Off-Season Decision Required - Just putting this out there

[David - Cleveland]

When I took over the ABL, as Commissioner I reviewed every thing about the league and the league file to get the best possible understanding of the league in the shortest amount of time.

One of the things I noticed after taking over and frankly must change (in my opinion) is the "Revenue Sharing/Luxury Tax" setting within the back-end settings of the file. Revenue sharing, in our case use of Luxury Tax, for those that do not know (which might be none of you, but just in case) is defined in OOTP as follows:

Luxury Tax - The league sets a "Soft Cap" as a % of the league average payroll, and a "Tax above Soft Cap" as a %. On the first day of the offseason, OOTP totals the payroll expenses of all teams in the league and averages them. It multiplies this number by the Soft Cap % to determine a cap figure. Any team that spent over this cap pays the "Tax above Soft Cap" into a revenue sharing pool. This pool is split equally between the bottom spending teams.

The "default" for this in OOTP games is a "Soft Cap" of 120% and a "Tax Above" of 20%. As seen in the rules and as setup in the initial ABL file, the current setting is: Luxury Tax - Soft cap 170% - Tax above 25%

Under this scenario I think it's very safe to say the rich will stay rich and have unbelievable capacity to spend and the poorer teams will rarely, if ever, experience redistribution of dollars under the tax system. I need not review the numbers from the first year (unless you want a summary, but it's pretty evident) but seeing some of those numbers is what prompted me to more fully research this in the back-end in the first place.

Baseball has used this vehicle to share revenue and while it has never really and truly curbed the big money markets, it has been beneficial to the markets with far less financial capacity (while they build their capacity of course). AND to be clear, I am NOT advocating moving away from the "Luxury Tax" I am merely suggesting we bring it back to default because it is an established norm and will lower the threshold at which revenue is actually distributed.

My greatest concern with making this fundamental change is this - When do we make it?

1) Before the off-season
If we make the change now (or right before the off-season, when the game calculates and sets it's financials) then it will punish those well about the newly imposed tax limit and be an immediate hit!
That said, it will immediately redistribute the funds to the poorer teams sooner, rather than the alternative.

2) After the off-season
If we do this immediately after the off-season, then it's out in the open and teams that are violating, and many that will probably continue to violate this, will at least have time to prepare and shuffle things in order to better comply with the financial hit at the END of the next season.
The rich will benefit for another season. The poor will have to suck it up for another season.

And, by the way, I would have raised this regardless of the franchise I currently control (if any) as being in the best interest of the league.
And that also should suggest my intention is clearly not to pit the "haves" against the "have nots", nor cause a furor among the GM's who are so valuable to sustaining ABL, I just think this is the right thing to do long term!

My plan is to raise this in a VOTE immediately after the regular season ends (unless there is overwhelming desire to do this right away).

[Deleted]

I appreciate you brought this forth, David. I also think it might be important to actually see the numbers from last year, so IMHO a summary might be helpful to connect us to what you are calling out. I'm in the corner of making this an even playing field. I look forward to the vote.

[aaron_commissioner]

This is great to have this discussion. Thank you for bringing it up. I have two thoughts:

What about reducing the cap % once before the offseason, and yet again after the offseason? This could kind of be a "compromise" of the two options and more slowly transition.

Also, I am curious to know what the current average payroll is, so what numbers would be looking like.

[David - Cleveland]

METS - I will work on some numbers. The tax is NOT perfect in the game as is, but my point is that 170% is not the right number to be effective in redistributing some wealth (in my opinion again). Not enough of the huge payroll teams feel the tax and the resulting redistribution is peanuts for the far lower payroll teams.

SEATTLE - The calculation occurs right at off-season transition, so I think the options are to either reduce it before of after (for the NEXT off-season date).

I have suggested a couple of times that the actual average payroll number be added to the game somewhere. So far, no luck. Obviously it would fluctuate almost constantly. Easiest way is to go to the league financial page and find the average of the listed team payrolls. If you have a spreadsheet program, you can cut, paste and average.

[David - Cleveland]

Can of Worms

I may have just opened a can of worms! But, at least it is a can of worms with which we all play in OOTP. But the solution may not be as clear cut as I had hoped.

Again, here's the manual description of the Luxury Tax: Luxury Tax - The league sets a "Soft Cap" as a % of the league average payroll, and a "Tax above Soft Cap" as a %. On the first day of the offseason, OOTP totals the payroll expenses of all teams in the league and averages them. It multiplies this number by the Soft Cap % to determine a cap figure. Any team that spent over this cap pays the "Tax above Soft Cap" into a revenue sharing pool. This pool is split equally between the bottom spending teams.

ABL was set up with a 170% "Soft Cap" and a 25% "Tax" for the amount any team is over the cap. And, in theory at least, that money is to be "split equally between the bottom spending teams!"

I have no idea where the line is for "bottom spending" and frankly, the distribution of the pool money is by no means equal. So I think I have hit upon a bit of an issue with OOTP and the Luxury Tax. By the way, I have sent a bug report (feature request/tweak) to the OOTP people. I think it's safe to say it will not be fixed in 18 as they have moved on to 19 by this time. But maybe there will be a solution in 19? After all, it should just be math, determined on the day the off-season starts.

Here are some actual numbers from this past season (the first) of ABL, and please note this is NOT from the first day of the off-season, but from January 1st when the league almanac was saved and based on the payroll numbers of each team (similar numbers can be found in-game on the league financial page or the same page in the online HTML reports). So this is merely an example.

League Avg Payroll (which I determined): $122,450,253.27
170% Soft Cap would then be: $122,450,253.27*1.7 = $208,165,430.55
Teams above that Cap (one - Boston): $28,283,944.45
25% Tax on the amount above = $7,070,986.11

Based on the description of how the Luxury Tax should operate, I read it as the $7M+ is the "pool" that should be "split equally between the bottom spending teams" provided you define "bottom spending!" In reality (and I am no mathematician) the actual numbers in the game simply do not work.

In the HTML (or the game) there is a "Revenue Sharing" number for each team. I would expect the BOS number to be $-7,070,986 (would you agree)?
The BOS number is $-274,462.
That number is approximately 3.9% of the amount BOS should be taxed, so I have no clue how they arrived at that number in OOTP?

The Limited Upside

The upside to the currently dysfunctional "Luxury Tax" (as I now feel of it) is that it does (although the math is unclear at best) TAX the one team that seemed over - BOS - that -274,462.

I think I am also safe in saying that the imaginary "bottom spending" line might roughly (VERY roughly) correlate to the bottom half of the actual number of teams in the league. While not the same number for each of the bottom half teams, they are all just over $18,000 in revenue sharing for each. I consider that a GOOD THING as there is at least some formula at work somewhere to reward the "lower payroll/poorer" teams!

The numbers are far smaller ($0 to $133) for the teams generally in the top half of the league payrolls, but there are still some random exceptions. Again, I simply cannot easily figure out their formula for this.

Using 120% instead of 170%

Actual numbers aside, if the Luxury Tax had been set at 120%, which is where the game defaults when you first fire up OOTP, instead of the 170%, there most certainly would have been MORE teams violating the tax threshold and therefore more money pooled and distributed (in whatever fashion it is they currently use).

My rough calculations:

League Avg Payroll (which again I determined AND would obviously remain the same): $122,450,253.27
120% Soft Cap would then be: $122,450,253.27*1.2 = $146,940,303.92
Teams above that Cap (NOW EIGHT - Boston, SF, Baltimore, LA Dodgers, STL, Seattle, NY Yankees & Toronto).

I won't bother with any more math because I don't know how they calculate the pool and distribution, but the simple fact would be - At 120% there would be far more penalty for the teams above 120% of average payroll and far more money distributed (in whatever fashion) for the lower payroll teams.

Options?

1) Obviously we can leave this as is (and forget I ever raised the matter - but I'm quite certain someone would have at some point).

2) A very simply course of action would be to lower the TAX threshold to 120% which would TAX the high payroll teams and DISTRIBUTE to the lower payroll teams (in whatever way the game currently does that).

3) For the sake of argument, another option is NO REVENUE SHARING. And quite honestly, with the settings we have right now producing AT BEST $18,000 for lower payroll teams and only a token taxing of the highest payroll team ONLY, we're pretty much there as is. Not "fair" in my opinion, but it wouldn't be a major leap.

4) Another option within the game, which of course would be introducing a new and different concept, would be the "flat tax." Defined as follows:

Set Percentage of Income - On the first day of the off-season, all teams pay a set % of their income into a pool of money. That pool of money is then divided equally between all teams in the league. (When this is selected, an additional field will become available to allow you to set the desired percentage.)

From what I can gather and have read, this method actually works. The default percentage of income is 20% contributed to the pool, but ANY amount can be plugged into the formula. And, of course, dividing equally between all teams is an easy calculation and results in the highest revenue teams being more heavily taxed, while the lowest revenue benefiting the most.

Using the same numbers I did (Almanac numbers from ABL 2017) for the rough Luxury Tax calculations above, and safely assuming income to be overall revenue (wish they would just specify that), here's a spreadsheet of the net effect based on the 20% revenue sharing tax (and again, the % tax could be any number - obviously 10% tax would be half - or twice - the numbers to the right):

As with any flat tax, there is proportional taxation and distribution based on your revenue. I'm sure there could be arguments for an against (and I would love to hear them - please post below).

SUMMARY

My preference would be that the Luxury Tax actually worked as intended. And maybe, someday, it might. But even if they fix it for 19, we are seasons away from that in ABL.

To summarize, I view the options being:

1) As is - 170/25

2) Tweak existing - 120/25 (or 120/20)

3) No sharing

4) Flat Tax (of an agreed percentage)

I am not trying to push any of these on you of course and we can always just leave things as is (not my preference, but easy). I actually kind of like the "Flat Tax" alternative. I have only seen it used in one other league (oddly enough also with the acronym ABL) but in that case the Commissioner brought the numbers out of the game, did some additional funky things, (totally to his credit) publicized everything that he did and then plugged numbers back into the game. I felt it REALLY made things unnecessarily complicated but that was his focal point for the league finances and he was really into it.

If we went the flat tax route, I would TOTALLY leave this to the game!

It would set ABL apart from most other leagues?

And should OOTP eventually make their Luxury Tax work as publicized, I would be more than willing to return to it.

I definitely plan a vote on this end of the regular season.

I definitely DON'T want this to be divisive but certainly welcome healthy debate.

Thoughts?

[Erick RockiesGM]

I'm fine with a tweak. 170% is very high, though 120 is also fairly low. What would the numbers look splitting the difference at 150% at 25%?

[David - Cleveland]

Sept 4, 2017 18:22:56 GMT -8 Erick RockiesGM said:

I'm fine with a tweak. 170% is very high, though 120 is also fairly low. What would the numbers look splitting the difference at 150% at 25%?

I think the larger point here, having looked into this, is that the tax doesn't actually work quite as intended. I really wish it did!
It sort of works and would reward the lowest payroll teams, but I can't really draw a straight line between how it is supposed to work and the numbers it produces. Therefore it is hard to definitively say what the numbers would be.

As I pointed out, if you drop the threshold to 120%, eight teams would then be taxed and contribute to a "pool" (based on numbers at January 1st). It's fair to guess that five or six might still be taxed.

I am more inclined to go with the flat tax option if there is a desire to Robin Hood. Possibly a 5 or 10% tax (you can figured that out based on the spreadsheet above.
OR just go without, which is more or less what the 170% is giving us right now.

When you set up you league Erick, what did you go with?

[Erick RockiesGM]

I'm with the same rules as Derek, but I didn't give much thought to it.

[aaron_commissioner]

I think a change needs to be made. Either flat tax or 120/20. Honestly, I prefer the flat tax because 1) it penalizes teams with high revenues, not necessarily high budgets (what if an owner dies, and the budget suddenly changes) and 2) because of the state of the Seattle Mariners, we prefer this option.

[samtigers]

I would prefer Flat Tax, however honestly it's not a big issue for me.