Shazback , I just gave a general definition of luxury tax as it relates to Professional Sports. Please note that I finished with a question mark. At 12.33pm Daryl made an interesting comment: “That’s sort of the point Shazback.” Do I need to comment any further.

Assuming you read Daryl’s entire post, somewhere he stated : “All this proves is that the big teams have a lot of strength in depth” and I followed up with: “Yes the big teams have a lot of strength in depth. This is so because there is no salary cap and luxury tax (pardon the typo, it was lapsus calami) in soccer.”

Salary Cap and Luxury tax can also work in open leagues but I guess I have to create a post for that. See you on my home turf.

Here is a “Prelude”

The structure of a promotion/relegation system means weaker teams struggle against the threat of relegation, adding importance and excitement to the matches of weaker teams? No wonder the “big four” will remain the “big four”

The poor will remain poor? :

Jobs are not readily available to people who have little to no experience in the field, yet workers cannot get experience without getting a job.

An individual with no credit history (not to be confused with poor credit history) has trouble getting credit, yet creditors are hesitant to give loans to people who have little to no credit history.

I say we have this Anglo-Scottish cup thing and winners can play in Champs League.

Anyway, who should be applying this “tax” or “cap”? The individual leagues? Why should the FA set a cap that is even similar to the Estonian FA’s cap? UEFA? On what basis would they legislate la Liga, Serie A or the Bundesliga, when they’re not running it?

Salary caps and Luxury taxes work in “closed” leagues, since bad teams aren’t relegated, so they need to be reinforced to be competitive. Hence the weakest team getting the first pick, the “poorest” team getting more money to buy better players, and other “balancing” mechanisms. In “open” leagues, teams aren’t rewarded for being bad, they’re punished by relegation. This means that “big” clubs tend to remain big (success brings more support, more support brings more money, more money and success brings better players, better players brings success), whilst “small” clubs tend to remain small (low profile, few supporters, little money, bad players). However, an open league isn’t nescessarily less competitive. Since players are trained in clubs (not in colleges), when players move to “big” clubs, the smaller clubs recieve payment that they can use to reinforce their team. If they purchase good players, they can start reversing the tendancy (ironically, Chelsea is a good example of this in the pre-Abrahmovic years, going from 6 11th-14th finishes to 6 3rd-6th finishes, another good example would be Lyon, who went from a small Ligue 2 club to a dominant force in Ligue 1 through astute management), and in turn become a “big” club. The contrary is possible too. A “big” club that fails to replace ageing players or has poor results for several seasons will fade into obscurity, and risk becoming a “small” club (Leeds United, a very big club of the late 60s, had a few revivals in the 80s and 90s, but now seems pretty safely nested in the “small” club category).

What worries me is that big teams are still winning it, even when they’re not really trying.

1978 Nottingham Forest
1979 Nottingham Forest
1980 Wolverhampton Wanderers
1981 Liverpool
1982 Liverpool
1983 Liverpool
1984 Liverpool
1985 Norwich City
1986 Oxford United
1987 Arsenal
1988 Luton Town

Liverpool won 4 in a row in the middle of their league domination (Division 1 champions 1976, 77, 79, 80, 82, 83, 84 and 86), Forest were league winners and runners-up in their consecutive League Cup wins and Arsenal can at least be considered the equal of Tottenham with their “just-outside-the-top-4″ status in 1987.

So, 1989-2009 : 10 League cups won by “big 4″ clubs (48%), 4 won by “almost top 4″ clubs (Villa & Tottenham, 19%), 7 won by “small” clubs (33%).
And, 1978-1988 : 6 League cups won by “top, top” clubs (55%), 1 won by “almost top 4″ clubs (Arsenal, 9%), 4 won by “small” clubs (36%).

There isn’t any pronounced difference I can see… Big clubs tend to win all competitions, even with “lesser” teams. Man U fielded Gibson and Welbeck to win this year, but they also fielded Tevez, Nani, Vidic and Giggs. Sure, they wouldn’t have fielded this team against Inter Milan, but then again, Inter Milan don’t play in the League Cup.

A luxury tax in professional sports is a surcharge put on the aggregate payroll of a team to the extent to which it exceeds a predetermined guideline level set by the league. The ostensible purpose of this “tax” is to prevent teams in major markets with high incomes from signing almost all of the more talented players and hence destroying the competitive balance necessary for a sport to maintain fan interest. The money derived from the “tax” is then divided among the teams that play in the smaller markets, presumably to allow them to have more revenue to devote toward the contracts of high-quality players.

Yes to luxury tax in soccer?