What would a luxury tax mean for the Leafs?

by Ryan Fancey on August 14, 2012 in League News - 87 Comments

With NHLPA representatives set to make their counter-proposal to the NHL today, a lot of talk in the last 24 hours has centered around the possibility of a luxury tax system. Apparently it’s something that is right up Donald Fehr’s alley, as it’s been said he’ll try as hard as possible to get away from the hard cap system the league currently operates under.

For those who are a little unfamiliar with it, a luxury tax system is simply where a tax threshold is implemented (instead of the hard cap), and when a team spends over that line, they start paying cents on the dollar to the league. It may be included in revenue sharing, it may not. In the MLB, only a handful of teams clear the threshold, and I suspect the NHL would likely be the same way.

Some teams will be able to do it, and most won’t even be close.

This is where you can take James van Riemsdyk’s quote about the Leafs being the Yankees of the NHL, and give it a little bit of substance. It’s likely the Leafs, along with the Rangers, Flyers, and perhaps a few others, would have no trouble clearing the tax threshold and paying out some coin to the league.

It’s uncertain as to how much the rules of a potential new luxury tax system would resemble that of another sports league, like the MLB, but to give you an idea of how lucrative things can get, the Yankees spent about $200 million in luxury tax from 2003 to 2010. No NHL team would come near to that (the MLB threshold is $170 million), but it does outline how a team like the Leafs, atop their league financially, could benefit from something new like this.

In the past, without a salary cap, the Leafs were able to spend to compete. Then, after the lockout, their fall was arguably the worst in the entire NHL. Should the new CBA somewhat pull the chains from big market teams, some believe the Leafs could be up in the area of $100 million dollar spending on salaries. Remember, this team used to spend $70 million before the lockout in 2004-05.

It’s quite obvious that with the ability to spend more freely, the team and fans wouldn’t be in such a panic over contracts like that of Komisarek, Lombardi, Connolly, or whoever. And I think the main point of interest for myself would be the potential freedom to pay bigger dollars for goaltending.

Right now it’s tough to spend a lot for help between the pipes, given the high risk. And quite frankly, it’s smart not to put too much money in net in a hard cap world. But with the ability to simply pay luxury tax on overspending, well… let’s just say Luongo would likely already be a Leaf, and we probably wouldn’t complain too much about it. The last time the team had anything resembling goaltending was when they threw dollars at Joseph and Belfour pre-lockout.

This may come off as a “this will fix all of the Leafs’ problems” article, but that isn’t really the case. It’s just this mention of a new salary system is a substantial chunk of news relating to CBA negotiations, and I think the whole luxury tax model is interesting, perhaps more so to the Leafs than any other club in the NHL.

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