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Kevin Pelton
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Joined: 30 Dec 2004
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Location: Seattle
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 Posted: Tue Mar 08, 2005 12:16 am Post subject: OT: Luxury Tax |
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This isn't our area of discussion, but our own Dan Rosenbaum authored a quick primer on the tax for the Keeping Score column in yesterday's New York Times:
http://www.nytimes.com/2005/03/06/sports/basketball/06score.html
| Quote: | In 2002-3 and 2003-4, the tax redistributed $680 million from players and high-spending owners mostly to low-spending owners.
That $680 million equals one-eighth of total N.B.A. revenue over these two seasons and dwarfs the $80 million redistributed during the five years of Major League Baseball's luxury tax. (This does not include its revenue sharing.) N.B.A. welfare for low-spending owners even surpasses the cash welfare systems in 30 states. |
Last edited by Kevin Pelton on Tue Mar 08, 2005 12:14 pm; edited 1 time in total |
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gabefarkas
Joined: 31 Dec 2004
Posts: 1313
Location: Durham, NC
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| Posted: Tue Mar 08, 2005 9:32 am Post subject: |
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congrats, dan!
I'm always amazed to be in the company of such impressive thinkers and writers... |
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kjb
Joined: 03 Jan 2005
Posts: 865
Location: Washington, DC
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| Posted: Tue Mar 08, 2005 10:55 am Post subject: |
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| Quote: | | N.B.A. welfare for low-spending owners even surpasses the cash welfare systems in 30 states. |
Now that's an eye-popping stat.
| Quote: | | This may tempt teams to game the system by manipulating revenue to avoid triggering the luxury tax. |
I wonder if there are ways for an individual team or two to game the system by manipulating revenues so that the luxury tax would be triggered. In other words, inentionally hold down their own revenues temporarily (deferred payments?, some kind of barter arrangement -- I'm sure some devious accountant could think up something) to punish teams close to the luxury tax threshold.
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KD
Joined: 30 Jan 2005
Posts: 163
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| Posted: Tue Mar 08, 2005 12:12 pm Post subject: |
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The Old Grey Whistle Lady!
(or something like that, I can never remember ...)
Great job Dan. |
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Dan Rosenbaum
Joined: 03 Jan 2005
Posts: 541
Location: Greensboro, North Carolina
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| Posted: Tue Mar 08, 2005 1:06 pm Post subject: |
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| WizardsKev wrote: | | Quote: | | N.B.A. welfare for low-spending owners even surpasses the cash welfare systems in 30 states. |
Now that's an eye-popping stat.
| Quote: | | This may tempt teams to game the system by manipulating revenue to avoid triggering the luxury tax. |
I wonder if there are ways for an individual team or two to game the system by manipulating revenues so that the luxury tax would be triggered. In other words, inentionally hold down their own revenues temporarily (deferred payments?, some kind of barter arrangement -- I'm sure some devious accountant could think up something) to punish teams close to the luxury tax threshold.
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I had to fight a bit to keep that comparison to state cash welfare programs in the piece. Not too hard though, the editor for the NY Times is very nice.
Actually, underreporting BRI is probably not the biggest problem since there have been incentives to do that for a long time. The incentives are greater, but the League and the NBPA are used to dealing with underreporting. The bigger problem could have been two high-spending teams overreporting revenues so that the luxury tax would not be triggered. Say the two agreed to purchase $50 million ads from each other in the other team's arena. That could boost league-wide BRI by $100 million, which in a year where the luxury tax was a close call could be enough to keep it from being triggered. |
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HoopStudies
Joined: 30 Dec 2004
Posts: 706
Location: Near Philadelphia, PA
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| Posted: Tue Mar 08, 2005 1:15 pm Post subject: Re: OT: Luxury Tax |
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| admin wrote: | This isn't our area of discussion, but our own Dan Rosenbaum authored a quick primer on the tax for the Keeping Score column in yesterday's New York Times:
http://www.nytimes.com/2005/03/06/sports/basketball/06score.html
| Quote: | In 2002-3 and 2003-4, the tax redistributed $680 million from players and high-spending owners mostly to low-spending owners.
That $680 million equals one-eighth of total N.B.A. revenue over these two seasons and dwarfs the $80 million redistributed during the five years of Major League Baseball's luxury tax. (This does not include its revenue sharing.) N.B.A. welfare for low-spending owners even surpasses the cash welfare systems in 30 states. |
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This article implies that Dan has the P&L statements for the different teams. Is it true that Dallas, Portland, and New York all lost money over that period of time? Do we know for sure? If so, I'd love to see those.
This statement:
| Quote: |
On the other hand, 13 teams - Chicago, Cleveland, Detroit, Denver, Golden State, Houston, the Los Angeles Clippers, New Orleans, Orlando, San Antonio, Seattle, Utah and Washington - received much of the redistribution (about $227 million) and increased profits to nearly $600 million from about $200 million. Staying under the luxury-tax threshold has become more profitable than winning.
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is definitely interesting. And confusing. How did they get $227M but increase profits almost $400M? The teams on this list actually look like better winners than NY, Portland, and Dallas. Or at least about equivalent, having Detroit, San Antonio, Houston, and Utah on the list.
One goal of a tax like this is to keep teams with a major financial advantage -- like New York -- from winning all the time as they do in MLB. Dallas and Portland aren't huge markets but have very wealthy owners willing to lose some money in order to win a title. The increased cost of doing so hurts them probably more than it hurts the big market teams. How much of the combined $200M loss suffered by NY, Por, and Dal was associated with the 3 teams? (Who owns their arenas and how are those charged against the bottom line?)
It's good to see that Dan likes the luxury tax better than a hard cap. I personally like this soft cap system. It is a very clever (and complex) system that can be gamed, but it's hard to see how anyone really makes out unfairly.
_________________
Dean Oliver
Author, Basketball on Paper
The postings are my own & don't necess represent positions, strategies or opinions of employers. |
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kjb
Joined: 03 Jan 2005
Posts: 865
Location: Washington, DC
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| Posted: Tue Mar 08, 2005 1:26 pm Post subject: Re: OT: Luxury Tax |
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| HoopStudies wrote: |
This statement:
| Quote: |
On the other hand, 13 teams - Chicago, Cleveland, Detroit, Denver, Golden State, Houston, the Los Angeles Clippers, New Orleans, Orlando, San Antonio, Seattle, Utah and Washington - received much of the redistribution (about $227 million) and increased profits to nearly $600 million from about $200 million. Staying under the luxury-tax threshold has become more profitable than winning.
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is definitely interesting. And confusing. How did they get $227M but increase profits almost $400M? The teams on this list actually look like better winners than NY, Portland, and Dallas. Or at least about equivalent, having Detroit, San Antonio, Houston, and Utah on the list.
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I didn't interpret this to mean that ALL of their increased profits were related to the luxury tax redistributions. In other words, they received $227 million in redistribution payments and increased profits from other revenue sources by another $100+ million. |
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radio
Joined: 17 Feb 2005
Posts: 13
Location: New York
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| Posted: Tue Mar 08, 2005 1:34 pm Post subject: Re: OT: Luxury Tax |
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| HoopStudies wrote: |
This statement:
| Quote: |
On the other hand, 13 teams - Chicago, Cleveland, Detroit, Denver, Golden State, Houston, the Los Angeles Clippers, New Orleans, Orlando, San Antonio, Seattle, Utah and Washington - received much of the redistribution (about $227 million) and increased profits to nearly $600 million from about $200 million. Staying under the luxury-tax threshold has become more profitable than winning.
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is definitely interesting. And confusing. How did they get $227M but increase profits almost $400M? The teams on this list actually look like better winners than NY, Portland, and Dallas. Or at least about equivalent, having Detroit, San Antonio, Houston, and Utah on the list.
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I read it as the extra money came from the player salary tithing that is collected before the luxury tax is levied. Dan, is that accurate?
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Ankur Desai
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Dan Rosenbaum
Joined: 03 Jan 2005
Posts: 541
Location: Greensboro, North Carolina
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| Posted: Tue Mar 08, 2005 1:37 pm Post subject: Re: OT: Luxury Tax |
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| HoopStudies wrote: | | admin wrote: | This isn't our area of discussion, but our own Dan Rosenbaum authored a quick primer on the tax for the Keeping Score column in yesterday's New York Times:
http://www.nytimes.com/2005/03/06/sports/basketball/06score.html
| Quote: | In 2002-3 and 2003-4, the tax redistributed $680 million from players and high-spending owners mostly to low-spending owners.
That $680 million equals one-eighth of total N.B.A. revenue over these two seasons and dwarfs the $80 million redistributed during the five years of Major League Baseball's luxury tax. (This does not include its revenue sharing.) N.B.A. welfare for low-spending owners even surpasses the cash welfare systems in 30 states. |
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This article implies that Dan has the P&L statements for the different teams. Is it true that Dallas, Portland, and New York all lost money over that period of time? Do we know for sure? If so, I'd love to see those.
This statement:
| Quote: |
On the other hand, 13 teams - Chicago, Cleveland, Detroit, Denver, Golden State, Houston, the Los Angeles Clippers, New Orleans, Orlando, San Antonio, Seattle, Utah and Washington - received much of the redistribution (about $227 million) and increased profits to nearly $600 million from about $200 million. Staying under the luxury-tax threshold has become more profitable than winning.
|
is definitely interesting. And confusing. How did they get $227M but increase profits almost $400M? The teams on this list actually look like better winners than NY, Portland, and Dallas. Or at least about equivalent, having Detroit, San Antonio, Houston, and Utah on the list.
One goal of a tax like this is to keep teams with a major financial advantage -- like New York -- from winning all the time as they do in MLB. Dallas and Portland aren't huge markets but have very wealthy owners willing to lose some money in order to win a title. The increased cost of doing so hurts them probably more than it hurts the big market teams. How much of the combined $200M loss suffered by NY, Por, and Dal was associated with the 3 teams? (Who owns their arenas and how are those charged against the bottom line?)
It's good to see that Dan likes the luxury tax better than a hard cap. I personally like this soft cap system. It is a very clever (and complex) system that can be gamed, but it's hard to see how anyone really makes out unfairly. |
Just to clear up a few things.
First, the $680 million does not directly have anything to do with profits and losses. It is simply the sum of the luxury taxes and escrow taxes paid over the last two seasons. As stated in the article, most of that $680 million has gone to low-spending owners. (But most is not all.)
Second, saying that New York, Portland, and Dallas combined to lose $200 million over a two year period does not imply that all three teams lost money. Portland mostly likely lost the bulk of this money, and Dallas and New York probably lost quite a bit less. New York may have even made a profit in one of the two seasons. Profits are notoriously difficult to estimate, but it is possible to group teams and get a sense of how profits were redistributed across the league. (And I know exactly how luxury taxes and escrow taxes were redistributed across the league.)
Third, profits overall for the league likely increased over this period. I would guess they were about $200 million higher in 2002-03 and 2003-04 than in 2000-01 and 2001-02. That would help explain the difference between $227 million and $400 million.
But I do realize that folks are going to misconstrue what I have written. I had a long conversation today with a Seattle Times city reporter about how my article does not imply that Seattle made huge profits over the last two seasons.
I tried to be very even-handed about the luxury tax system. This piece has the potential to be a much bigger deal in front offices than it is among fans. Personally, I find the luxury tax to be a little excessive in that taking $200 million out of the hands of three teams over a two year period seems a bit much to me. Especially since Dallas, Portland, and New York have hardly been burning up the league over the last two seasons. The massive amounts of money being passed around run the danger of creating a lot of unintended consequences. |
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radio
Joined: 17 Feb 2005
Posts: 13
Location: New York
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| Posted: Tue Mar 08, 2005 2:05 pm Post subject: |
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All in all, I'd have to say I'm opposed to the luxury tax. I disagree with Dean when he argues that "One goal of a tax like this is to keep teams with a major financial advantage -- like New York -- from winning all the time as they do in MLB."
Well, Dan may be right that that's the goal, but I doubt it will work. First, let's just note that the last 4 World Series were won by the Red Sox, Marlins, Angels and Diamondbacks, and only one of those teams was in the top-5 in MLB payroll the year of their championship. Now, people somewhat fairly claim baseball has caste system problems, but I view the 2 castes as being the Yankees and everyone else. The Yankees payroll last year was $57,000,000 higher than the second-highest payroll, that of the Red Sox. Subtract $57,000,000 from the Red Sox payroll and they're about league average, with the 14th-highest payroll in baseball. It's clear that some teams don't spend enough to compete-- Tampa Bay, Milwaukee, and Pittsburgh all spring to mind. But it's also true that Oakland and Minnesota have been 2 of the majors' most successful teams over the past 5 years despite spending far less than the league average. More important than the salary gap in baseball-- even still-- is the intelligence gap. The Mets can spend $100,000,000 every year, but as long as they keep spending it the way they have been, the A's will always be better.
But back to the NBA. The reason I don't like the luxury tax is because, as Dan puts it, "Staying under the luxury-tax threshold has become more profitable than winning." Now, perhaps, if everyone eventually realized that, no one would ever exceed the tax again, and the tax would become a kind of hard cap. I suspect that isn't what's going to happen, though. I suspect that there will be a handful of teams always willing to exceed the tax threshold, and those teams will have a marked advantage in acquiring talent. The intelligence gap will always be an issue, in every sport; I can't imagine the Spurs being bad in the next 10 years, simply because they're too well-run. Still, the tax system seems to me to codify a caste system in a way in which MLB has never really done. For a league that has had dynasty issues for the last 20 years, that doesn't seem wise to me.
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Ankur Desai
Amateur Hoops Junkie |
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HoopStudies
Joined: 30 Dec 2004
Posts: 706
Location: Near Philadelphia, PA
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| Posted: Tue Mar 08, 2005 2:20 pm Post subject: Re: OT: Luxury Tax |
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Oh yeah, definitely a good piece. Thought-provoking, not because the concept is new (I have read your stuff before), but because you had some specific numbers that I hadn't seen (or recall seeing).
| Dan Rosenbaum wrote: | | HoopStudies wrote: |
This article implies that Dan has the P&L statements for the different teams. Is it true that Dallas, Portland, and New York all lost money over that period of time? Do we know for sure? If so, I'd love to see those.
This statement:
| Quote: |
On the other hand, 13 teams - Chicago, Cleveland, Detroit, Denver, Golden State, Houston, the Los Angeles Clippers, New Orleans, Orlando, San Antonio, Seattle, Utah and Washington - received much of the redistribution (about $227 million) and increased profits to nearly $600 million from about $200 million. Staying under the luxury-tax threshold has become more profitable than winning.
|
is definitely interesting. And confusing. How did they get $227M but increase profits almost $400M? The teams on this list actually look like better winners than NY, Portland, and Dallas. Or at least about equivalent, having Detroit, San Antonio, Houston, and Utah on the list.
It's good to see that Dan likes the luxury tax better than a hard cap. I personally like this soft cap system. It is a very clever (and complex) system that can be gamed, but it's hard to see how anyone really makes out unfairly. |
Just to clear up a few things.
First, the $680 million does not directly have anything to do with profits and losses. It is simply the sum of the luxury taxes and escrow taxes paid over the last two seasons. As stated in the article, most of that $680 million has gone to low-spending owners. (But most is not all.)
Second, saying that New York, Portland, and Dallas combined to lose $200 million over a two year period does not imply that all three teams lost money. Portland mostly likely lost the bulk of this money, and Dallas and New York probably lost quite a bit less. New York may have even made a profit in one of the two seasons. Profits are notoriously difficult to estimate, but it is possible to group teams and get a sense of how profits were redistributed across the league. (And I know exactly how luxury taxes and escrow taxes were redistributed across the league.)
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But you do have some knowledge of their profits, it sounds. (I never thought you could release any detailed info, but I really couldn't tell if you had additional info.) How do you know that they lost $200M? How do you know that the other teams had profits of $200M that went to $600M? I'm still a bit confused about that.
| Dan Rosenbaum wrote: |
Third, profits overall for the league likely increased over this period. I would guess they were about $200 million higher in 2002-03 and 2003-04 than in 2000-01 and 2001-02. That would help explain the difference between $227 million and $400 million.
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I guess I'm doing the academic thing: What is your reference for the info?
| Dan Rosenbaum wrote: |
But I do realize that folks are going to misconstrue what I have written. I had a long conversation today with a Seattle Times city reporter about how my article does not imply that Seattle made huge profits over the last two seasons.
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I never thought that, having heard it so many times that we lost $10-20M last year. And will do so again this year.
| Dan Rosenbaum wrote: |
I tried to be very even-handed about the luxury tax system. This piece has the potential to be a much bigger deal in front offices than it is among fans. Personally, I find the luxury tax to be a little excessive in that taking $200 million out of the hands of three teams over a two year period seems a bit much to me. Especially since Dallas, Portland, and New York have hardly been burning up the league over the last two seasons. The massive amounts of money being passed around run the danger of creating a lot of unintended consequences. |
I think the concerns about the redistribution is that the money doesn't necessarily go back into building a better basketball team. NY, Por, and Dal have definitely tried to build good teams with varying levels of success. San Antonio, Seattle, Detroit, Utah, and most of the teams on the list of teams receiving the redistribution are also trying to build good teams. It's the Clippers that bug everyone because Sterling essentially places no value on winning, just profits. You economists have a term for this that I never remember, but the fact that Cuban and Allen place so much personal value on winning means that they are willing to spend more to achieve it, whereas Sterling is at the opposite end. He is the detached profit-seeking businessman at the cost of Cuban/Allen. Isn't he providing them a service by building such bad teams? 
So what are the unintended consequences?
_________________
Dean Oliver
Author, Basketball on Paper
The postings are my own & don't necess represent positions, strategies or opinions of employers. |
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HoopStudies
Joined: 30 Dec 2004
Posts: 706
Location: Near Philadelphia, PA
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| Posted: Tue Mar 08, 2005 2:34 pm Post subject: |
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| radio wrote: | All in all, I'd have to say I'm opposed to the luxury tax. I disagree with Dean when he argues that "One goal of a tax like this is to keep teams with a major financial advantage -- like New York -- from winning all the time as they do in MLB."
Well, Dan may be right that that's the goal, but I doubt it will work. First, let's just note that the last 4 World Series were won by the Red Sox, Marlins, Angels and Diamondbacks, and only one of those teams was in the top-5 in MLB payroll the year of their championship. Now, people somewhat fairly claim baseball has caste system problems, but I view the 2 castes as being the Yankees and everyone else. The Yankees payroll last year was $57,000,000 higher than the second-highest payroll, that of the Red Sox. Subtract $57,000,000 from the Red Sox payroll and they're about league average, with the 14th-highest payroll in baseball. It's clear that some teams don't spend enough to compete-- Tampa Bay, Milwaukee, and Pittsburgh all spring to mind. But it's also true that Oakland and Minnesota have been 2 of the majors' most successful teams over the past 5 years despite spending far less than the league average. More important than the salary gap in baseball-- even still-- is the intelligence gap. The Mets can spend $100,000,000 every year, but as long as they keep spending it the way they have been, the A's will always be better.
But back to the NBA. The reason I don't like the luxury tax is because, as Dan puts it, "Staying under the luxury-tax threshold has become more profitable than winning." Now, perhaps, if everyone eventually realized that, no one would ever exceed the tax again, and the tax would become a kind of hard cap. I suspect that isn't what's going to happen, though. I suspect that there will be a handful of teams always willing to exceed the tax threshold, and those teams will have a marked advantage in acquiring talent. The intelligence gap will always be an issue, in every sport; I can't imagine the Spurs being bad in the next 10 years, simply because they're too well-run. Still, the tax system seems to me to codify a caste system in a way in which MLB has never really done. For a league that has had dynasty issues for the last 20 years, that doesn't seem wise to me. |
Any "welfare" system has the danger of rewarding those who don't deserve it. There still are financial rewards for winning. Whether those balance the rewards for spending little is unclear. As long as there is debate on the matter, it seems like the balance is at least close.
Ignoring the massive social commentary that we could get into, there is debate into what is "right" even in sports. Some would say that the large market of NY should get more titles than the smaller market of Utah because you're pleasing more people that way. So let them spend more money. And if their fans are willing to pay more to win, they deserve more titles, so don't penalize them. Then there is another side that suggests that sports is about the uncertainty of winning and if you KNOW that one city and one people want it more and you give them the power to follow that, then that takes away from the SPORT itself.
I am personally undecided on the philosophy. I do love the game involved with the soft cap, but I am unsure whether we should be playing it.
_________________
Dean Oliver
Author, Basketball on Paper
The postings are my own & don't necess represent positions, strategies or opinions of employers. |
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radio
Joined: 17 Feb 2005
Posts: 13
Location: New York
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| Posted: Tue Mar 08, 2005 4:34 pm Post subject: |
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| HoopStudies wrote: |
Any "welfare" system has the danger of rewarding those who don't deserve it. There still are financial rewards for winning. Whether those balance the rewards for spending little is unclear. As long as there is debate on the matter, it seems like the balance is at least close. |
That strikes me as being a reasonably big problem. The system shouldn't be offering teams a hard decision between winning and spending little.
| HoopStudies wrote: |
Ignoring the massive social commentary that we could get into, there is debate into what is "right" even in sports. Some would say that the large market of NY should get more titles than the smaller market of Utah because you're pleasing more people that way. So let them spend more money. And if their fans are willing to pay more to win, they deserve more titles, so don't penalize them. Then there is another side that suggests that sports is about the uncertainty of winning and if you KNOW that one city and one people want it more and you give them the power to follow that, then that takes away from the SPORT itself. |
Well, I agree that this is a pretty thorny issue. Just taking your two points above, though, I would think that paying teams a lot of money to not try to compete would hurt the fans of several teams and cut down on overall uncertainty.
| HoopStudies wrote: |
I am personally undecided on the philosophy. I do love the game involved with the soft cap, but I am unsure whether we should be playing it. |
Well, to address your second point first, there's a good deal of gamesmanship involved in the NFL's hard cap as well. I don't really know much about the NFL's rules, but they do appear to be satisfyingly complicated. I think that any system we'd come up with would be intricate enough to reward teams that are smart and forward-thinking, without doing quite so much to reward teams that are merely penurious. A simple way to do this would be to only award tax money to teams that spend above a certain threshold amount on player salaries (essentially, imposing a floor on the amount of money you can spend while still qualifying for cap payments). This would encourage teams to try to stay competitive while also leveling the playing field to correct for the Cubans and Allens of the world.
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Ankur Desai
Amateur Hoops Junkie |
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Ben F.
Joined: 07 Mar 2005
Posts: 391
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| Posted: Tue Mar 08, 2005 6:47 pm Post subject: |
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At the same time, leaving it open like the MLB used to do before the latest collective bargaining agreement has it's major disadvantages. Dean, you said you wanted to stay away from the major social commentary, but I think you have to drag that aspect into it. A little before the turn of the century America was pretty much a pure capitalist society, with no government intervention. It ended up not turning out too well. I'm sure Dan can come along and perhaps explain the economic ramifications of lifting government regulations and setting loose a pure capitalistic society.
But that's not really what I want to get into. The fact is that principle doesn't really work. The NFL has some of the most stringent regulations, as radio pointed out, and yet is also the most successful. It has the most balance and most parity. And although some lament the disappearence of the dynasty, it doesn't seem to have hurt the sport financially at all.
To basketball, I think that the system has been relatively effective. The two best teams in the league, the Spurs and Suns, have a combined payroll of about $90 million, which is less than the Mavericks' alone. There's no chance in baseball that the #24 and #25 ranked payrolls are the two best teams in the league.
And as you hinted at, radio, a lot is about intelligence, not just money. But you certainly don't want a situation like baseball, where the rich get richer and the poor skimp to try and get richer.
I think Dean also made a great point in saying that you also have to look at the economic impact of losing versus the economic gain you get from spending little. The Hawks, Hornets, Bobcats, Jazz, Nuggets, the 5 lowest spending teams in the league, all will attempt to spend their cap room this offseason in an effort to get better (especially New Orleans, if they don't have to move again because of a dwindling fan base). Now that could be their competitive desire, as after all, it is sports, but I think it also says that the luxury tax really isn't THAT extreme.
Last point, as I know this is long.
I think it's a great aspect of the CBA that the luxury tax is tied directly to BRI. I'm not sure if the other leagues have this, but it's great because it's only there if necessity demands it. |
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HoopStudies
Joined: 30 Dec 2004
Posts: 706
Location: Near Philadelphia, PA
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| Posted: Tue Mar 08, 2005 7:29 pm Post subject: |
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| radio wrote: | | HoopStudies wrote: |
Any "welfare" system has the danger of rewarding those who don't deserve it. There still are financial rewards for winning. Whether those balance the rewards for spending little is unclear. As long as there is debate on the matter, it seems like the balance is at least close. |
That strikes me as being a reasonably big problem. The system shouldn't be offering teams a hard decision between winning and spending little.
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That's not what it's doing. The cap is based on the theory that owners are profit maximizers and that some markets have an inherent advantage in allowing their owners to do so. So let's balance these out. Winning and spending little both provide a route towards maximum profitability. The routes are just different.
| radio wrote: |
| HoopStudies wrote: |
I am personally undecided on the philosophy. I do love the game involved with the soft cap, but I am unsure whether we should be playing it. |
Well, to address your second point first, there's a good deal of gamesmanship involved in the NFL's hard cap as well. I don't really know much about the NFL's rules, but they do appear to be satisfyingly complicated. I think that any system we'd come up with would be intricate enough to reward teams that are smart and forward-thinking, without doing quite so much to reward teams that are merely penurious. A simple way to do this would be to only award tax money to teams that spend above a certain threshold amount on player salaries (essentially, imposing a floor on the amount of money you can spend while still qualifying for cap payments). This would encourage teams to try to stay competitive while also leveling the playing field to correct for the Cubans and Allens of the world. |
If you really want to balance things out, you look at the inherent costs and revenue potential associated with each market. Places like Indiana have smaller revenue potential and smaller costs (as in land prices and other fixed costs). But they have much smaller revenue potential. Doing that analysis is a pain in the royal sirloin, so spending is a kind of surrogate for the resources available.
I'm oversimplifying and probably forgetting, but whatevah.
_________________
Dean Oliver
Author, Basketball on Paper
The postings are my own & don't necess represent positions, strategies or opinions of employers. |
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