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wouldn't a luxury tax further competetive imbalance?

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12-05-2004, 03:27 AM
  #1
Fish on The Sand
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wouldn't a luxury tax further competetive imbalance?

correct me if I'm wrong, but wouldn't a luxury tax hurt the small smarket teams more than levelling the playing field? Say a team really doesn't care if they cross the threshold, lets call this team the Wings. Hypothetically they feel signing Jarome Iginla could push them over the top, so they sign him, going well over the threshold. Now, the Wings are able to take this hit, but the Flames would have absolutly no means of fielding a competetive offer. A luxury tax, if ignored, only furthers competetive imbalance does it not?

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12-05-2004, 03:35 AM
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Theoretically yes, it could do that like in the example you just mentioned.

But in reality the teams have budgeted a certain amount for their star players that they can possibly pay, for example Flames can probably go as high as $9M to keep Iginla. If someone is willing to pay more than that, it doesn't matter whether there's luxury tax or not. Compare it to current situation, what's the difference? Flames can't possibly or don't want to pay Iginla as much as Wings or Rangers COULD pay him. Even if Flames had $12M left in the payroll before reaching the cap they wouldn't give Iginla that much just because Wings are offering him that.

So in most cases the limiting factor is common sense before payroll soft cap.

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12-05-2004, 08:54 AM
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Quote:
Originally Posted by Fish on The Sand
correct me if I'm wrong, but wouldn't a luxury tax hurt the small smarket teams more than levelling the playing field? Say a team really doesn't care if they cross the threshold, lets call this team the Wings. Hypothetically they feel signing Jarome Iginla could push them over the top, so they sign him, going well over the threshold. Now, the Wings are able to take this hit, but the Flames would have absolutly no means of fielding a competetive offer. A luxury tax, if ignored, only furthers competetive imbalance does it not?
Well, we do have a sorta-close actual example of this with the Yankees. However, as their payroll has skyrocketed over the past few seasons, I think it can be argued that they have still come back to the pack a bit as far as the actual quality of their team since their last WS. On top of that, baseball's tax system is a joke, as it has no real teeth to it; though, the last I knew, player salaries league wide had still went down by about 3% since the tax came into being.

If the NHL settled for a tax system as badly set-up as baseball's then, yeah, it would be pretty worthless. But I think a hockey equivilant would be a tax level at $60 million and twenty-five cents on the dollar. It would have to be pathetically bad. A good tax system with some actual teeth to it should do what the league wants done: lower the overall player costs.

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12-05-2004, 10:35 AM
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of course it perpetuates the competitive imbalance. just look at the basic math.
lets say the tax threshold is $40m and the tax is $1.00 for each $1.00 over the limit.
there are 6 teams spending over the threshold at an average or $20m($60m payroll). that is about where we were last season. so its realistic.

all of the other 24 teams spend the minimum on payroll and are eligible for a share of the tax dollars. the breakdown of tax money to teams under the threshold is $5m paid to each team. So....6 teams buy 4 players at $5m a year a piece and the other 24 teams get $5m to spend on one player in the same price range. it works out to 4 players to 1 player advantage.

its pretty obvious which group of teams get a competitive advantage in a luxury tax league.

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12-05-2004, 11:20 AM
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Quote:
Originally Posted by Fish on The Sand
correct me if I'm wrong, but wouldn't a luxury tax hurt the small smarket teams more than levelling the playing field? Say a team really doesn't care if they cross the threshold, lets call this team the Wings. Hypothetically they feel signing Jarome Iginla could push them over the top, so they sign him, going well over the threshold. Now, the Wings are able to take this hit, but the Flames would have absolutly no means of fielding a competetive offer. A luxury tax, if ignored, only furthers competetive imbalance does it not?
In the case you just mentioned with the "Wings" ignoring the tax the Flames would get some of that tax revenue. So, if the Wings ignored the tax the flames would get some benefit that they would not get without the tax. So it would still help, not hurt, although you're right it would not level the playing field.

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12-05-2004, 11:35 AM
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Quote:
Originally Posted by Fish on The Sand
correct me if I'm wrong, but wouldn't a luxury tax hurt the small smarket teams more than levelling the playing field? Say a team really doesn't care if they cross the threshold, lets call this team the Wings. Hypothetically they feel signing Jarome Iginla could push them over the top, so they sign him, going well over the threshold. Now, the Wings are able to take this hit, but the Flames would have absolutly no means of fielding a competetive offer. A luxury tax, if ignored, only furthers competetive imbalance does it not?
you are also right that this current CBA is much better for the Flames than a luxury tax or hard cap.

in a hard cap or luxury tax enviroment, would COL have given up Regehr for 1 month of Fleury ? nope, even if they wanted to, they wouldnt have fit Fleury into their cap.

would DAL have given up Niuewendyk for Iginla ? nope, again they couldnt have afforded the contract.

So CGY (as an example) is crazy to vote for a cap league, it will hurt them more than help. oh wait, under a cap, the flames could have maybe signed Fleury and Niewendyk instead of being forced to trade them. yup, that will help ! who wouldnt rather have Neiuwendyk and Fleury instead of Iginla and Regehr. Those poor fans in CGY who have to suffer !

DR

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12-05-2004, 12:09 PM
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If you are looking to the luxury tax to act as a defacto cap, then yes, it will not appear to be working right. But that cant be what the luxury tax is to do. It has a different purpose. Not to create 'perfect fairness'. But to gather revenue for redistribution in the quintessential Canadian way. The purpose is to provede safety nets for a system that guarantees losers. Not to prevent spending or cap it.

If a suitable market correction is achieved, the point of the tax is to prop up the poor, not pin back the rich. As long as a fair system that provides equality of opportunity to develop exists, this can be fair.

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12-05-2004, 12:32 PM
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Quote:
Originally Posted by Fish on The Sand
correct me if I'm wrong, but wouldn't a luxury tax hurt the small smarket teams more than levelling the playing field?..A luxury tax, if ignored, only furthers competetive imbalance does it not?
Your overall point is taken, but, respectfully, your premise is flawed.

Namely that competitive imbalance currently exists, at all. It doesn't.

Economic imbalance, yes. Competitive (on ice), no.

An argument can be made that the NHL - both during the regular season and playoffs - is as competitive as any major league. You have both perennial contenders AND annual "surprise" teams. That's competitive.

No "engineering" will make it any more "competitive".

And, this is not directed toward you whatsoever, but when I hear/read a fan talk about creating more parity in the NHL, all he is really saying, indirectly, is: "How can we arrange for my team to win?"

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12-05-2004, 12:35 PM
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Quote:
Originally Posted by Fish on The Sand
correct me if I'm wrong, but wouldn't a luxury tax hurt the small smarket teams more than levelling the playing field? Say a team really doesn't care if they cross the threshold, lets call this team the Wings. Hypothetically they feel signing Jarome Iginla could push them over the top, so they sign him, going well over the threshold. Now, the Wings are able to take this hit, but the Flames would have absolutly no means of fielding a competetive offer. A luxury tax, if ignored, only furthers competetive imbalance does it not?
It all really depends on what the tax is and what the limit is. A 10-25% tax on a $60 mil. payroll really wouldn't bug the bigger teams (Wings, Avs, etc.), they'd happily pay it to get the big name star. But a tax of 50-75% on a $40-50 mil. payroll (like the current rumoured proposal) would make even the most spend-happy team think twice (NYR), because if your spending even $.50 for every dollar you go over, the only way to really make it payoff is to raise the Cup while hosting every possible home game during the Finals, and that just puts us back where we are now.

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12-05-2004, 05:53 PM
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Quote:
Originally Posted by txpd
of course it perpetuates the competitive imbalance. just look at the basic math.
lets say the tax threshold is $40m and the tax is $1.00 for each $1.00 over the limit.
there are 6 teams spending over the threshold at an average or $20m($60m payroll). that is about where we were last season. so its realistic.

all of the other 24 teams spend the minimum on payroll and are eligible for a share of the tax dollars. the breakdown of tax money to teams under the threshold is $5m paid to each team. So....6 teams buy 4 players at $5m a year a piece and the other 24 teams get $5m to spend on one player in the same price range. it works out to 4 players to 1 player advantage.

its pretty obvious which group of teams get a competitive advantage in a luxury tax league.

If the rich clubs are getting 4 players to take their payroll to $60m then they are paying $80m total ($60m payroll + $20m tax). Now that $80m would buy them 8 players at $5m/y if there was no tax.

The question for the weaker clubs is it better

a) the rich teams get 4 players and give you $5m
or
b) the rich teams get 8 players and give you nothing

There is even the idea that the rich clubs are forced to keep salaries down. Instead of spending $40m and then adding 4 players getting $10m/y (bad for inflation), they could pick up 4 players at $5m/y (+5m/y per player in tax). For a poorer club under cap, what is going to be easier to match, $5m/y or $10m/y? Which system is going to control salaries better and reduce inflationary pressures?

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12-06-2004, 12:45 PM
  #11
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Quote:
Originally Posted by Fish on The Sand
correct me if I'm wrong, but wouldn't a luxury tax hurt the small smarket teams more than levelling the playing field? Say a team really doesn't care if they cross the threshold, lets call this team the Wings. Hypothetically they feel signing Jarome Iginla could push them over the top, so they sign him, going well over the threshold. Now, the Wings are able to take this hit, but the Flames would have absolutly no means of fielding a competetive offer. A luxury tax, if ignored, only furthers competetive imbalance does it not?

Hopefully the tax hit is so hard this "Wings" team cant afford to sign this player. Thats one of the ideas of the luxuxry tax, your not just signing a 9 million dollar player your really signing a 15.75 million dollar player (salary + luxury tax at 75 cents on the dollar)

Lets say there is a hard cap of 40 million dollars, a team like the Preds (example only) who dont have much money tied into contracts could sign Iginla for 9 million dollars where as the Flames might not have that money to match the offer. Now i'm not saying it would happen but it could. If a team has the money and values a player that much they will find a way to sign him.

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12-06-2004, 12:52 PM
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Luxury tax wont work properly if its not tied to a soft salary cap like the NBA. With teams paying large amounts of tax money, they are gonna also now operate at looses, and then what about revenue sharing, are they gonna share there looses, it makes no sense. It will probablly be the money they pay on tax comes right back to hem from revenue sharing.

55% of revnues to players, if the total salaries at the end of the year total more then 55% league wide then a luxury tax at a dollar for dollar rate kicks in, violating teams are also penalized for revenue sharing shares. The harsher it is the less teams will go over the cap.

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12-06-2004, 01:13 PM
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what competitive imbalance?

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12-06-2004, 01:36 PM
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Quote:
Originally Posted by NYR469
what competitive imbalance?
LOL...the part where the same big payroll teams challenge for the cup and one of them wins 9 out of 10 years...the part where small payroll teams almost never challenge for the cup...that would be the competitive imbalance part.

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12-06-2004, 01:44 PM
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Quote:
Originally Posted by JWI19
Hopefully the tax hit is so hard this "Wings" team cant afford to sign this player. Thats one of the ideas of the luxuxry tax, your not just signing a 9 million dollar player your really signing a 15.75 million dollar player (salary + luxury tax at 75 cents on the dollar)

Lets say there is a hard cap of 40 million dollars, a team like the Preds (example only) who dont have much money tied into contracts could sign Iginla for 9 million dollars where as the Flames might not have that money to match the offer. Now i'm not saying it would happen but it could. If a team has the money and values a player that much they will find a way to sign him.
i looked at a basic luxury tax model. $40m threshold for having to pay the tax. $30m payroll minimum to get a share of the tax money paid. 6 teams over the threshold averaging a payroll of $60m. each of the 24 under the threshold teams get $5m each.

so...$5m is only half of iginla's salary and nashville is already stretching to spend $30m as it is. i dont see your scenario working. what i see is the teams spending over $60m still getting over on the little guys.

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12-06-2004, 01:48 PM
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Quote:
Originally Posted by me2
If the rich clubs are getting 4 players to take their payroll to $60m then they are paying $80m total ($60m payroll + $20m tax). Now that $80m would buy them 8 players at $5m/y if there was no tax.

The question for the weaker clubs is it better

a) the rich teams get 4 players and give you $5m
or
b) the rich teams get 8 players and give you nothing

There is even the idea that the rich clubs are forced to keep salaries down. Instead of spending $40m and then adding 4 players getting $10m/y (bad for inflation), they could pick up 4 players at $5m/y (+5m/y per player in tax). For a poorer club under cap, what is going to be easier to match, $5m/y or $10m/y? Which system is going to control salaries better and reduce inflationary pressures?
IMO the luxury tax is about the same as a payoff the the smaller teams in exchange for big teams doing all the winning. its better than nothing, but it certainly does very little to curb the competitive imbalance.

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12-06-2004, 02:01 PM
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Quote:
Originally Posted by txpd
i looked at a basic luxury tax model. $40m threshold for having to pay the tax. $30m payroll minimum to get a share of the tax money paid. 6 teams over the threshold averaging a payroll of $60m. each of the 24 under the threshold teams get $5m each.

so...$5m is only half of iginla's salary and nashville is already stretching to spend $30m as it is. i dont see your scenario working. what i see is the teams spending over $60m still getting over on the little guys.
Okay, you have 6 teams over the threshold when using last years payrolls the number would be closer to 14. And let say 6 teams are only over the threshold doesn't it show you the system is working somewhat? It means 8 teams have dropped thier payroll below 40 million dollars?

As for Nashville after the success they had last year i would expect thier revenues to increase, plus that 5 million dollar tax revenue you used. But that really wasn't my point, which was if a team has 9 million to spend under any kind of CBA and values a player that much they will find a way to sign him. I just used the Preds as an example because they dont have a lot of money tied up in players. I

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12-06-2004, 02:27 PM
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Quote:
Originally Posted by txpd
LOL...the part where the same big payroll teams challenge for the cup and one of them wins 9 out of 10 years...the part where small payroll teams almost never challenge for the cup...that would be the competitive imbalance part.
True, as we have seen, the big spenders like NYR, the Leafs, Blues and Stars dominate the league, while smaller market clubs like the 'Canes, Ducks, Flames and Lightning never go deep into the playoffs.

We need more competitive balance = "I want my team to win, so its time to destroy the makup of those franchises that draft well, make shrewd deals, make the financial committment to retain their own players...and win regularly as a result."

Punish success. Elevate mediocrity! And draw exaggerated connections between spending $$$ and winning. It flies in the face of all that we have witnessed over the years, as recently as last spring! (I know, just another pair of "cinderella/fluke" teams. Funny how we hear that EVERY spring! )

This hockey fan wants the best franchises to be able to retain their talent, not have to give some of it away annually to poorer-run teams under some type of socialistic hardcap scheme. Even if my own is not among them.[/I]

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12-06-2004, 02:35 PM
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Quote:
Originally Posted by Trottier
True, as we have seen, the big spenders like NYR, the Leafs, Blues and Stars dominate the league, while smaller market clubs like the 'Canes, Ducks, Flames and Lightning never go deep into the playoffs.
9 out of the last 10 cups have been won by a big market team.

think about it.

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12-06-2004, 02:41 PM
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Originally Posted by Pepper
9 out of the last 10 cups have been won by a big market team.

think about it.

Define Big Market? Isn't Chicago the 3rd biggest market in the NHL? As a matter of fact the teams in the 3 Biggest markets in the US haven't done **** in over a decade. It's not about market size it's about how you build the franchise. Why should the Avs (not the biggest market) be penalized for drafting well, making smart trades, creating good team chemistry, and god forbid have some revenue to improve their team? The same revenue they had to build themselves, not earn off the backs of other successful franchises?


p.s. after posting this about the Avs i feel the need to take a shower.

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12-06-2004, 02:44 PM
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big market = big budget

Chicago has had mid-low budget for the last 4-5 years or so.

It's owned by a Wirtz after all.

EDIT: I don't mind if teams are allowed to go over the cap to sign those players that are drafted by them.

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12-06-2004, 03:29 PM
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Quote:
Originally Posted by txpd
IMO the luxury tax is about the same as a payoff the the smaller teams in exchange for big teams doing all the winning. its better than nothing, but it certainly does very little to curb the competitive imbalance.
I don't understand.

A big market team (let's say the Rangers) is at the luxury tax limit (let's say $40M), and a small market team (let's say the Hawks) is well below the luxury tax limit. They are both interested in signing Pavol Demitra. Hawks are willing to pay $4M for PD's services, it will cost the Rangers $7M. If the Hawks were willing to pay $6M, it would cost the Rangers $10.5M, with $4.5M of the Ranger's "cost" being distributed to all of the teams below the salary cap.

I think it's obvious that all of the teams DO have a team budget, even the big market teams. This sort of system effectively "halves" the competetive imbalance (assuming most teams aren't willing to go over $70MM in annual salary). If the Rangers want to spend $70M, they would have a $55M payroll & contribute $15M to the teams below the luxury tax limit (assumed $40MM). The new system would be a $15M surplus to the luxury tax limit limit (or approx 33%) compared to $30M surplus now which is about an 80% premium. In this case, the competetive imbalance is greatly reduced.

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12-06-2004, 03:31 PM
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Quote:
Originally Posted by Trottier
True, as we have seen, the big spenders like NYR, the Leafs, Blues and Stars dominate the league, while smaller market clubs like the 'Canes, Ducks, Flames and Lightning never go deep into the playoffs.

We need more competitive balance = "I want my team to win, so its time to destroy the makup of those franchises that draft well, make shrewd deals, make the financial committment to retain their own players...and win regularly as a result."

Punish success. Elevate mediocrity! And draw exaggerated connections between spending $$$ and winning. It flies in the face of all that we have witnessed over the years, as recently as last spring! (I know, just another pair of "cinderella/fluke" teams. Funny how we hear that EVERY spring! )

This hockey fan wants the best franchises to be able to retain their talent, not have to give some of it away annually to poorer-run teams under some type of socialistic hardcap scheme. Even if my own is not among them.[/I]
Lets look at a few of the teams that have been active in the free agent market over the past few years. Lets also look at some of the teams who have feasted off of the financially strapped teams (paid minimally in players and prospects for top end talent).

Detroit
Lang
Hatcher
Schneider
Cujo

Colorado
Kariya
Selanne
Boughner

Toronto
Belfour
Roberts
Mogilny
Klee

NYR
Holik
Jagr

By looking at this list, I have a hard time understanding your complaint about retaining home grown talent. To me it looks quite obvious that the teams that bring in the higher revenue, also buy up the high price free agents. This has been a sore spot in the smaller markets for many a year.

Can't you hear the concern coming from a team like Calgary who has been faced with the prospect of trying to sign a Jerome Iginla. Haven't you watched the despair of the Edmonton Oilers and Pittsburg Penguins who have had to part with the stars of their lineup at the trade deadline (Weight, Kovalev, etc.).

It is true that teams like Calgary have made a run to the finals in recent years. How much chance does Calgary have of keeping the lineup together. When key players like Regehr, Kipper, etc demand more money, Calgary will be forced into another sale. Teams like the Leafs and Flyers and Wings do not face this dilemna. This CBA is aimed at giving the Flames, Penguins, and Oilers of the league the same competive chance as the big spenders.

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12-06-2004, 03:32 PM
  #24
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Quote:
Originally Posted by JWI19
Define Big Market? Isn't Chicago the 3rd biggest market in the NHL? As a matter of fact the teams in the 3 Biggest markets in the US haven't done **** in over a decade. It's not about market size it's about how you build the franchise. Why should the Avs (not the biggest market) be penalized for drafting well, making smart trades, creating good team chemistry, and god forbid have some revenue to improve their team? The same revenue they had to build themselves, not earn off the backs of other successful franchises?


p.s. after posting this about the Avs i feel the need to take a shower.
I think the big markets are more big spenders. The Wal-Mart heirs in COL (and in STL) aren't worried if the Av's make money or not. Wirtz is probably worth about the same $'s, but he runs the Hawks like a business as opposed to an expensive toy. Thus, the Hawks are consistently around the league average in salary even though they are in one of the biggest population areas.

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12-06-2004, 04:33 PM
  #25
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Who are the fools who say that a luxury tax won't narrow competitive imbalance?
Do some basic logic people.

1) The small market teams need more money, the problem that Calgary has is that it makes in revenue maybe what a third of what Detroit or Toronto makes. Without a hard cap and absolute revenue sharing, there will never be complete "competitive balance." This is effectively the way the NFL does it.

2) Considering that the players have no interest in a hard cap and I'm sure the biggest market teams have no interest in losing all of their local money into a general pool, an effective luxury tax may be the best you are going to get. I think $35-40M would be an effective number, and I guarantee you that 25 teams or so will struggle to get lower than that number. Who says that the ratio would even stay at 1:1? If you make the luxury tax punitive enough, you will see all payrolls stay under $X Million, because every team (even the metaphorical Yankees) has a budget.

Consider this hypothetical plan:
To be eligible for revenue sharing, a team must have a payroll of at least $30M. From $30-$40M, no penalty. $40-45 million, 1:1 ratio. ($45M payroll = $50M payroll). From $45-50 million, 2:1 ratio. ($50M payroll = $65M payroll), Above $50 million, 3:1 ratio ($60M payroll = $95M payroll). I guarantee you that the rangers would not have a $80M payroll with that system.

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