Time to Implement a Luxury Tax?

[SHANNYPLAN]

Earlier this season it was announced that the Salary Cap for the 2020-2021 Season will fall between $84 and $88.2 million. With the impact of COVID-19 and the season likely being cancelled, it is unlikely that the Cap will increase beyond the current $81.5 million, with rumours that it may actually go down. With the amount of teams struggling to stay below the cap to begin with, and the financial impact on small market teams as a result of the cancellations, it may be time to finally implement a Luxury Tax similar to the NBA.

This would allow teams (most likely contenders) to spend above the salary cap and be taxed as a result, with the tax money going towards supporting the smaller market teams that have been impacted by recent events. Not only would this allow teams to remain in contention, but it would allow the owners of small market teams to recover and also return to contention.

Thoughts?

Click to read more...

 

[Sweetpotato]

Compliance buyouts would be nice but this makes a ton of sense.

Edit: But only in the short term.

 

[SotasicA]

Small market teams lose less, if at all, due to the cancellation of the season. Some might even save money. No travel, no rent, lay off some staff and of course players are responsible for 50% of the lost revenue.

The amount teams like Canadiens, Leafs and the Rangers will lose is huge.

 

[tgo0]

The owners had a lockout to institute a hard cap, which guaranteed cost certainty for small market teams as well as larger profits for large market teams. Can’t see them loosening their grip on either now.

If anything they’ll keep the cap stagnant or have a slight increase coupled with a larger escrow from the players as a potential offset.

 

[SotasicA]

The owners had a lockout to institute a hard cap, which guaranteed cost certainty for small market teams as well as larger profits for large market teams. Can’t see them loosening their grip on either now.

If anything they’ll keep the cap stagnant or have a slight increase coupled with a larger escrow from the players as a potential offset.

I'd assume this new tax system would still work under the 50/50 split.

Which means the "extra" money paid in salaries goes from the pockets of other players (via escrow).

 

[tgo0]

I'd assume this new tax system would still work under the 50/50 split.

Which means the "extra" money paid in salaries goes from the pockets of other players (via escrow).

Maybe I’m misinterpreting what you’re saying but are you implying that the additional salaries are taken from the escrow? I’m not sure how that would work... or why the PA would sign off on that.

 

[SotasicA]

Maybe I’m misinterpreting what you’re saying but are you implying that the additional salaries are taken from the escrow? I’m not sure how that would work... or why the PA would sign off on that.

Players have already signed off on 50% of HRR. Why would they expect that to increasd? No matter how you arrange the cap.

 

[ffh]

What makes money for small market teams is competing for the playoffs and filling their arenas. And not having a league with the Yankees and red Sox spending the way they do. And having most stadiums empty cause they cant compete. Football and hockey have it right. Parity is the only way to go.

 

[wintersej]

No. They figure out a one year patch to the cap where both players and owners take a little hit and then they continue on as normal.

 

[tsujimoto74]

Maybe I’m misinterpreting what you’re saying but are you implying that the additional salaries are taken from the escrow? I’m not sure how that would work... or why the PA would sign off on that.

The players get 50% of HRR. Just because you let the owners spend more than 50% of HRR on player salaries doesn't mean the amount of HRR is any bigger. As always, the players would have to pay the extra money they got over 50% into escrow. The players don't understand and hate escrow.

 

[DaBadGuy7]

I always thought you should able to spend up to $10 million over the cap, but you also be taxed at the amount you are over as well. I believe that is fair. Teams that can afford can do it as long they want and it allows teams more flexibility in keeping their cores in tact.

 

[FerrisRox]

Earlier this season it was announced that the Salary Cap for the 2020-2021 Season will fall between $84 and $88.2 million. With the impact of COVID-19 and the season likely being cancelled, it is unlikely that the Cap will increase beyond the current $81.5 million, with rumours that it may actually go down. With the amount of teams struggling to stay below the cap to begin with, and the financial impact on small market teams as a result of the cancellations, it may be time to finally implement a Luxury Tax similar to the NBA.

This would allow teams (most likely contenders) to spend above the salary cap and be taxed as a result, with the tax money going towards supporting the smaller market teams that have been impacted by recent events. Not only would this allow teams to remain in contention, but it would allow the owners of small market teams to recover and also return to contention.

Thoughts?

I think it would be a terrible direction for the league to take and I also dispute the notion that there are a lot of teams that are struggling to stay beneath the cap.

What's wrong with having a level playing field?

 

[Flukeshot]

Escrow is the great equalizer. They can still move the cap up to allow for salary cap space and player re signings. It's just going to mean a lot of escrow percent hold back.

 

[kingsholygrail]

Because the luxury tax totally works in the NBA. lol

 

[FerrisRox]

Small market teams lose less, if at all, due to the cancellation of the season. Some might even save money.

You don't understand how this business works.

If the season were cancelled, every team would suffer staggering loses.

The players still get their full salaries, but now the owners have lost tens of millions in gate receipts for lost home games and millions and millions more in lost playoff revenue.

 

[Pure Slaughter Value]

I always thought you should able to spend up to $10 million over the cap, but you also be taxed at the amount you are over as well. I believe that is fair. Teams that can afford can do it as long they want and it allows teams more flexibility in keeping their cores in tact.

So a drop in the bucket penalty for rich teams to be able to toss more money at players? Doesn't work as a lot of rich team's cores would consist of FA's. You'd have teams going 10 mill over the cap as they're paying 2M more per season to 5 players than what the smaller markets would pay.

 

[SotasicA]

You don't understand how this business works.

If the season were cancelled, every team would suffer staggering loses.

The players still get their full salaries, but now the owners have lost tens of millions in gate receipts for lost home games and millions and millions more in lost playoff revenue.

Players return money to balance out the 50/50 split.

 

[Just Linda]

I'd assume this new tax system would still work under the 50/50 split.

Which means the "extra" money paid in salaries goes from the pockets of other players (via escrow).

Well no, a luxury tax would be additional spending to salaries. It would be above and beyond player salary, the optional hit would be at the expense of the teams not the players.

 

[FerrisRox]

Players return money to balance out the 50/50 split.

Why would they do that?

 

[EdJovanovski]

As a Rangers fan, count me in!

 

[SotasicA]

Well no, a luxury tax would be additional spending to salaries. It would be above and beyond player salary, the optional hit would be at the expense of the teams not the players.

Then it's a no-go. Owners fought and lost an entire season to get to 50/50. They ain't voting in favour of something that wrecks it.

Might as well just increase the players' split to 55%, if that's what you're after. That increases the cap just the same, but in a more fair way.

 

[SotasicA]

Why would they do that?

Because CBA says so? That's why the escrow exists.

https://nypost.com/2020/03/19/coronavirus-could-cost-nhl-players-a-ton-of-money/

Player salaries are not fixed. They are tied to league revenue.

 

[SHANNYPLAN]

I always thought you should able to spend up to $10 million over the cap, but you also be taxed at the amount you are over as well. I believe that is fair. Teams that can afford can do it as long they want and it allows teams more flexibility in keeping their cores in tact.

I like the idea of the $10 million limit

 

[SomeDude]

As a Rangers fan, count me in!

Yep, cause the Rags were so successful when they paid mediocre players $8 mill a year.

 

[EdJovanovski]

Yep, cause the Rags were so successful when they paid mediocre players $8 mill a year.

We never stopped.