In each league of the four major sports in North America, teams have some sort of semblance of what we know today as a “salary cap”, which ultimately sets a limit on how much a team can spend on player salaries. Depending on what league a team is in, this “salary cap” can be more flexible, such as the NBA and the MLB, which have a luxury tax, effectively taxing teams for going over the salary cap limit. If you are in the NFL and especially the NHL, the cap space is set to a “hard salary cap”, which means you absolutely cannot go over the limit or your team will be punished with major fines, loss of draft picks, loss of contracts, and more. The NHL’s salary cap rules are the best in all of sports.
The MLB’s and NBA’s Cap Rules: The Plight of the Small Market Team
In America’s past-time, the players are paid huge sums of cheddar, with each player in the MLB averaging about $4.4 million in 2016. In the 2019 MLB season, the threshold of salary money could not exceed $206 million. That is, of course, if you don’t want to pay a 20% overage tax to each player that goes over the limit. This can be problematic for small-market teams such as the Cincinnati Reds, the San Diego Padres, the Miami Marlins, the Tampa Bay Rays, etcetera.
In the NBA, this is also true. Teams can fork over a lottery tax to lift their cap ceiling and sign more star players. However, the NBA’s rules are slightly different than the MLB’s rules. In 2011, the NBA “introduced a progressive tax rate” (SB Nation, 2018). Although this is a tougher rule on the luxury tax than the MLB’s, it still incentivizes the “big boys.”
Big market teams essentially get a bonus for signing multiple big free agents and other major additions that small market teams just cannot stomach. It’s easy to see why; big market teams generate more revenue, thus allowing them to fork over extra money to pay for more star players. Sure, small market teams such as the Milwaukee Brewers or the San Antonio Spurs can have a loyal fan base and generate a lot of revenue for the team, but, for one, it still doesn’t come close to the amount of revenue big market teams such as the Boston Red Sox or the Chicago Bulls generate, and most small market teams do not have the strong, loyal, “through-thick-and-thin” support like most big market teams (and few small market teams) have.
The NFL’s Cap Rules: Great but Not the Best
The NFL’s cap rules are completely different from the previous, using a “hard cap space” which sets a hard limit that teams cannot go over whatsoever. This is much similar to the NHL’s rules. However, there’s one problem with the NFL’s salary cap rules that puts it under the NHL’s.
If a player doesn’t produce to a certain degree in a contract agreement, it does not count against the team’s cap space, whatsoever.
Some might say that this is amazing, but is it? There’s a certain risk/reward factor when signing contracts in sports. If a general manager signs a player for a certain amount of money, they have to be confident in that player’s abilities. It’s in the phrase, “risk/reward”. Taking away some of that risk makes for a slightly less strategic way of going about offering contracts. It also takes away from the competitive side of management. General managers are competing just as much as the players are, working out the best contracts in hopes of being the most cost-efficient manager in the league.
The NHL is the “King of Cap Space”
With the NHL’s rules, each team is subject to a league-wide standard cap ceiling. Each manager has to be confident in the contracts they sign. There is not a “reward” for signing a bad contract like the NFL. There isn’t a luxury tax like the NBA and MLB, which destroys any parity in those leagues. Each team in the NHL can make the same financial decisions, whether or not they are a small or big market.
This is why the NHL’s cap space rules are the best in all of the major sports.