Now for part 2 of 3 examining proposed and current economic systems in the
National Hockey League.

So now the players want a luxury tax??? Well,it is a concession but what it really amounts to is a salary cap with very little penalty....at least thats how the owners look at it. I think if you have a luxury tax,it has to have some teeth to it. The only professional league to have a luxury tax is Major League Baseball and it could work. However,it hasn't been in existence long enough to give a true framework whether it helps or hinders franchises. After all,there is only one team over the luxury tax threshold:the New York Yankees.

The strange thing is that they are over the tax by about $50 million US. Why can they do this? It's because they will still make gobs and gobs of money regardless of how much tax they pay. The good thing about luxury tax is that,like a salary cap,it's tied to revenues so going over the tax helps the smaller market teams make money. It also gives some restrictions to spending but also gives teams the choice to go over knowing they will pay tax to smaller market teams. By doing this,players salaries will drag but not by very much,especially in the Yankees case. Obviously the players love this system and the big market fans will as well because more often then not, their favorites will be kept. The other and last good point about this system is that there is a revenue sharing component to this so smaller market teams get the financial assistance they need.If the tax is set low and enough of a penalty will be paid,this could work.

Now for the bad. Once again,it doesnt do as much to drag players salaries. With a tax,the Leafs,Red Wings,Flyers and other rich clubs dont really care about a tax because the buildings are full,they sell merchandise like its going out of style and they will always be in the black no matter how much tax they pay. Therefore,nothing is stopping them from being like the Yankees and buying the best players. The competitive balance is still on the rich clubs sides and smaller market teams like the Oilers and Flames have to continue to hope for the stars to align in order to do anything meaningful in the playoffs. Also,it still does nothing for teams like Nashville with a $23 million payroll and loses money. If they agree to a luxury tax,it will come out to about $35 million a year per team. How in the hell does that help Nashville? What about Florida who lost $64 million last year? The payroll there was about $30 million,how does the tax help them? The revenue sharing component happens only when a team surpasses the tax threshold and because there are a good six or seven franchises that need to be propped up, there still wouldn't be enough revenue to go around. The revenue sharing component is there but in a league like the NHL which is in huge financial trouble, it's not enough. As far as keeping players,the middle and small market teams can kiss their best players goodbye, like they do now, at contract time. General managers are going to have to make accounting decisions,not hockey decisions, to make sure the team is under the threshold. The other really negative point is that while there is an amount you have to stay under,there is an amount that you must come up to. Once again,the teams that can't afford a 25 million dollar payroll will not be helped by a luxury tax since it does nothing to solve their issues. Any big money team can throw the system out of whack at anytime. On theory,it's a great idea and if everyone stuck to this,it works. Of course,if every team stayed under the threshold,there would be no revenue sharing and some teams would have the same problems as always. It's a real catch-22.