Why does the NHLPA want a Luxury tax system

[PeterSidorkiewicz]

You see the NHL has just as much to lose from an extended lockout as the players. You think any of the owners that borrowed money from banks don't have to make payments during the lockout? Of course they do. Without revenues coming in at all, that's gonna be tough to keep doing that. And that's not going to be good for the league if teams start going bankrupt just to get a cap...and who would want to take a chance and buy an organization in the middle of stalled labor negotiations??

The "No matter how long it takes" stance by both sides is stupid and assinine because it solves nothing. Until I start hearing about significant revenue sharing that goes along with the league's salary cap stance, I'm just more likely to not come back when this does get resolved. And the players keep talking about this themselves: 'Sources also say the players aren't pleased with the NHL's proposal on revenue sharing, citing it as not "meaningful" enough.' And the NHL is using the same tactics that the players are...its HARD CAP and that's it (well now its triple cap too). I think you'd see some more possibilities of discussion if the league just considered moving off of the hard cap and maybe towards a combination soft cap/luxury tax system with 40% gate revenue shared among all teams that met certain financial criteria (minimum team payroll, minimum attendance figures, etc).

I agree 100% with you on all of that.

 

[shnagle]

If they want a percentage like that, I don't care if it takes three years for hockey to come back. It would be almost impossible for a team to even break even having 60% of revenues going to the players.

That's a great point, but the NHL's last proposals force small revenue teams to do exactly that. Let me explain using the NHL's last offer. The league says it will have a salary range based on total league revenue between 51 and 57 percent. The floor number calculates to 34.6 million.
Based on the league example above with 2.1 billion total revenue divided by 30 means that an average revenue team would be at 70 million. Meaning if you have 70 million in revenue than your cost ratio will be 51%. The reality for small revenue teams is that their revenue is more likely to be 55 million and that means their cost ratio is 34.6/55 or 62%. I have brought this issue up a few times and nobody has been able to explain how a salary floor as it is currently calculated helps any small revenue franchise. Further, it certainly goes against the cost certainty the league claims it needs to have.

 

[CarlRacki]

That's a great point, but the NHL's last proposals force small revenue teams to do exactly that. Let me explain using the NHL's last offer. The league says it will have a salary range based on total league revenue between 51 and 57 percent. The floor number calculates to 34.6 million.
Based on the league example above with 2.1 billion total revenue divided by 30 means that an average revenue team would be at 70 million. Meaning if you have 70 million in revenue than your cost ratio will be 51%. The reality for small revenue teams is that their revenue is more likely to be 55 million and that means their cost ratio is 34.6/55 or 62%. I have brought this issue up a few times and nobody has been able to explain how a salary floor as it is currently calculated helps any small revenue franchise. Further, it certainly goes against the cost certainty the league claims it needs to have.

The league has guaranteed that they will implement a revenue sharing system that will ensure that all 30 teams can meet the salary floor.

 

[shnagle]

The league has guaranteed that they will implement a revenue sharing system that will ensure that all 30 teams can meet the salary floor.

I understand that the league has guaranteed the revenue sharing. Even if they are able to implement this revenue sharing, why force small revenue teams into the very cost ratio they claim is killing the league financially? It just doesn't make sense to me.

 

[kerrly]

I understand that the league has guaranteed the revenue sharing. Even if they are able to implement this revenue sharing, why force small revenue teams into the very cost ratio they claim is killing the league financially? It just doesn't make sense to me.

Its a concession the league is making to the NHLPA to make sure they still get a fair chunk of the change rather than having a team drop their payroll to take advantage of this. Each team will also enter each season with a chance to be as successful as any other team in the league. If they can actually compete, fan support will grow, and so will playoff revenues. I don't know about you, but I understand why some teams get the fan support they do. I would be hard pressed to by season tickets to Carolina, Florida, games or any other team that has no real prospect of competing year to year. The very fact that each team has a chance to be successful will see revenues grow in smaller markets, especially with fan support that is less than stellar. You cannot deny this is very possible. Sure it won't happen in all markets at the same time, but with the revenue sharing helping them meet these levels season after season, a team is one or two acquisitions away from realising these goals in every season. These acquisitions under the cap, are also far more possible than ever before.

 

[shnagle]

Its a concession the league is making to the NHLPA to make sure they still get a fair chunk of the change rather than having a team drop their payroll to take advantage of this. Each team will also enter each season with a chance to be as successful as any other team in the league. If they can actually compete, fan support will grow, and so will playoff revenues. I don't know about you, but I understand why some teams get the fan support they do. I would be hard pressed to by season tickets to Carolina, Florida, games or any other team that has no real prospect of competing year to year. The very fact that each team has a chance to be successful will see revenues grow in smaller markets, especially with fan support that is less than stellar. You cannot deny this is very possible. Sure it won't happen in all markets at the same time, but with the revenue sharing helping them meet these levels season after season, a team is one or two acquisitions away from realising these goals in every season. These acquisitions under the cap, are also far more possible than ever before.

I understand the reason they gave a salary range. Keep in mind that the ratio I gave you is just to meet the floor. If a team spends more than the floor that ratio will go up.
I'll grant you that I think the cap will make teams more competitive and they might make more revenue. However, that is a far cry from the cost certainty the league has said it requires. IMO the league has only guaranteed that the cost of small revenue teams will always be around 62% and large revenue teams will be around 38%. I just find it very contradictory position to take by the league. Again, I'll ask the question which nobody seems to be able to answer, Why force small revenue teams into a cost ratio which the league says it can't sustain? By the way, I'm for some version of a cap with revenue sharing but something just doesn't add up here.

 

[Jaded-Fan]

And by the same token, players would likely accept an $80m hard cap (which, frankly, I think the owners would be best served to gun for -- say a $35-40m soft level after which luxury tax applies, and then a $65m or so hard cap; then, next time, owners can negotiate from that as it's a lot easier to make gains incrementally than all at once).

AN $80 MILLION HARD CAP? What a friggin joke . . . 19 of 30 baseball teams do not have $80 million payrolls, and they have a much bigger revenue stream than hockey does . . . world's bigger. Who in the hell is your $80 million dollar cap (which, frankly, you think the owners would be best served to gun for) going to hit in hockey?

http://www.onestopbaseball.com/TeamPayroll.asp

ps, look at those numbers again, some system they have there, isn't it, where 18 of the 30 teams are at one third of the highest aggregate salary team or less. And the lowest payrolled team has a payroll at 14.5% of the highest payroll.

You luxury tax apologists ought to be ashamed of defending such a system and wanting it for hockey.

 

[vanlady]

AN $80 MILLION HARD CAP? What a friggin joke . . . 19 of 30 baseball teams do not have $80 million payrolls, and they have a much bigger revenue stream than hockey does . . . world's bigger. Who in the hell is your $80 million dollar cap (which, frankly, you think the owners would be best served to gun for) going to hit in hockey?

http://www.onestopbaseball.com/TeamPayroll.asp

ps, look at those numbers again, some system they have there, isn't it, where 18 of the 30 teams are at one third of the highest aggregate salary team or less. And the lowest payrolled team has a payroll at 14.5% of the highest payroll.

You luxury tax apologists ought to be ashamed of defending such a system and wanting it for hockey.

I like many others have seen the flaws in baseball and have learned our lesson, personally I am in favor of a luxury tax. but with very punitive levels. Personally if you are stupid enough to want to spend over 60 million you should pay 5 to 1