POLL: Luxury Tax

[niles08]

The conversation in the "bonus funds uses" topic got my wheels spinning on different things. This is not an official poll from the powers that be but more of a simply poll/discussion on a crazy idea that came to mind and sort of just flowed.

The discussion came about when discussing the salary cap and how it is in place to help those teams that are lower on the revenue earning side at the time.

Here is what I am interested in hearing your thoughts on...

This proposal would eliminate the $110,000,000 salary cap, and make it more of a "soft cap" similar to what currently happens in MLB & NBA. Any team who goes over the cap would be billed at a rate of $500,000 for each $1,000,000 they were over the cap(50%). This money however would not just go away. It would actually be given to the bottom 5 budgets of the league.

For instance say there was 5 teams in the league that were over the salary cap by a total of $29,000,000. That $29,000,000 would be split evenly($5,800,000 per team) among the lowest budgeted 5 teams in the league and added to their budget for the following season giving them additional flexibility.

The number used would be the number at the end of the season for "Player payroll". So this would not have to be managed by Matt each sim having to look if someone is over but rather at the end of the year seeing who's payroll exceeded $110,000,000.

Using this current situation it looks like Jacksonville and California actually went over? Jacksonville had $120,407,387 and Cal had $114,533,555. The 14,940,942 would be evenly split among 5 teams at the bottom(HAW, EDM,VAL,VAN,DM) giving each team an additional budget of $2,988,188.

I also think it would be interesting to have "competitive comp" rounds in our draft similar to what MLB currently does. We could say the lowest 5 earning revenue teams get an extra pick at the end of the 2nd round. I think it would very much so even the plane for those "low budget" teams to have an additional pick at the end of the 2nd or 3rd round as well.

What are the leagues thoughts on such a thing and how crazy am I?

[Bumstead]

There's an entire luxury tax system built into OOTP. I would think we would just use that system in your example above rather than singling out certain teams as receivers of "revenue sharing." The financial system in OOTP works much smoother without a salary cap. However, this league has been a "Salary Cap" league for many seasons. It would change the entire landscape of the league and create just as many haves vs have nots as currently exist in this system. I think it would be difficult to drop the salary cap in this league. JMO

Jeff

[bcslouck]

Using this current situation it looks like Jacksonville and California actually went over? Jacksonville had $120,407,387 and Cal had $114,533,555.

Just commenting on this portion since you have the question mark. I'd assume teams go over the $110M in player expenses all the time by year end without ever going over the cap at any one point. Probably why they are "over."

[niles08]

Using this current situation it looks like Jacksonville and California actually went over? Jacksonville had $120,407,387 and Cal had $114,533,555.

Just commenting on this portion since you have the question mark. I'd assume teams go over the $110M in player expenses all the time by year end without ever going over the cap at any one point. Probably why they are "over."

Yea, I am guessing their total for the year is actually over $110,000,000 when they figure players they pay quite a bit to before trading them in the middle of the season to get "back under the cap".

[niles08]

There's an entire luxury tax system built into OOTP. I would think we would just use that system in your example above rather than singling out certain teams as receivers of "revenue sharing." The financial system in OOTP works much smoother without a salary cap. However, this league has been a "Salary Cap" league for many seasons. It would change the entire landscape of the league and create just as many haves vs have nots as currently exist in this system. I think it would be difficult to drop the salary cap in this league. JMO

Jeff

I didn't know OOTP had one I would have probably just figured out how it worked and used that for the proposal instead. However what I actually like about this proposal is that the "bottom budget teams" actually are getting that money each year to even the landscape even more. Currently with a cap of $110,000,000 it's not like Hawaii is going to get there anyways with a budget of $70,000,000. This proposal would bring them a big closer to the rest of the pack in my opinion.

Yes, teams could in reality spend more, but could they afford to? Most teams don't have enough money laying around each season to spend $10,000,000 more on a player and then turn around and pay an additional $5,000,000 for being over the cap on him as well(therefore making him worth $15,000,000 basically to that team).

[handaspencer]

From my experience I am pretty excited about the parity in this league. There was only 1 team that won 100 games and we only had 3 teams lose 100 games seems pretty balanced to me in my limited time here. I am not necessarily opposed to dipping into the bonus funds and treating it as a soft cap but it would need to be very restricted and painful to dip into the funds. My initial reaction is I am against it.

I am definitely against additional comp picks, I believe we had 19 or 20 comp picks already which is almost another complete round just by itself. Any action to add a competitive balance round would need offset by the reduction of compensation picks overall.

[Bumstead]

We should do a poll on eliminating comp picks! Recte will love it!

[agrudez]

The soft cap / luxury tax part of this is dead on arrival, but I actually like the idea of comp picks for struggling teams on its own merits. I'm not sure what the best barometer would be for qualification, though. If you go by revenue you're basically just going by record (since in OOTP there is a much stronger correlation there than real life) which doesn't seem to meet the intent (after all, even the 'haves' can have a down period here or there). Maybe some amalgamation of market size and fan loyalty? The benefit there is that those two things are much slower to change than revenue, record or fan interest - so you'd more likely to be helping the truly 'struggling' teams.

[Ted]

The soft cap / luxury tax part of this is dead on arrival, but I actually like the idea of comp picks for struggling teams on its own merits. I'm not sure what the best barometer would be for qualification, though. If you go by revenue you're basically just going by record (since in OOTP there is a much stronger correlation there than real life) which doesn't seem to meet the intent (after all, even the 'haves' can have a down period here or there). Maybe some amalgamation of market size and fan loyalty? The benefit there is that those two things are much slower to change than revenue, record or fan interest - so you'd more likely to be helping the truly 'struggling' teams.

Since we're discussing it, what I expect to find with the current comp picks is that the are largely going to teams that are already making money (and therefore able to spend it on free agents on short team deals) and NOT going to teams that actually "need" them. The historical purpose of comp picks is to let small market teams recoup value when they cannot afford to sign a guy and he goes to free agency. I do not believe that is what is happening in the Brewster. This all ties into cap versus no cap and revenue sharing. In a capped league, where the cap is such that really any team should eventually be able to spend to the cap if they make a point of growing their revenue stream, I feel they are really necessary.

What I think is happening is that the overwhelming majority of comp picks are "earned" by vets who are on free agent deals (sometimes their second or ever third). Good free agents are largely signed by teams that are making money already. What we have instead created is a system that rewards people who understand how to earn comp picks. Maybe that is what we want. I don't know. I don't like it. The draft system is largely set up to give worse teams better picks. How altering the competitive balance with comp picks that aren't necessarily helping struggling franchises more often than they are helping already good ones serves any purpose is beyond me.

What lit this fire under me is compiling the comp pick list, and seeing a bunch of 26 year olds go to FA because teams decided they couldn't pay, or the player wasn't worth the money (lots of arb declines this year), and most of the comp picks (in what feels like is often the case) going to teams with sound financials and either had a player opt out/decline a po, or reached the natural end of a big free agent deal.

I think it's hard to make sure comp picks go to "deserving teams" and think the best bet would be to simply not have them at all. But if we are trying to use them for their historical purpose, which is help teams that can't afford to keep their own players, the criteria should be based on service time and WAR over that service time, not just one year. Furthermore, it should only apply to players running out of team control, NOT free agents.

But maybe that's not what we're trying to do with comp picks. I could be missing something. But first, I'll get the data and see what is actually happening.

[agrudez]

Since we're discussing it, what I expect to find with the current comp picks is that the are largely going to teams that are already making money (and therefore able to spend it on free agents on short team deals) and NOT going to teams that actually "need" them.

I think that's absolutely true, currently, for FA comp picks. I was discussing adding unique comp picks divorced from FA that went specifically to the downtrodden teams for no other qualification other than that. Whether or not we want to keep the current FA comp pick system is another interesting discussion, though - and you laid out some very salient points against it. I'm not sure where I fall on that particular issue. One thing that I think goes against the spirit of the intent to me is the FAs that sign a 1 year deal, go have a career year and then give their team a comp pick when they sign for 2x 2M. Moving from last year's WAR to career average WAR as the metric for qualification seems like a good suggestion to mitigate that (and the cases of a superstar that had an injury plagued contract year that misses the mark).

[jiminyhopkins]

Can I vote "no" without the "moron" part?

[RonCo]

One thing to note is that, while they are often discussed this way by fans, comp picks in the MLB are not really about competitive parity. They are about owners recouping some of the value of a lost asset. You can see this in the way GMs of real teams craft contracts--in that they approach a deal with the understanding of the value of a future/potential comp pick baked into them, and they deal or don't deal players depending on whether they can get something better than a comp pick for them. A weaker team who trades a guy that would normally bring a round 1 comp pick should work hard to extract that value from a front runner. Blah, blah, blah...

I suspect Ted's study will show that the more forward-thinking/well-rounded GMs in the BBA get more comp picks. As a rule, those forward thinking, well-rounded GMs will be more likely to be running teams that win more games...but those are slightly different things.

If you thinking comp picks should be about competitive balance, then we should consider getting rid of them--because they most definitely are not. But I think that would be a bad thing. To me, comp picks are just one more in a wide array of balls a good GM should juggle to extract value from its assets.

[RonCo]

The hard salary cap done in the way the BBA has done it makes it one of the most difficult competitive environments in the OOTP universe. JimBob's running feature of how often the playoff teams churn is a great feature, and shows exactly why we shouldn't consider dropping it. IMHO, of course.

[aaronweiner]

Player expenses are not the cap. The cap is the cap. You cannot exceed, on your team, $110 million in salaries at any given time.

[aaronweiner]

I should note that in voting no, I have no objection to the comp picks really.

[RonCo]

Player expenses are not the cap. The cap is the cap. You cannot exceed, on your team, $110 million in salaries at any given time.

That's not what the rules say. The rules say you can be over cap, but your team will pay a penalty.

[Ted]

One thing to note is that, while they are often discussed this way by fans, comp picks in the MLB are not really about competitive parity. They are about owners recouping some of the value of a lost asset. You can see this in the way GMs of real teams craft contracts--in that they approach a deal with the understanding of the value of a future/potential comp pick baked into them, and they deal or don't deal players depending on whether they can get something better than a comp pick for them. A weaker team who trades a guy that would normally bring a round 1 comp pick should work hard to extract that value from a front runner. Blah, blah, blah...

I suspect Ted's study will show that the more forward-thinking/well-rounded GMs in the BBA get more comp picks. As a rule, those forward thinking, well-rounded GMs will be more likely to be running teams that win more games...but those are slightly different things.

If you thinking comp picks should be about competitive balance, then we should consider getting rid of them--because they most definitely are not. But I think that would be a bad thing. To me, comp picks are just one more in a wide array of balls a good GM should juggle to extract value from its assets.

Yup, this is what I expect. On some level, I don't have a problem with this. However, we've just had two big free agent classes in a row (which is nice), and it's possible that with better arbitration and tougher extensions that seem to be the norm recently, this will continue. If that happens, I really don't like it, and think we should at least look at the thresholds. We could have 19 comp picks this year. We won't, but even like 12-15 is probably too many. Or we could move them back a round. I just don't like the teams that are trying to build from nothing losing access to good talent in the draft.

My other question is why should teams be compensated for losing talent to free agency (outside of revenue based competitive balance system) at all? Everyone loses players to free agency. The idea that teams who have benefited from having a good player get compensated and teams that don't get nothing just seems rather arbitrary to me. I appreciate the fun of having the strategy and having more balls to juggle, but it just seems a tad overpowered, and comes at the expense of teams that truly need help.

[aaronweiner]

Player expenses are not the cap. The cap is the cap. You cannot exceed, on your team, $110 million in salaries at any given time.

That's not what the rules say. The rules say you can be over cap, but your team will pay a penalty.

Yes, technically, but nearly nobody does this on the basis of the penalty. As you pointed out it would be very hard to maintain this for very long.

[RonCo]

Yes, technically, but nearly nobody does this on the basis of the penalty. As you pointed out it would be very hard to maintain this for very long.

Yes, the penalty is solid and works well to dissuade the practice. But we've generally also viewed it purely for it's punitive nature rather than as a tool to use in the right spot.

[handaspencer]

I want to understand how this cap works better. So if I understand it the actual "cap" is payroll only? It don't count staff expenses, draft expenses, international FA, or misc player expenses? So for example I could have 110 mill in payroll but have 140 in total expenses and still be ok with the cap?