What are the effects of a salary cap, tax, or revenue sharing?
A salary cap is an agreement which places an upper limit (and sometimes a lower limit) on the money each team can spend on player salaries. In the 1994 negotiations, the owners proposed to limit each team’s salaries to 50% of average team revenues for the previous year; every team would be required to have salaries between 84% and 110% of that level. (Before the strike, the players got 58% of average team revenues, according to the owners’ methodology; the actual reduction in salaries would be greater because salaries of players on the 40-man roster and incidental expenses such as meal money would be counted against the cap.) A decision by an individual team to set a budget is not a cap. Several teams did this, publicly announcing their budgets, with no complaints of collusion. For example, if the Tigers refuse to spend more than $80M on salaries, they can do that without a cap. If that means that they have $75M already allocated and there is a player (either one of their own players o
