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NHL agent calls for league to adopt luxury tax system

Jul 21, 2012, 8:42 PM EST

Fehr-Bettman-Getty Getty Images

Powerful NHL agent Allan Walsh is among the league’s most outspoken player representatives. He made some bold statements about concussions a few months ago and is now providing some interesting thoughts on the CBA talks. Most specifically, Walsh took to Twitter to express his belief that the league needs to adopt a “revenue sharing/luxury tax system.”

Here are some of the highlights from his multiple comments.

“The solution is revenue sharing/luxury tax system to ensure financial health for all franchises,” Walsh wrote. “NHL big market owners are OK paying players big money contracts as long as they don’t have to share their revenue with small market clubs. That’s why the only option for Bettman is to keep coming after the players again and again. There will be no end to this.”

The NBA has a luxury tax system that – in the simplest terms – charges richer teams who exceed the “soft” cap and distributes the “tax” evenly among the teams that avoid the tax. The NHL currently has a “hard” cap, with the most meaningful guidelines being the ceiling (for “big market” teams) and floor (typically for “small market” teams). We’ll see if the NHLPA brings up revenue sharing whenever they decide to provide their counter-proposal.

(H/T to Kukla’s Korner.)

  1. ucaneverscorenoughgoals - Jul 21, 2012 at 9:08 PM

    A luxury tax is not going to dissuade wealthy teams from trying to manipulate a competitive system. The tax is trivial to them. And, you need to look no further than baseball to see that revenue sharing is abused just like welfare in this country. The intent is good but, human nature causes all people to look for ways to milk the system.

    Revenue sharing did not stop the Pittsburgh Pirates from struggling. It may have even given their ownership reason to avoid spending money because the revenue coming in from other teams allowed them to break even while spending very little of THEIR OWN money. In the mean time the Pirates served as a club for other teams to pluck starters from.

    No group of fans should have to sit through 19 straight years of losing and still continue to support their team while revenue sharing enables ownership to wait for lightning to strike from a talent sense.

    A competitive salary cap is neccessary. And, there will always be some small market teams who can’t spend to the cap limit. BUT, at least a reasonable cap limit gives them an opportunity to try and compete with the big market teams.

    I am all for players being compensated in line with what the market will bear. But the market must be regulated so that it is competitive across the board. Don’t allow a player agent to offer new ways to inflate player contracts while also allowing teams to handcuff themselves. The agent has no regard for the the competitive balance of the league, he is just as happy if his client signs with the bully as he is with the underdog.

    • atwatercrushesokoye - Jul 21, 2012 at 9:57 PM

      The Pirates owners and management are to blame for 19 years of failure not the system or any other teams. Many other small market teams have had success to various degrees in MLB, it is possible to do it you just have to have owners who want to do it and management capable of doing it.

      In a luxury tax system you won’t have run away salaried teams because they just won’t be able to, if you set the tax at $70 million with a $0.75 tax for every dollar over for the first $10 million, then $1 for every dollar over the next $10 million and then $2 for every dollar over after that things add up quickly and cut into profits big time, then if you make it so being over for a second consecutive year doubles the tax…well pretty soon even the richest teams are hurting.

      Add to that the accumulation of escalating salaries and diminishing returns (what the Red Sox and Yankees are soon to be dealing with) and giving out rich new contracts to more players year after year just becomes too much of a financial burden.

      • ucaneverscorenoughgoals - Jul 21, 2012 at 10:13 PM

        I think that when dealing with people who are worth hundreds of millions fo dollars, even significant taxes are ignored because they have enough money coming in from different avenues. They are willing to do whatever it takes to create a monopoly in a given market even if their percentage of profit is not that high in a given year. They are only interested in furthering they’re brand.

      • atwatercrushesokoye - Jul 21, 2012 at 10:23 PM

        I used to agree with you fully, then I heard an interview with Doug McLean (who I hate) and it changed my mind he talked about how rich the owner of Columbus was (when McLean was there for the last lockout) and how even though he had made plenty of money elsewhere and still was it would drive him crazy that they were losing money, and in that season they had only lost $3.8 million. Couple this with the fact that 11 teams are currently for sale but they can’t find new owners, and that 17 teams lost money in 2010-11, you can lose money for a little bit but eventually people get sick of losing money and try to figure out a way to make money.

        For my final point I will use two of the richest teams, the Flyers and Maple Leafs, these teams are owned almost entirely by publicly traded corporations, those corporations have shareholders who expect certain profits if they start having diminishing profits or even losing money those shareholders are going to get upset and start asking why and demanding things change. Not everyone who owns shares in Rogers/Bell or Comcast cares about the NHL, winning or losing or building those teams brands, they want profit.

      • ucaneverscorenoughgoals - Jul 21, 2012 at 10:37 PM

        Ok, but aren’t Canadien teams like the Toronto and Montreal bad examples because they are two of oldest most successful franchises in NHL history? Not to mention the fact that Hockey is like a religion in canada, so support for those two franchises is skewed compared to the rest of the league.

        I’m not hating on either by the way. Hockey being like a religion is something to be appreciated. I wish more cities had that type of following.

        If the NHL is primarily driven by gate reciepts my point is that people will show up to watch games no matter what in those two cities so they will always be profitable.

      • atwatercrushesokoye - Jul 21, 2012 at 10:44 PM

        But eventually their profits would drop because they’d be spending more on salaries and of course the luxury tax. The Maple Leafs actually make more profit now then they did in the early 2000’s because their costs are capped.

  2. ndrick731 - Jul 21, 2012 at 9:25 PM

    If an agent thinks something is good he means good for him.

  3. hockeyfootball98 - Jul 21, 2012 at 9:26 PM

    Any system can be broken and bad teams will be….well bad teams. How long have the Islanders been bad with a hard salary cap? Look at the NFL how long have the Browns been bad and NFL has had a hard cap for a while. Point is hard cap isnt a guarantee to create balance, players will sign where they want to. Teams that spend to the cap dont always succeed either. I personally think a luxury tax would be helpful to the league and fans.

    • ucaneverscorenoughgoals - Jul 21, 2012 at 9:36 PM

      You’re entitled to your opinion.

      Mine is that both the Islanders and Browns (because of poor ownership, personel management and injuries) would have even less of a chance to compete without a salary cap. AND, that a luxury tax does nothing to dissuade the Cowboys and Patriots from using the Browns or the Rangers and Flyers from using the Islanders as farm teams.

      A hard cap is no guarentee, but it is obvious that it regulates the competitive landscape from year to year more so than revenue sharing or luxury taxes ever could.

      • atwatercrushesokoye - Jul 21, 2012 at 10:02 PM

        When was the last championship the Cowboys, Patriots, Rangers or Flyers won? The answer is 2004 season for the Patriots. The Cowboys haven’t won a playoff game since 96, the Rangers won a cup in 94, which was their first since the 6 team league, and the Flyers haven’t won since the 70’s. Being in a big market, having a rich owner and using other teams as farm teams does not guarantee success.

      • ucaneverscorenoughgoals - Jul 21, 2012 at 10:08 PM

        Atwater,

        I didn’t say anything about big market/rich owner guarenteeing success but their is no denying that without a cap, richer teams have increased odds of getting into the playoffs and winning championships from year to year.

        Money simply allows them to always be in contention to take on a big contract via free agency or trade whenever they want. Small market teams don;t have this luxury. A salary cap reigns that in.

      • atwatercrushesokoye - Jul 21, 2012 at 10:37 PM

        Ucanneverscoreenoughgoals: for this I’m going to use the example of Glen Sather, look at how competitive his Edmonton teams were in the late 90’s when he had a tight budget and they had to rely on drafting and developing players and then trading for and signing affordable valuable pieces. Then look at the lack of success Sather had with the Rangers in the early 2000’s (before the cap) when he was able to spend unlimited amounts of money on pretty much any big name player he wanted. It didn’t work because he didn’t create a team instead he just spent money on players. It wasn’t until after he was put on a budget and he finally started to draft and develop good talent that the Rangers have finally started to turn things around a little bit.

        The teams that have success are going to be those that develop players and create teams with the pieces that are needed to do all things. Signing a bunch of high priced free agents won’t work because every team needs third and fourth line players who will do the dirty work and play 12 minutes a night without complaining.

        I understand what you’re saying, and your point is equally as valuable as mine, I just think that the notion of spending cash equals championships is misguided, and I think if we were to look back at the last 10-15 Cup champions very few, if any, would be comprised of players that were expensive free agents.

      • ucaneverscorenoughgoals - Jul 21, 2012 at 10:54 PM

        I’m willing to agree “that the notion of spending cash equals championships is misguided”

        But money allows teams to avoid prolonged down periods when the elite level talent and chemistry that wins championships is not available.

        The 01-02 redwings were a perfect example of a team with a ton of talented players that were able to be brought in because ownership had a ton of money.

  4. isithockeyseasonyet - Jul 21, 2012 at 9:44 PM

    Why should teams like the rangers/flyers pay a luxury tax to teams like Nashville who lose money yearly? I don’t like the idea of punishing a big market team for doing what any successful business does- make money. Am I missing the point?

    • atwatercrushesokoye - Jul 21, 2012 at 10:04 PM

      Because of the artificial cap floor it’s impossible for many teams to make money, in 2010-11 only 13 of 30 teams made money. Without some system of revenue sharing in place it’s down to a 15 team league quickly.

    • ucaneverscorenoughgoals - Jul 21, 2012 at 10:04 PM

      No you’re not. I actually don’t want to punish wealthy successful teams either. Primarlily because they have enough money to continue to try and bend the rules even if they are taxed. That is why I’m not in favor of a luxury tax or revenue sharing for that matter.

      Annually signing player’s to cap circumventing deals is bending the rules. Annually exceeding a cap limit that smaller market teams can not regularly meet is bending the rules.

      Revenue sharing and a luxury tax will do very little for a team like nashville to compete with a teams like the rangers/flyers who have hundreds of millions of more dollars to throw around.

  5. mclovinhockey - Jul 21, 2012 at 11:08 PM

    I got an idea, why not award fan bases who care about their team… Let teams like DET, Montreal, Philadelphia and Toronto do what they want since they have the best fan bases in the game.

    If you want your team to win be loyal, 3 of the 4 most loyal fan bases haven’t won cups in a long time.

    Screw helping the little guy, I mean if you have rules like this why not have a rule like I just stated.

  6. swedeg - Jul 22, 2012 at 2:20 AM

    Of course, you could always contract those failing franchises. Get down to 16 healthy teams. Abandon the southern experiment and knock out the smaller Canadian teams.

    Keep the original 6, Philly, Pit, Minny, Dallas, LA, Vancouver, Colorado, San Jose, Washington, and one more.

    Don’t punish the good franchises because it’s not economically viable to have hockey in 30 markets.

    • atwatercrushesokoye - Jul 22, 2012 at 5:53 PM

      Every single Canadian team makes money (thats 7 of the 13 nhl teams that made money!) the fan base of hockey fans is 950,000 Edmonton is probably bigger than almost every American city. And then we could get into big market Atlanta team moving to small market Winnipeg and finally profitable…or we could go with the fact that the national TV deal in Canada generates more revenue for the NHL than the American deal. Yeah getting rid of “small market” Canadian teams is a great idea…

    • atwatercrushesokoye - Jul 22, 2012 at 5:56 PM

      Not to mention Dallas is 29th in league attendance, was recently in bankruptcy and loses money. Minnesota loses money. Colorado’s attendance is declining and I believe they lose money. Other than that though your idea was great…

      • swedeg - Jul 22, 2012 at 6:41 PM

        Minnesota does not lose money. Dallas is important as a franchise location because of the market size. I could hear an argument against keeping Denver, but it’s good to have at least one team in the Mountain time zone. Sorry, but nobody really cares about Edmonton, Calgary, Ottawa or Winnipeg. If you wanted to make one team in Alberta and split the games, that might work. It’s about attractive TV markets with decent fan bases. Who in their right mind wants to watch Carolina play Winnipeg, or Nashville play Edmonton. And if they dispersed, you’d have better hockey, probably more competetive, and people would want to watch.

      • atwatercrushesokoye - Jul 22, 2012 at 7:05 PM

        Minnesota does lose money! Just reference the interview their owner gave in April that the reason the Wild lose money is because of high player costs.

        Winnipeg has the richest individual owner in the NHL, David Thompson is woth more than $19 billion. Murray Edwards (the leader of the rich oil men who own the Flames) is worth $2.2 billion personally. Darrel Katz is worth $2 billion…all in the top 10 amongst owners wealth (amongst non corporate owned) in the NHL.

        Calgary sells out every single game 19,289 which is 7th in the league in attendance (they have for every year since the lockout) they also have a wait list for ticket holders. Edmonton also sells out every single game and have for years, they also have a new arena approved. Winnipeg…yep sellouts. Actually every single Canadian team sold every single ticket for every single game last year! Let’s not forget all 3 of these teams also have regional tv contracts worth more than most American teams.

        The problem with the NHL has nothing to do with Canada, it’s got to do with bad American markets where people don’t care. It’s great you value Dallas so much they had 14,000 fans per game who agreed with you.

        As for your “who cares about Calgary, Edmonton, Winnipeg, and Ottawa.” arguement, watch any game they play in a US arena and you’re bound to see a lot of their jerseys, way more than you’d expect.

        It’s great that you’re Captain America here, unfortunately for you and your argument Canada carries the NHL, you get rid of most Canadian teams and the league struggles.

  7. greatminnesotasportsmind - Jul 22, 2012 at 3:36 AM

    Yeah, let’s make the NHL just like the NBA. Only 7 teams have won a championship since 1996. What makes the NFL better is every team has a chance within 5 years of winning. More up and downs which makes the fans more interested year in and year out.

  8. firemarshal1 - Jul 22, 2012 at 11:28 AM

    Let’s be honest, Mr. Allan Walsh’s motivation here is only MONEY for his clients. Mr. Walsh is the typical “NEW AMERICAN, RIGHT WINGER” whose only success is only measured by their greed, power, and most of all MONEY.

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