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stevkrause

Luxury Tax System

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This is something I just can't get over as to why the NHL does not have one... they could even make it a very detailed Luxury tax to prevent crazy contracts thrown at FA's, or teams buying up all the talent...

1. Teams can exceed the cap by up to 10% of the cap, but must match dollar for dollar for every amount they go over (ex. if a team goes over the cap by 5 million, they must pay an additional 5 million into a league revenue sharing program)

2. All the money generated by teams utilizing the Luxury Tax will be dispersed to all the other teams in the NHL which are ONLY ABOVE the cap floor by 50% or less (ex. If the cap floor is 50 million and the ceiling is 70 million - all teams with a cap of 60 million or less would get an equal cut of the Luxury Tax pool, as opted)

3. ALL TEAMS which ACCEPT money from this Luxury Tax pool get a new, modified floor and MUST exceed the cap floor by at least 110% of the Luxury Tax money they were given (ex. If the cap floor is 50 million and Team X receives 1 million in Luxury Tax sharing, their new cap floor becomes 51.1 million) or they can opt for only a percentage of the revenue sharing revenue offered (under the same guidelines as above, 110% rule, etc, etc) or opt out of the revenue sharing all together and the revenue would then get dispersed to the rest of the qualifying teams - If for any reason there were revenue left over from the revenue sharing system, it would get evenly split between the 30 teams and has no salary cap implications(basically it would just go back into the owner's pockets)

4. Teams are given a home grown cap relief player - Every team can designate ONE player on their roster which is given a "Franchise Tag"(player must have been drafted by the team to qualify) - 20% of this players salary will NOT count against the cap (this applies to both the floor and the ceiling) but WILL count towards the luxury tax total if it takes the team over the cap - This tag must be applied yearly (ex. If player X was tagged in 2009, it does not mean they are automatically tagged in 2010 and the team can opt to tag a different player, if desired) - They still cannot exceed the league max contract and if they are traded, the team absorbing the contract absorbs 100% of the contract as the cap hit

I think this system would actually pump MORE money into the league from the bigger teams which are willing to pay it, however, since it has a HARD cap value of only 10% over, teams will not be able to go out and just buy up all the talent in the league, or simply throw money at their problems (ala NY Yankees) - Also, the smaller markets would be given more money, which they would HAVE to spend on their team, to improve their on ice talent... this also encourages players to stay where they came from, thus letting markets attach themselves to players closer and fan bases to have investments in individual players (good for marketing)

I don't see how this could do anything but positive things for the league and think, if anything, it would actually create BETTER parity...

Edited by stevkrause
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This is something I just can't get over as to why the NHL does not have one... they could even make it a very detailed Luxury tax to prevent crazy contracts thrown at FA's, or teams buying up all the talent...

1. Teams can exceed the cap by up to 10% of the cap, but must match dollar for dollar for every amount they go over (ex. if a team goes over the cap by 5 million, they must pay an additional 5 million into a league revenue sharing program)

2. All the money generated by teams utilizing the Luxury Tax will be dispersed to all the other teams in the NHL which are BELOW the cap ceiling by 75% or more (ex. If the cap floor is 50 million and the ceiling is 70 million - all teams with a cap of 55 million or less would get an equal cut of the Luxury Tax pool)

3. ALL TEAMS which receive money from this Luxury Tax pool get a new, modified floor and MUST exceed the cap floor by at least 125% of the Luxury Tax money they were given (ex. If the cap floor is 50 million and team X receives 1 million in Luxury Tax sharing, their new cap floor becomes 51.25 million)

4. Teams are given a home grown cap relief player - Every team can designate ONE player on their roster which is given a "Franchise Tag"(player must have been drafted by the team to qualify) - 20% of this players salary will NOT count against the cap (this applies to both the floor and the ceiling) but WILL count towards the luxury tax total if it takes the team over the cap - This tag must be applied yearly (ex. If player X was tagged in 2009, it does not mean they are automatically tagged in 2010 and the team can opt to tag a different player, if desired)

I think this system would actually pump MORE money into the league from the bigger teams which are willing to pay it, however, since it has a HARD cap value of only 10% over, teams will not be able to go out and just buy up all the talent in the league, or simply throw money at their problems (ala NY Yankees) - Also, the smaller markets would be given more money, which they would HAVE to spend on their team, to improve their on ice talent... this also encourages players to stay where they came from, thus letting markets attach themselves to players closer and fan bases to have investments in individual players (good for marketing)

I don't see how this could do anything but positive things for the league and think, if anything, it would actually create BETTER parity...

Agree with it all...even though it's not the greatest thing for the Wings, I'd don't believe Chicago should be penalized for good scouting and if they want to keep everyone, let them pay the tax!

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Agree with it all...even though it's not the greatest thing for the Wings, I'd don't believe Chicago should be penalized for good scouting and if they want to keep everyone, let them pay the tax!

Exactly... I don't think teams should have to lose guys THEY drafted, just because they can't afford them all... it doesn't help us much this year, but it could have been huge this past off season...

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I'm all for it. I've always thought the same thing. The NBA has it, seems to work for them. I like all the points you stated 1-4. Call your boy Bettman up and suggest your brilliant idea to him. See what he thinks!

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While I agree with this 100%, I think the league still wants everyone on a level playing field! Baseball and Football have the same sort of cap, but its still the same teams fighting for the championship every year, sure the Saints and Tampa Bay Rays are exceptions; I just think the NHL is looking for competition on a level field.

I would love the idea of a luxary tax, I think it is the way to go!

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What I'd like more for the NHL is for them to implement the veteran's minimum policy where players signed under that amount don't count against the cap.

Just imagine Homer, Lils, Bert and Drapes (especially Drapes) all have contracts that don't hurt the Wings' cap and they all get at least 1.2 mil. Lidstrom, if he signs, could do that as well but we all know he's going to get at least 5 mil. Hope I'm wrong on that one though.

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your hired! :thumbup: ...i like the idea about a veteran's minimum policy also

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This idea just makes too much sense, which is why the league will never go for it. In all honesty, I don't see any way that this could be anything but positive for the league. Speaking as a Wings fan, I would love to see our team be able to afford to keep our best players and actually be able to go out and get that one big missing piece of the puzzle and simply pay the luxury tax to cover it.

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I think the big problem with that type of system is that you might still see stronger teams remaining stronger and while some of the small market teams may get financial support through revenue sharing, they may still struggle to compete on the ice with the bigger spenders, which will keep them from growing their business and developing a healthy revenue stream from within.

I think the league wants all of its franchisees to be healthy and artificial financial suppport through a luxury tax system may not be the answer. I can see the logic whereby limiting what you can spend helps keep other teams competitive and therefore a better chance at financial success.

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I think the big problem with that type of system is that you might still see stronger teams remaining stronger and while some of the small market teams may get financial support through revenue sharing, they may still struggle to compete on the ice with the bigger spenders, which will keep them from growing their business and developing a healthy revenue stream from within.

I think the league wants all of its franchisees to be healthy and artificial financial suppport through a luxury tax system may not be the answer. I can see the logic whereby limiting what you can spend helps keep other teams competitive and therefore a better chance at financial success.

Look at it this way though, based off the current 56.8 million ceiling, the most a team could go over the cap would be 5.68 million - Based off of what teams USED to pay in the bigger markets, I think it's fair to assume that at least half the league (15 teams) from Canada and the northern states (maybe more) would go at least a few million over(lets say 3 million over for arguments sake) as their markets and owners can support it... now lets assume that 5 other teams get that money (that is 45 million total) so now, those 5 teams get an additional 9 million dollars to fill in their cap, plus an additional 2.3 of their own money, as part of the revenue sharing rule as well... under this scenario, you essentially get 15 teams with a cap around 60, and the other 15 all between 52-56.8... whereas, now, a teams payroll can range anywhere from 40 to 56.8... you tell me where the parity seems more likely and in which scenario teams are more likely to be able to put a more even team on the ice? The one where one team could essentially have almost 17 million more in payroll, or the one where, at most, the other team could have approximately 8 million more in payroll....

I know this is all a hypothetical, but it's also very realistic based off of team spending/markets... the only difference, is where the money is coming from... also, as teams become more competitive, they generate more of their own revenue, as more fans come out to see them and ALSO, they get a better marketing situation, by being able to lock down a star and keep him there for years(as he will very rarely be able to make more elsewhere than he will at home) thus giving the franchise a face...

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I don't know that the salary cap is all the league wanted. Costs are rising regardless of what the league had in mind. Five years ago, right after the rollback, the salary cap was $39 million. In 2009-10, the cap was $56.8.

Luxury taxes are a slippery slope and I'm not convinced it works in the NBA as something that keeps the playing field level. I'm also not convinced a Beckham Rule where you can have one player not count against the cap would work either.

I want something where a player who gets hurt for over half the year has the amount of time that he's hurt opened up permanently in LTIR. So if Franzen msses 80 per cent of the year, 80 per cent of his cap hit will be available for the entire season, not just 100 per cent when he's out. Just think if the Wings (or Flyers, or Bruins, or anyone else who was missing key players) would have been able to bolster their lineup with a Whitney-type rental player.

I don't mind a solid cap. What I do mind is having an injury to a $3.5 million player determine the course of your season, where you have no way to permanently recoup that if you so choose. What Pittsburgh did two years ago with putting Satan's bad contract in the minors to rent Guerin until the playoffs is currently the only way around that.

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I don't know that the salary cap is all the league wanted. Costs are rising regardless of what the league had in mind. Five years ago, right after the rollback, the salary cap was $39 million. In 2009-10, the cap was $56.8.

Luxury taxes are a slippery slope and I'm not convinced it works in the NBA as something that keeps the playing field level. I'm also not convinced a Beckham Rule where you can have one player not count against the cap would work either.

I want something where a player who gets hurt for over half the year has the amount of time that he's hurt opened up permanently in LTIR. So if Franzen msses 80 per cent of the year, 80 per cent of his cap hit will be available for the entire season, not just 100 per cent when he's out. Just think if the Wings (or Flyers, or Bruins, or anyone else who was missing key players) would have been able to bolster their lineup with a Whitney-type rental player.

I don't mind a solid cap. What I do mind is having an injury to a $3.5 million player determine the course of your season, where you have no way to permanently recoup that if you so choose. What Pittsburgh did two years ago with putting Satan's bad contract in the minors to rent Guerin until the playoffs is currently the only way around that.

You need to re-read my original post... not a single one of your points was in context to my original post...

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Figured this would come up the next time the Wings lost a playoff series.

A luxury tax system is nice, but it still encourages more spending. Teams had proven when there was no system in place to curb their spending that they would spend themselves into bankruptcy to try and be competitive as far as having superstars and getting (at very least) into the playoffs is concerned. A luxury tax would, despite the "sharing" of tax revenues of those over a designated cap, still encourage reckless spending and thus pit the NHL into the same problem it had pre-cap era.

This is without foresight at all, and imo it's just a way to get the Wings out of a cap system so they can spend a lot more money and buy a lot more superstars again so we can see another roster like that of 2002.

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Figured this would come up the next time the Wings lost a playoff series.

A luxury tax system is nice, but it still encourages more spending. Teams had proven when there was no system in place to curb their spending that they would spend themselves into bankruptcy to try and be competitive as far as having superstars and getting (at very least) into the playoffs is concerned. A luxury tax would, despite the "sharing" of tax revenues of those over a designated cap, still encourage reckless spending and thus pit the NHL into the same problem it had pre-cap era.

This is without foresight at all, and imo it's just a way to get the Wings out of a cap system so they can spend a lot more money and buy a lot more superstars again so we can see another roster like that of 2002.

I agree, the examples as described just shows total salaries increasing across the board. So, more money to players, but no more revenues to the league. Not sure how the owners would feel about that.

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learn capitalism: tax can not improve anything.

luxury tax promotes socialism, taxes take money from the ones who earned them and give them to the ones who didn't.

Edited by ami
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But why would the teams that have money thrown at then by the overspending "haves" have to spend it on improving their respect team? Or is this part of the "proposal"? In principle, that's the way the system is supposed to work in MLB, but it sure hasn't worked out that way.

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I agree that the league should have a luxury tax, also I think they need to do something about the floor. Forcing teams to spend more than what they bring in doesn't make any sense to me at all. The small market teams were doing better before the lockout.

Also I think it's unfair for the rich teams to fit the bill for the poor teams for nothing. A luxury tax would allow the rich teams to help the poor teams, and also themselves.

Edited by Barrie

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learn capitalism: tax can not improve anything.

luxury tax promotes socialism, taxes take money from the ones who earned them and give them to the ones who didn't.

The luxury tax is more capitalistic than the system they have now.

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This is something I just can't get over as to why the NHL does not have one... they could even make it a very detailed Luxury tax to prevent crazy contracts thrown at FA's, or teams buying up all the talent...

1. Teams can exceed the cap by up to 10% of the cap, but must match dollar for dollar for every amount they go over (ex. if a team goes over the cap by 5 million, they must pay an additional 5 million into a league revenue sharing program)

2. All the money generated by teams utilizing the Luxury Tax will be dispersed to all the other teams in the NHL which are BELOW the cap ceiling by 75% or more (ex. If the cap floor is 50 million and the ceiling is 70 million - all teams with a cap of 55 million or less would get an equal cut of the Luxury Tax pool)

3. ALL TEAMS which receive money from this Luxury Tax pool get a new, modified floor and MUST exceed the cap floor by at least 125% of the Luxury Tax money they were given (ex. If the cap floor is 50 million and team X receives 1 million in Luxury Tax sharing, their new cap floor becomes 51.25 million)

4. Teams are given a home grown cap relief player - Every team can designate ONE player on their roster which is given a "Franchise Tag"(player must have been drafted by the team to qualify) - 20% of this players salary will NOT count against the cap (this applies to both the floor and the ceiling) but WILL count towards the luxury tax total if it takes the team over the cap - This tag must be applied yearly (ex. If player X was tagged in 2009, it does not mean they are automatically tagged in 2010 and the team can opt to tag a different player, if desired)

I think this system would actually pump MORE money into the league from the bigger teams which are willing to pay it, however, since it has a HARD cap value of only 10% over, teams will not be able to go out and just buy up all the talent in the league, or simply throw money at their problems (ala NY Yankees) - Also, the smaller markets would be given more money, which they would HAVE to spend on their team, to improve their on ice talent... this also encourages players to stay where they came from, thus letting markets attach themselves to players closer and fan bases to have investments in individual players (good for marketing)

I don't see how this could do anything but positive things for the league and think, if anything, it would actually create BETTER parity...

I'm always impressed with how well thought out and presented your ideas are. The problem that I have always had with a luxury tax is that it makes it easy for big well financed teams, the Lakers for an NBA example, to constantly put out one of the best products because they can charge more for tickets, make more from merchandise, etc. so they can always afford to pay a lot more than say the Timber Wolves. If tickets in LA cost the same as tickets in Minnesota it might work but LA, NY (although they are proof that tons of cash doesn't necessarily mean a good team), Boston, etc. always have more money to play with. Add to that the fact that some teams have owners that have so much cash that they don't care about the luxury tax, a la Dallas, and it just makes a threshold that some teams can't compete with. There is a reason that the same NBA teams are always paying luxury tax (with a few others in one year and out the next). Compound that with the fact that when your team is winning you generally get more ticket and merchandise sales and it makes it even harder to crack into that group of good teams if you start out with a lot less cash. However, as far as luxury taxes go I think yours is better than the NBA model.

Agree with it all...even though it's not the greatest thing for the Wings, I'd don't believe Chicago should be penalized for good scouting and if they want to keep everyone, let them pay the tax!

What I don't like is that often it is not primarily good scouting but crappy performance that allows a team to get a top 5 picks three or four years in a row. They continue to suck so they continue to get players that have a very high likelihood of being great.

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The whole idea of a cap is ridiculous in the first place. A luxury tax would be better than what we currently have, but it's not a solution. Basically, teams should be able to spend what ever they want. Big market teams should not be penalized because hockey is a big deal in their cities. If a team has a rabid fan base, and can dish out tens of millions more than their competition then they should be able to do so.

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A luxury tax system might be better than the current hard cap. It might not. But let's take a look at one possibility:

Luxury tax:

Use existing method for determining cap ceiling. Teams pay equal into revenue sharing pool what they exceed cap by. This revenue sharing is divided equally among existing revenue-sharing eligible teams who pay less than the "tax line" (halfway between cap max and floor, or $8m below cap max) while any revenue sharing teams who spend above that line do not receive from this pool.

Teams can choose to spend as much or as little as they wish on salaries. A team could have a total payroll of $11.025m by having 21 players making the league minimum (as of next season I believe) of $525k if it chose to do so.

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I don't know much about luxury tax systems, so forgive my ignorance. Wouldn't this effectively be the same as increasing the cap by x amount and also increasing the minimum salary by some y amount, while increasing revenue sharing amongst the teams? We would essentially by increasing the cap to x, and the wealthy teams would be able ot reach this level. However, the less-wealthy teams-which currently receive revenue via revenue sharing- would receive more money. Therefore, the minimum and maximum would essentially by raised, with the low-end being supported by the top end growth. On the other hand, this would increase the amount of NHL money going towards struggling teams, but I'm not sure if it improves their overall financial situation.

The NHL is in a bit of a bind when it comes to the cap. It needs to be kept low enough for low revenue teams to compete, but high enough to attract players and allow good teams. Hopefully, the league can stabilize themselves in some iffy markets and the cap can start to see large increases.

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The luxury tax is more capitalistic than the system they have now.

less poops in jam doesn't make it more eatable...

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I am all for it. The hard cap is a pain in the ass. It would be nice if there were a 5-10% luxury tax range. To make it more enticing for the league, it I wouldn't mind seeing there being a range of two or three years you can do it for at a time. So it is more of a cushion than just a pure luxury tax, because then it will just escalate salaries even more. It would be nice to see teams just have a cushion to make a late season trade for a playoff push rather than just have big market teams load up even more, and the Wings' are no exception.

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Figured this would come up the next time the Wings lost a playoff series.

A luxury tax system is nice, but it still encourages more spending. Teams had proven when there was no system in place to curb their spending that they would spend themselves into bankruptcy to try and be competitive as far as having superstars and getting (at very least) into the playoffs is concerned. A luxury tax would, despite the "sharing" of tax revenues of those over a designated cap, still encourage reckless spending and thus pit the NHL into the same problem it had pre-cap era.

This is without foresight at all, and imo it's just a way to get the Wings out of a cap system so they can spend a lot more money and buy a lot more superstars again so we can see another roster like that of 2002.

I think it would need some real analysis, and I think it could be something to look at in the future, but after a cursory look at some numbers can't see how it could be viable right now.

Most teams in the league are already spending close to or over the cap for salaries. All but 3 teams over $45M. 19 spent ~$51M or more. Then looking at revenue reports from 09, I guesstimate non-salary expenses to be around $30M. That puts the break-even revenue already at $80-90M. Many teams are likely still well below that, and only a handful significantly above.

This probably wouldn't hurt (and might even help) the franchises struggling the most, but the middle of the pack teams would suffer. Those making a little now would likely slip into the red, while those losing a little would get even worse. It could even push some pretty successful teams into a loss.

Perhaps in the future, if we move some teams into better markets, get a better TV deal, better sponshorship, or whatever; get to a point where the majority of teams in the league are actually turning a profit, then it would be worth discussing. But right now, if anything, it looks like the cap is a little too high.

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