Pros, Cons and Other Options for a Luxury Tax System in the NHL

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The NHL’s salary cap makes it near impossible to maintain prolonged success, which is a good thing, but could it be better?

The NHL has multiple teams up against the cap, the Toronto Maple Leafs, Vegas Golden Knights, and Tampa Bay Lightning to name a few. They have big-time guys signed for a lot of money, and role guys signed for cheap (as many teams are run, this isn’t new). But, when the playoffs come around, the NHL’s salary cap is tossed out the window.

Yes, seeing the same team in the finals for four to five years in a row isn’t the best for the game. The beauty of the NHL compared to other major leagues is how hard it really is to build a winning team and personnel. With that said, could a luxury tax help the NHL in forms of keeping fan interest long term? I will go over both options here, and a final point at the end of the article.

Why the NHL should use a Luxury Tax
Why the NHL should not use one
A simpler option

Why the NHL Should Have a Luxury Tax System:

Let’s get right to the team I have in mind, which is the Vegas Golden Knights.

The NHL has loopholes in the cap, as I have talked about before (you can read that here) and the league knows that teams will bend the rules and play their cards to bypass the rules. This is unfair for other contenders who have to maintain their healthy roster into the postseason. Other teams, like the Golden Knights, have a massive addition in Mark Stone for the playoffs alongside Jack Eichel. The Golden Knights are approximately 10 million over the $82.5 million cap ($91.522 million) with Mark Stone and Alec Martinez in LTIR.

Then there are teams with massive contracts on their payroll, such as the Toronto Maple Leafs and the Edmonton Oilers. Connor McDavid is earning 12.5 million dollars per year and the Maple Leafs have four guys who make up more than half of their cap space, led by Auston Matthew‘s 11.64 million dollar deal. A ten million dollar cushion could add a massive rental to make a serious run at the Cup.

With the luxury tax of 10 million dollars, teams can build strong teams without cheating the cap while maintaining the same difficulty it takes to win the Stanley Cup. The top teams in the league who are in position to contend at the moment have to pay a tax rate which would be distributed equally to the teams who did not exceed the salary cap as compensation.

No one points out the massive difference between your team’s situation and the current salary cap (Tampa Bay and Chicago) after winning the Cup AND you are compensating their team with a sizable check.

Now, let’s go over the next part.

PITTSBURGH, PENNSYLVANIA – MAY 24: Evgeni Malkin #71 (Photo by Emilee Chinn/Getty Images) /

Now why the league should NOT use a Luxury Tax.

There are teams like the Pittsburgh Penguins and Colorado Avalanche who navigated the cap perfectly to ice a competitive roster under $82.5 million. Players take massive pay cuts in order to help the team win, making that Stanley Cup that much more sweeter.

Nathan MacKinnon is well-documented for his current salary (6.3 mil) making him the most underpaid NHL player right now. Guys like Cale Makar could easily be making a ton of money, but signed for a cut of 9 million and Samuel Girard signed for 5 million. Sidney Crosby has been massively underpaid with a 8.7 million dollar salary for 12 years as well, to name a couple examples.

Again, the luxury tax could bode very well for teams like Vegas and Toronto, BUT it could lose the allure of the Stanley Cup. Guys sacrifice for the championship in this league, whether it be playing through injury or taking pay cuts to grind out four, seven-game series to win the grandest trophy in all of sports. Not many leagues can say that their championship is the hardest to build and play for. With a luxury tax, teams would have the potential to cruise right through the bracket for an easy Cup.

No one wants to watch that, except the fans of that team. Not to mention that teams with money-hungry owners won’t care about winning because they get a guaranteed check at the end of the season. Passionate, competitive owners want to win more than anything and spending 10 million dollars won’t do much for them.

Now, there is an obvious solution to this. And something everyone involved has asked for a LONG time now.

The Chicago Blackhawks celebrate after teammate Patrick Kane #88 scored (Photo by Al Bello/Getty Images) /

Yes, the easy solution here is to raise the salary cap altogether, making it easier to retain RFAs AND maintain competitiveness for a longer period of time. Every team has an equal chance to ice a competitive roster without having to compensate teams for their lack of drive to be competitive after years of mediocrity. When you hit gems in the draft, you can sign and retain them rather than having to clean house after every successful year.

The Chicago Blackhawks are a perfect example of this as they had to let go of many key members of their championship teams. Dustin Byfuglien, Troy Brower, Andrew Ladd, and more were sent off after the 2010 championship, which led to a retooling process for the next two years. A raised salary cap of 92.5 million dollars rather than adding a 10 million luxury tax would still encourage competitive hockey without compensating for the undriven teams.

To Conclude…

It’s quite easy to see the real, effective answer here. The NHL could raise their horrendously low salary cap a bit to allow teams to be competitive for longer periods of time. Luxury tax systems will compensate owners who just want money while financially costing owners who want to win. It would also cause a massive headache for the league as a whole, especially teams who built their rosters perfectly to fit under the cap AND be competitive. Yes, while the effects of COVID-19 are still lingering, this may not happen for a while, but the league HAS to raise the cap as soon as possible.

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