries paid out and only a few teams would possibly be able to sustain the higher taxes that a big % of revenues going to players would mean. If the target is negociated at 54% and player salaries are at 70%, the tax would be 2:1 starting at $40M (so $20M in taxes for a $50M payroll).

Also, this system WILL work, it's not a "if". The mechanism is there to prevent the salary inflation. Where the actual final numbers lie have to be negociated (ie: the tax could go up by 2% per 1% of salaries paid over the target, the luxury tax could be 25% at $40M, 50% at $50M and 100% at $60M).

By not being a static luxury tax, it prevents teams from increasing permanently their payroll by limiting the systemic salary inflation (because the punishment increases significantly with the inflation).

 

[AlexGodynyuk]

I had trouble finding sleep, so I decided to think about a possible lockout solution. After thinking about the different parameters for a while, a very creative solution came to me. If both parties are going to agree, they will have to make compromises. As well, what seems to be preventing a resolution is each party holding onto different philosophical views. The owners want cost certainty and the players don't want a cap. Well, I think there's a way for both parties to get what they want.

How? I think the answer lies in a luxury tax that would assure the owners cost certainty. Possible? Indeed.

Difficulties regarding such a solution:
- The players have to agree to put a link between salaries and revenues.
- The owners have to go for a solution that isn't a hard cap.
I think that's a compromise that both parties could do, and still claim to be the winners. The owners will say they got cost certainty, the players will say they got away from a cap.

But how can a luxury tax assure the owners of a relative cost certainty? To achieve this, we need to create a luxury tax that will adjust to the salaries paid in % of league revenues. The adjusting luxury tax would tend to stop (or encourage) the spendings.

How can this be done?
1- The league and the players will have to agree on a paid salaries % based on revenues as an objective to attain. Using the players last proposal, let's put this at 56% player salaries.
2- The initial tax has to be implemented in a way that would keep the total player salaries close to the initial %. Since the luxury tax will be self adjusting, then the initial luxury tax doesn't have to be ultra precise. Let's use 10% at $40M, 20% at $45M, 30% at $50M+.
3- At the end of the year, independent auditors verify the salaries paid vs the league revenues. At this point, we know the % of salaries paid.
4- Adjust the luxury tax for the following year. For each point of % between the real salaries paid and the agreed % in 1, each level of the luxury tax will increase by 10%. Ie: The auditors find that salaries for the 1st (full) year were 58% of the total revenues. The luxury tax for the next year will be 30% at $40M, 40% at $45M, 50% at $50M+. If the salaries paid were to fall below the objective, the luxury tax level would decrease by the same margin, up to a 0% luxury tax for each level.
5- All the luxury tax revenues are distributed evenly to the teams that didn't pay a luxury tax during the year. The reason for the even distribution of funds is that payroll isn't necessarily based on lack of revenues, and that each team has a different situation. As long as the teams can't afford to pay a luxury tax on their payroll, they could benefit from this tax, which would tend to increase the overall payroll of these teams.

Advantages of this method: There is no cap at all on payroll. It's just that teams having a bigger payroll will have to plan for possible raises in luxury tax they'd have to pay. However, since the luxury tax would increase if the total player salaries went over the objective (or the target), then it should keep the richer teams payroll from being too far from the lower payroll teams. It should help control the salaries while still keeping a degree of freedom over individual team actions.

Feel free to add your comments.

Add a little NBA touch to it where after your payroll hits say $42 million, you may not sign other teams Free Agents. You can only re-sign your own and sign players to the league minimum (with a possible annual exception to sign someone in the 1.0-1.5 million range)

 

[krandor]

No way the NHLPA agrees to this. Their opinion will be that this plan still basically forces salary to be 55% of revenue since the tax goes up if it is over that. They will call it a hard tax under another name. It would probably work to keep salary under control which is why the NHLPA will not accept it.