Is there really a salary cap in professional sports?

Over the last five years, the Los Angeles Rams have mortgaged their future to win now. They traded away numerous first-round picks to get stars and sign them to massive contracts. Their reward for this was finally winning the Super Bowl. However, many believe the Rams will someday be in cap misery. Nevertheless, no major sports league has a hard-set cap. Yes, they all have restrictions, but there are loopholes in almost all of them.

Salary caps are one of the most controversial and argued things in professional sports. According to the Bureau of Labor, the NBA was the first North American professional sports league to introduce a salary cap in the 1984-85 season. The NFL soon followed in 1994, with the NHL and MLB having a strike on the issue in the same year.

Salary caps ultimately limit the amount of money a professional sports team can spend on their athletes. Most leagues introduce salary caps to make leagues competitive as some markets allow owners and teams to spend more and attract better players than others. Salary caps and the percentage of revenue are usually agreed upon by the players association and the team owners. However, over the last decade, some leagues' labor relations between owners and their players' associations have been more tumultuous in some sports than others.

For example, the NFL has had strikes in 1982, which lasted for eight weeks, another in 1987, which lasted 24 days, and most recently in 2011, which lasted over five months and caused multiple preseason games to be canceled. However, since the NFL agreed to its new collective bargaining agreement in 2020, the league's salary cap has become more of a glory show and easy to manipulate. Although the NFL cap is characterized as a hard one, it ultimately is not as teams can spend money through bonuses.

MLB does not have any form of a salary cap, although it does have a luxury tax on clubs that annually spend beyond a certain amount on salaries. The first discussion of a salary cap in baseball negotiations occurred in 1989-90. The owners proposed a salary cap that would limit the salary any team could pay to players. Salary caps protect teams in small markets, like the Milwaukee Brewers and Minnesota Twins, from having their players bought up by big market teams. In 1994-95, MLB's collective bargaining agreement expired, and a big reason for the strike that took place that season was the salary cap issue.

In the NBA, teams can spend into the luxury tax to accumulate better players to fill out their roster. Rather than prohibit excessive spending, the NBA uses a luxury tax system that sets a separate threshold above the salary cap and applies a graduated payment system for every dollar above it. Currently, this stands at between $1.50 and $4.75 per dollar above the threshold. In the last two decades, only six champions have won the title by paying the luxury tax. This illustrates that if a team operates within the current cap restraints and rules, they will likely not be contending for the championship. If the sole purpose is to win the ultimate prize in your sport, why spend under the luxury tax?

The NHL is the closest to having a salary cap of the three major U.S. sports. Until 1992, hockey had never had a work stoppage and enjoyed multiple years of play without dramatic interruption. The 1992 strike lasted only 10 days but was primarily due to the main issue of the conflict being the salary cap and the owners' attempt to slow salary growth. This one did not compare to the strike in the 2004-05 season. During the 2003-04 season, there was a huge disparity between small-market and big-market teams.

For example, the Detroit Red Wings reside in a city that loves hockey, and their payroll was $77 million. Compare that to Tampa Bay, which at the time was not a city that historically loved hockey, only had a payroll of $34 million. Not only did this prompt the league to develop a salary cap, but they also had to develop ways to share the revenue to implement this cap which is precisely what goes into developing most salary caps.

However, in the NHL, like most leagues, there are loopholes for each sport. In the NHL, it’s the system of the Long-term Injury Reserve (LTIR). According to The Star and puck purpose, an injured player’s salary is not on the cap while they are labeled with LTIR.

Now, as the playoffs begin, the salary cap is thrown out the window, and all systems go. An example of this occurred in 2021. The Tampa Bay Lightning used this loophole to bring back two-star players off Injury Reserve and be $19 million over the cap with no consequences.

The results and loopholes that teams have faced in using these loopholes show that no professional sports league has an actual salary cap. In reality, they just have an eligible excuse to give and show fans in case their teams lack spending, which leads to a lack of success.