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Luxury Tax Idea

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Luxury Tax Idea

Postby jschmidt0211 » Sat Feb 18, 2012 1:48 am

I'm a commissioner to a newly established league at work. We have a few very serious participants and a few people who are just looking for a diversion from work during the summer. I expect a total of either 9 to 12 participants and we are doing a head-to-head league. I made the decision to create three divisions rather than two. My thinking was that it may be easier for some people to stay interested if they only need to beat two or three people in their division to reach the playoffs, rather than being virtually eliminated early in the season by sitting in 5th or 6th place.

Now that I've given a brief summary of the league, I wanted to run this idea by you guys.... I have implemented the Free Agent Auction Bidding system for our ESPN league and my thinking is to cap the budget at $100. The twist to this setting is that the budget would be for $100 actual real life dollars. Money spent on free agents would be assessed a real life fee in the form of a "luxury tax". For instance if a player uses all $100 by the end of the season and we only have 9 people in the league, then at the end of the season the $100 would be divided equally to the other 8 competitors ($12.50 each - not bad since that would pay for almost 1/2 of the small $25 entry fee).

This is kinda similar to real life, where the Yankees and Red Sox are hit with the luxury tax nearly every year, and they end up paying that money to teams like the Royals and Pirates. My hopes would be that some of the less motivated players would hold some interest in the fact that they know they will get their fair share of money coming to them if some people overspend on free agents.

Also, this scenario would also reward the people who drafted well, because the ones who drafted poorly would need to spend real life dollars to catch up.

Can some of you more experienced commissioners tell me what you think about this idea. What kind of flaws might I run into?

Thanks!
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Re: Luxury Tax Idea

Postby RDD15 » Sat Feb 18, 2012 10:30 am

This is something to ask your league, not us. Perhaps some of your people that are just in "for a diversion" will not want to have to give up to $100 in order to have a chance to compete.

If you already have owners lined up, then I think you need a unanimous "yes" from them in order to implement this after people have already agreed to participate in a $25 league.

So say they all do say yes, and this gets put into place. The major downfall that you will see is that after the first 2 months of the season, teams that are not as good will completely give up on buying FA's even for a dollar. They wont want to throw even a couple bucks at a losing team. Get a couple of injured players that they dont feel like replacing, and they will totally ignore their team. Then you have a couple teams rotting, which is bad for everyone.

At some point, it will make sense for bad teams to stop spending money on FA's, and simply wait for the "revenue sharing" to come in at the end of the year, at which point its almost certain that they will get more than their $25 buyin back.
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Re: Luxury Tax Idea

Postby Merlin401 » Sat Feb 18, 2012 11:01 am

If you did this it would have to be a fraction of the entrance fee, not a 4x multiple of it!
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Re: Luxury Tax Idea

Postby jschmidt0211 » Sat Feb 18, 2012 11:47 am

I guess I need to clarify a bit more. The $100 is just a limit as to how much could be spent over the course of the season, it would not be an up front fee that everyone is forced to pay. Some people may not spend any money at all, in which case their $25 registration will be the only money they will spend all year. Essentially, the a cap could be unlimited, but one of my participants has made a habit of making close to 300 transactions per season in a fantasy football league and I thought that establishing a ceiling would control that type of playing style.

I honestly don't think people would spend more than $10 for the season, so this whole topic may be very menial. I'm just trying to think of any unforeseen surprises that could turn into major problems.

Thanks again.
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Re: Luxury Tax Idea

Postby TopChuckie » Sat Feb 18, 2012 11:54 am

RDD hit the nail on the head, your luxury tax won't promote interest/activity/involvement from the less interested owners, it will deter it. "The less I do at this point, the more I'll make later."

I'm on board with your smaller divisions will increase prolonged interest by always having a smaller mountain to climb. Another idea might be to award the high score for the week or something like that to keep teams striving to put their best team on the field. You could supplement that pool with your FAAB payments, i.e. the more you spend to improve your team throughout the season, the better your team will be (in theory), and the better your chances of winning the weekly award. Return on investment.

In my leagues we treat all money as real, the auction draft, fees for transactions, and FAAB dollars spent, all actually has to be paid and all goes into the prize pool. It goes to the winners though, not the guys who spent the least. You don't want to create the Marlins and Pirates of the past decade.
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