A TALE OF TWO FOOTBALLS
Europe is a more equal society than the United States, with much lower inequality in pre-tax income, a higher tax burden, and highly progressive taxation. There is one interesting exception to that: payments to top athletes.
Major League Baseball in the United States implements a luxury tax, wherein teams are fined if their combined payroll exceeds some amount. A team that goes over the luxury tax threshold for the first time in a five-year period pays a penalty of 22.5 percent of the amount they were over the threshold, and the maximum fine for repeat offenders is 50 percent of the excess. Most other major sports leagues in the United States (the NFL, the NBA, Major League Soccer, etc.) have salary caps. The maximum that could be paid in total for a team in the NBA in 2018 was $177 million. Not a trifle, but in 2018 the Argentine soccer player Lionel Messi was paid a yearly total of $84 million by his club, Barcelona, way above what would be possible in the US.Salary caps in professional sports are hardly the product of some Nordic idealism. Clearly, the main rationale of the salary caps is to control costs. It is what a cartel of team owners does to limit how much of the proceeds go to players and, by implication, increase the amount that goes to them. But it has the virtue, and this is the stated reason for the caps, that it ensures some degree of equity between the teams, making the season much more interesting to watch. Unlimited money creates too much inequality, with the result that within a league only a few teams ever have a real chance of winning. In Europe, where Major League Soccer does not have salary caps, some teams (such as Manchester City, Manchester United, Liverpool, Arsenal, and Chelsea in England) spend vastly more than others and enjoy an uncontested domination. So much so that in 2016 the odds against the team of Leicester winning the Premier League championship was five thousand to one, lower than the probability of spotting Elvis alive. Bookmakers lost a combined 25 million pounds when the team, to everyone’s surprise, actually won.
There is plenty of opposition to the salary cap in the United States. A Forbes article described it as “Un-American,” arguing that “based on the capitalist system, spending money on employees (and that’s what athletes are in professional sports) should be based on performance and not encumbered by system.”60 Players naturally hate it, resent it as deeply unfair, and have staged multiple strikes to oppose it. Interestingly, the one argument no one makes is that players would play harder if only they were paid a little (or a lot) more. Everybody agrees that the drive to be the best is sufficient.