NHL CBA Negotiations: The Stats About Luxury Tax and How It Would Kill the NHL

Mark Jones@@CanesReportSenior Analyst IAugust 23, 2012

Luxury tax?

That's one indulgence the NHL can't afford.

It's been well over a week now since the league Player's Association made their counter proposal in the NHL's ongoing CBA discussions, and after cancelling Wednesday's meeting to focus on Thursday's scheduled financial negotiations, talks may be reaching a tense climax.

At the center of the debate, without a doubt, is the salary cap.

And at the center of that dispute lies luxury tax.

Such a system may—or may not—have been included in the NHLPA's proposal last week. However, either way, it's undoubtedly a topic that will get more than its fair share of limelight in the coming days of discussion.

While Gary Bettman and Donald Fehr exchange blows and the media world contests their arguments, number crunching proves only one fact about this particular "luxury."

To the NHL's picture-perfect system of equal opportunity and balanced slates, luxury tax is nothing but a cold-blooded assassin.


Crunching the Numbers: Scenario One

The current difference between the NHL salary floor ($54.2 million) and salary cap ($70.2 million) is roughly 129.5 percent.

The Columbus Blue Jackets, at the moment, lead the league in percentage of franchise net worth (per Forbes.com) spent on annual salary (per CapGeek.com), with their $57.6 million payroll equating to approximately 37.9 percent of their $152 million net worth. Following closely behind in that regard are the Tampa Bay Lightning (36.3 percent), Buffalo Sabres (35.5 percent) and St. Louis Blues (34.2 percent).

The New York Rangers rank as the lowest, with only 11.5 percent of their $507 million net worth devoted to their $58.5 million cap hit. Just above them are the Toronto Maple Leafs (12.1 percent), Montreal Canadiens (14.4 percent) and Detroit Red Wings (17.0 percent).

Now, say that the NHLPA's projected $69 million salary cap is adopted along with an NBA-style luxury tax system—for every dollar over the cap a team spends, it must give another dollar to the revenue-sharing pool. We'll eliminate the salary floor, as well, for comparison's sake.

Without a hard salary limit in place, let's assume that every franchise spends at the 37.9 percent standard set by Columbus. Due to the luxury tax, conversely, only half of the cash they each spend over $69 million goes towards player salaries.

Under that model, a whopping 19 teams would enter taxable range. Nine (Pittsburgh, Philadelphia, Vancouver, Boston, Chicago, Detroit, Montreal, Toronto and New York) would spend over $100 million in total. Three (Montreal, Toronto and New York) would have over $100 million in player salaries. 

Toronto would lead the NHL with both total monetary commitment ($197.4 million, 389 percent of Phoenix's league-low $50.4 million) and net salary ($133.2 million, 262 percent of the Coyotes' mark). Those differences cannot even be compared on a graph to the league parity ratio of today.

Further, the 12 most-highly paid teams' net salaries would nearly equal that of the 18 least-highly paid. The seven Canadian clubs would average $89.9 million in salary. The 23 American teams would average $75.1 million.

The NHL, as we know it, would be shattered. Franklins would rule. Equal playing fields wouldn't.

But it gets worse.


Crunching the Numbers: Scenario Two

Suppose that, after the new CBA was enforced and the luxury tax concept put into place, each franchise spent the current league average of 24.6 percent of their net worth on annual salaries, rather than the Blue Jackets' league high of 37.9 percent.

Obviously, team-by-team cap hits would decrease compared to our first scenario. In this case, only three teams would spend over $100 million in total and none would have total cap hits above $99 million.

Yet, nonetheless, parity would become even rarer. The Maple Leafs' $98.6 million cap hit would be equal to roughly three times (299.1 percent) that of the Coyotes $33.0 million, an additional 36.8 percent over the prior example.


Crunching the Numbers: Scenario Three

Moreover, what if the NHL owners took a page out of baseball's book? After all, MLB squads only spend, on average, 17.37 percent of their net worth on yearly salaries.

In keeping with the trend, the balance would become even more skewed.

In that case, total player salaries would drop even further. A mere three teams would hit luxury tax range, and the league would tally only $1.23 billion in net player paychecks, compared to $2.36 and $1.68 billion in the first two circumstances, respectively.

However, the difference between the Leafs' ($79.8 million) and Coyotes' ($23.3 million) cap hits would rise to a stunning 342.4 percent in this case, and even the difference between the second-most highly-paid team (the Rangers, $78.6 million) and second-least paid team (the Islanders, $25.9 million) would stand at 303.2 percent.


Real-Life Comparison: NBA

The statistics give only one clear answer; luxury tax is wrong for the NHL.

But all of those figures and digits only give us the conclusion that the NBA has already provided.

Over the past 19 seasons of hockey, 21 of the league's 30 teams have won or made an appearance in the Stanley Cup Finals. In the past 19 seasons of basketball, just 16 of the league's 30 teams have found their way to the NBA Finals.

Additionally, just two hockey clubs (Detroit and New Jersey) have had more than two Cup Finals over that time span. Four basketball squads (Chicago, Miami, San Antonio and Los Angeles) have completed that same feat.

Further, since 1982, back-to-back Stanley Cup Finals appearances has occurred nine times.

Also since 1982, back-to-back NBA Finals appearances has happened a jaw-dropping 15 times, including five times by the Lakers alone.

Parity? That's not in the NBA's dictionary.

And obviously, it's not in luxury tax's, either.


Mark Jones has been a Bleacher Report featured columnist since 2009. In that time, he has written more than 415 articles and received more than 695,000 reads. Visit his profile to read more, or follow him on Twitter.

Editor's Note: All statistics referenced or discussed in this editorial were calculated solely by the author unless otherwise cited.


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