Abandoning the salary cap for a luxury tax would benefit the NHL more than just the Leafs
By Filipe Dimas1 year ago
The NHL’s salary cap was introduced in 2005 in an effort to bring more parity to the league, which would theoretically make the NHL more exciting for fans to watch as every team had a chance to be competitive. At least that’s the story we were told, the truth is the salary cap exists only to save billionaires money and prevent athletes from getting paid what they’re worth.
In fact, over the past decade the NHL has actually had the least parity among the big four North American sports with only six unique champions compared to seven in the NBA and eight in each of the NFL and MLB.
Whatever the reasoning, it’s time that we admit that the salary cap experiment has failed, at least in its current iteration. With NHL free agency season set to start today, fans should be excited to see if their team is able to make a major signing, the kind that can vault a contender into a Stanley Cup favourite, however that unfortunately won’t be the case. Even with stars like Dougie Hamilton and Philipp Grubauer available, the vast majority of teams are unable to sign any of these players due to the NHL’s hard salary cap rules.
If that weren’t enough, it turns out the salary cap is even preventing teams from keeping their own stars as the Las Vegas Golden Knights were just forced to trade reigning Vezina winner Marc-André Fleury to the Chicago Blackhawks for virtually no return. Take a step back and consider how absurd it is that a team was forced to give away someone just named the league’s best player, in the sport’s most important position due to the rules in place.
It’s a situation that’s plagued the league ever since the salary cap was first introduced in 2005. Previously, the first day of free agency, and the NHL’s trade deadline were considered two of the most exciting days on the league’s calendar as every team had an opportunity to shake up their roster and make some franchise-altering changes. However, recently each of these days has been little more than a collection of minor moves due to the salary cap preventing teams from pushing their chips all in and making the kind of blockbuster deal that shakes up the hockey world.
A superstar being a free agent should be an exciting time for every team, yet that isn’t the case in the NHL where most teams already find themselves dangerously close to the cap ceiling, unable to freely spend to improve their team. Rather than trying to get better by any means necessary, teams are now forced to be risk averse as a single bad contract could be enough to handicap a franchise’s competitive chances for years to come. The result is a boring league where excitement and change is an outlier rather than a part of the product.
Take for example the reaction when John Tavares signed with the Maple Leafs. A star player in their prime switching franchises is common in all other major leagues, yet it’s such a rarity in the modern NHL that it was treated as a betrayal on par with Luis Figo moving from Barcelona to bitter rival Real Madrid over 20 years ago. A situation which enraged Barcelona fans so much, they threw a severed pig’s head on the field during Figo’s first return to Camp Nou.
So what’s the solution? Trying to remove the salary cap will probably result in another lockout, a thing no one wants except for maybe one eager KHL marketing manager. The simplest solution may be to move into a soft salary cap, one that would still introduce some amount of parity and salary control, while also affording teams increased flexibility and allowing them to push all their chips into the centre of the table and go all-in when it matters most. Of course, it makes sense that a Leafs fan is suggesting abolishing the salary cap as Toronto is one of the league’s richest franchises. However, the benefits of abandoning the current salary cap rules would help the league as a whole far greater than any one team.
As it stands, there are a few options available to the NHL that could see more than just the rich teams benefit.
The Luxury Tax
The NHL already has revenue sharing in an effort for some of the poorer and smaller market teams to not be left behind by the big market franchises. Despite this, we still see teams like Arizona and Ottawa often struggling to meet the salary floor, agreeing to take on ghost contracts of injured players who have a high cap hit and insured salary that the struggling team won’t have to even pay. It should go without saying but when a team is actively trying to trade for injured players you know the system is broken.
What if these teams had another revenue source? One that evened the playing field any time a large market team decided to spend some cash.
Much like the MLB and NBA’s system, a luxury tax would allow teams to spend over the salary cap at the cost of paying a hefty tax every time they did so. The NHL could then take all the extra money paid by teams that exceeded the salary cap and redistribute it to those that didn’t. Alternatively, a portion of the money could be invested into growing the game, doing things like sponsoring a women’s league, offering free hockey camps, or giving away tickets to those who may not be able to afford the cost of attendance.
MLB’s luxury tax starts at 22.5% of each dollar spent over the cap, while the NBA’s starts at a whopping 150% with teams getting taxed even more the further over the cap they spend. If the NHL were to roughly split the difference and tax teams at 100% for going over the cap, that would mean every franchise could have a chance to go full Tampa and be 18 million over the cap during a season, they would just have to pay a total of $36 million to do so, with parts of that extra 18 million going directly to some of their rivals.
The Designated Player
The most famous example of a designated player is in MLS, though the NFL’s Franchise Tag operates in a similar way.
Essentially, when a player is signed, they can be marked as a “Designated Player” which has the effect of most of their salary not counting against the cap. In MLS, teams are able to have up to three designated players and regardless of how much money these players are being paid, they only count as 12.5% of the salary cap.
If these same rules were to apply to the NHL with its current 81.5 million salary cap, that means that any player marked as a Designated Player would only count for $10,187,500 against the salary cap, regardless of if they were being paid 11, 12.5, or even 20 million.
The result would be that franchise players would no longer be pressured into taking a hometown discount to help their team win. Star players could be paid what they’re worth without sabotaging the rest of the team due to their massive salary.
If the NHL wanted to have a lot of fun with it (spoiler alert: they don’t) they would even consider allowing teams to temporarily trade their Designated Player slot to another franchise.
Is your team rebuilding and not planning on signing a superstar any time soon? Trade two years of your designated player slot to another team for a first round pick. You gain an asset, and lose something you weren’t going to use anyways, while your trade partner is now able to sign another star at a fraction of the price against the cap.
The Tradeable Cap
Sending cash to a team as part of a trade is a very common occurrence in pro sports, so why not take it one step further and allow teams to trade away a portion of their cap space for an agreed upon number of years? The NHL practically already does this, with teams being allowed to retain salary on a player that they’re about to trade away.
Allowing teams to trade cap space would allow for even more flexibility. Looking to pick up a star free agent but can’t afford them? See if another team in rebuilding mode is willing to trade over some of their cap space for the next year or two. The contending team gets their star player, and the rebuilding team is able to turn cap space they weren’t going to use into an asset that speeds up their rebuild.
Even owners would have a hard time turning down this option as it means that the maximum amount of money being spent on player salaries league wide still remains the same. The only difference is now rather than having a few rebuilding teams who sit with tens of millions of unspent cap space, the rebuild will be accelerated as they sell that valuable cap space to contending franchises.
At the end of the day the NHL is supposed to be an entertainment product, and there is absolutely nothing entertaining about watching 32 franchises try to balance the books. These days, the biggest competitive edge a team can get isn’t found in signing a superstar but rather in finding a loophole that allows them to exploit the salary cap rules.
The NHL is not a league of parity, as the reality of the hard cap is that superstars are far undervalued. McDavid is the highest paid player in the NHL, and yet he brings far more than 12.5 million dollars of value to the Edmonton Oilers, especially when compared against a number of fourth liners throughout the league who each make 2-3 million.
This is why the last decade has seen four teams be able to repeat as champions. Chicago, Los Angeles, Pittsburgh, and Tampa all benefited from mini-dynasties because each team had at least three superstars they drafted and developed, all making far less than they should have. This makes it impossible for other teams to compete as the lack of flexibility afforded by the hard cap means that star players almost never change teams and the contenders stay contenders until their stars begin to decline. The only course of action left is for teams to number crunch in an effort to avoid signing bad contracts while also hoping they draft well to develop a superstar or two of their own.
If the NHL wants parity it should introduce a luxury tax, designated player slots, or some other method of softening the salary cap rules. Not only would it make the league more exciting as player movement and bidding wars can bring a new level of excitement to free agency and the trade deadline, it would also give General Managers a way to correct their mistakes, rather than suffering for multiple years because the star player they signed had a sudden and steep decline.
The result would be a league where every single year, every team has the potential to make some wild moves and become a contender. The idea of a “competitive window” would be all but abolished, as even the worst teams could decide to outbid the rest of the league and sign all the best free agents in an effort to vault from bottom feeder to playoff contender. Without a hard cap this year could have been the season where the Arizona Coyotes decide to sign Alex Ovechkin, Gabriel Landeskog, and Dougie Hamilton all at once. Instead, we’re stuck in the universe where they are trading for injured players to help other teams free up cap space while most marquee stars just re-sign with their old team due to a lack of other options.
If the NHL is looking to be more exciting in a way that allows any team to become an overnight contender then the only option is to abandon the hard salary cap. Until then, we’re stuck doing what sports fans do best, watching the teams we cheer for send out a roster of players that is 90% identical to last year’s roster and hoping things will go differently this time.
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