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The Tax...looks like we need some fine print...
Posted by Allan Sellers on Sunday, Mar. 27th, 2011 at 11:14 PM

Hi guys,

So...the two gentlemen who have been taxed have weighed in with an opinion different than mine.  Of course I thought the rule was clear...of course it wasn't.  

Here's the rule:

 

There will be a one-time tax assessment per season for teams reaching specific bank thresholds.  This assessment will occur just after the session 8 deadline (starting in Season 8).  Teams with 3500-4499 will lose 10%; 4500-5499 will lose 20%; 5500+ will lose 30%.

So, my take on the rule (and always my assumption) was that the tax was on overall bank balance.  That's why I said teams with a certain amount would lose 10%, for example, and not "10% of anything above the threshold".  

While "payroll" type tax in America, for example, (and presumably elsewhere?) works more like the guys expected whereby we tax you at a % above a certain threshold (and not tax you at say 35% for all the 80,000 you make), it wasn't my intention to be that complicated here.

It was simply that if you exceed 3500...you get taxed 10% of whatever you have.

I'd like the rest of the league to weigh in on this.  Was it just me that thought this way (and I realize that's certainly possible)?   How do other leagues that tax do it?  And so on...

Al

Readers Comments

My assumption based on the discussion and writing of the rule was that it was to be a tax on the total bank if it exceeded the levels.

Rob Peterson on Monday, Mar. 28th, 2011 at 1:38 AM
 

I thought the rule was applied appropriately as promised by the powers that be.

...or the power that is.

Phil McIntosh on Monday, Mar. 28th, 2011 at 5:30 AM
 

As a newbie, I have read the rules about 6 times this season (I think I've got them now!).  If you read the rule "3500 - 4499 will lose 10%", it has to mean it comes from the entire balance or else it would read "3500 - 4499 will lose 10% OVER anything above 3500."

And if you apply a little bit of logic, then a 10% tax of anything over 3500 would be 79 (in the case of Tranmere), not much of a penalty .......

Chris McDougall on Monday, Mar. 28th, 2011 at 10:04 AM
 

The rule has been applied the way it was written.  Perhaps it needs further review by the league en mass; I would vote to raise the minimum level (e.g. 4000k) and perhaps vote to alter how the system is applied, such as Ian thought it would/should work.

Brian Beerman on Monday, Mar. 28th, 2011 at 2:33 PM
 

No the rules are simple, 10% of the total was too be deducted for the amount 3500-4499, thats what happens in other leagues. No voting on a different way forward, just spend your money you guys that hord!! Like all governments spend, spend, spend it makes the world go round.

Simon Compton on Monday, Mar. 28th, 2011 at 5:30 PM
 

Thanks for the feedback so far...hoping for more.  And if others misunderstood it, I do want to hear that.  To me this was a straightforward thing (which is why I tried real hard not to be at 3500 or above).  But I know sometimes we can all make assumptions.  What I would ask of everyone though is that if you think something is unclear or have any doubts at all, please drop me an email and I'll be happy to clarify.

Allan Sellers on Monday, Mar. 28th, 2011 at 11:39 PM
 

I also read it as a flat tax on total amount, and that's what I voted on.

Mostly, I'm floored that Ian is paying enough attention to things this season that he even noticed he got taxed.

Kevin Martin on Wednesday, Mar. 30th, 2011 at 4:24 AM
 

The way I read it was you were to be taxed $3500 if you didn't hurt 10 players through the course of the first 8 sessions.  Furthermore this increased to 15% if none of those 10+ players were a Preston player.

Dave Dohm on Thursday, Mar. 31st, 2011 at 6:23 PM
 

ï»I dont think that the rule was written ambiguously. I just think that it makes no sense that someone who has 5100 for example will end up with much less than someone who had 4900after the tax is levied.

ï»Managers should then at the very least be able to donate the extra amount to a charity or something in order to put themselves in a better tax bracket..

ï»Essentially this tax means that the first 500 earned after 5000 is taxed at 100% and thereafter at 20%.If only 200 more than 5000 is earned it is taxed at about 250% which is obviously unfair.-No one can really believe that it is fair to tax at an amount greater than one is earning.

ï»The fairest and simplest way to levy the tax would be a flat percentage over a certain amount (I would suggest 0 K so that all those voting for a tax are also affected) but more realistically something like 15 or 20% above 2000K would probably make more sense.

Alon Atie on Thursday, May. 26th, 2011 at 9:26 PM
 

I agree with Alon that the rule as written (or at least as implemented) makes no sense, or more accurately makes a mockery of common sense.

Why not have a flat percentage affecting all clubs?  Simple to implement and will narrow the gap between the rich and the poor, without any daft manipulating to ensure that clubs are at a certain level to avoid the next higher tax bracket.  Otherwise we'll end up with deals to swap cash for less cash, because that way a rich club is better off than without giving that money away!

Andy Bate on Friday, May. 27th, 2011 at 1:19 AM
 

If this was indeed such a poor rule, I should have heard more about it when it was written into the rules, which occurred with plenty of advance notice and after a ton of discussion.

Personally I don't care either way...get rid of it fine...keep it and revise it fine. Someone needs to come up with specifics and no ambiguities on a new rule. And it needs to be extremely detailed with examples because, based on the first attempt, otherwise it won't be clear.

So if it needs fixing, then let's fix it. What are the specific plans?

Allan Sellers on Friday, May. 27th, 2011 at 11:14 AM
 

I like polls and voting.  Can we come up with another poll/vote on this issue (or some specific component of said issue)?

Brian Beerman on Friday, May. 27th, 2011 at 1:49 PM
 

I see it as the total balance however i agree that this tax is slightlty unfair on the boys that have the cash.

I believe there should be a tax free threshold and then perhaps a 25% deduction on the first stage and perhaps 35% on the balnce if it is extra high. for example

£3500 tax free

If a club has £4500 they get taxed 25% of the £1000 extra being £250

If a club has £5500 they get taxed 35% of the £2000 extra being £700

thus assuming £3500 is tax freee.. hope this makes sense

Graham Wilkes on Friday, May. 27th, 2011 at 9:00 PM
 

If the goal of the tax is to encourage teams to not stockpile cash, and invest in trades/auctions to keep prices up, then the flat tax is the way to go.  Teams above the tax line will lose more than teams just a bit below them in cash.  That is where the whole "encouragement" part comes in to be more active in your spending.  A team at 3600k needs to spend 101k to save 259k in the process.  A team at 4600k is going to be hit with a 920k tax, so spending down to 4499 (where they only lose 450k) is a bargain.  Spend 101k and save 369k as a result.

Switching to the 'real life' tax model, where amounts exceeding a tax line are taxed at a higher rate, won't have the same effect.  For example, a team with 3700k gets taxed at 10%, and would lose 370k currently.  Even if you taxed the amount above 3500 at 100%, they would only lose 200k total.  The deterrent becomes nearly non-existant in a hurry.

While 100% tax is not the intent, it would take at least a 50% rate to start nearing that motivational level.  A team at 5000k would stand to lose 1000k under the 20% rule.  Even at 50% tax rate of anything over 3500k, that would be 750k, or 250k less than currently.

So if there is a desire for a chance, the % of tax rate has to be bumped up significantly to keep the motivational purpose alive and well.  Here is some details on what a 25/50/75% rate would look like:

3400k, no tax, 3400k after.

3500k, 25% tax over 3499k = 3499k, 1k tax

3600k, 25%, 3574k, 26k tax

3700k, 25%, 3649k, 51k tax

4000k, 25%, 3874k, 126k tax

4300k, 25%, 4099k, 201k tax

4700k, 25% of 3500-4499, 50% of 4500+, 4349, 351k tax

4800k, 25/50%, 4399k, 401k tax

5000k, 25/50%, 4499, 501k tax

5400k, 25/50%, 4699, 701k tax

6000k (a ridiculous amount of cash for this league), adding in 75% tax on everything over 5499k...

equals 4874k left, or 1126k taxed.

ï»

What I hope you notice is that the amount currently taken from a team with 3500k (10% or 350k) would not be reached until 4700k under a scaled tax system at even the punitively high rates of 25%/50%/75%.  The motivation to spend goes down.

So in order to make the system really work as I believe most of us had in mind when it was set up, we'd have to start the tax lines at a considerably lower level.

10% tax on cash between 2000 & 2499k.

20% tax on cash between 2500k & 2999k.

30% tax on cash between 3000k & 3499k.

50% tax on cash between 3500k & 3999k.

75% tax on 4000k+.

Tax for every 250k increment from 2100k on under that system:

2100k, 2090k after, 10k tax

2350 - 2315, 35k tax

2600 - 2529, 71k tax

2850 - 2729, 121k tax

3100 - 2918, 182k tax

3350 - 3093, 257k tax

3600 - 3248, 352k tax

3850 - 3373, 477k tax

4100 - 3472, 628k tax

4350 - 3472, 815k tax

4600 - 3597, 1003k tax

and on up...

5000 - 3697, 1303k tax

5500 - 3822, 1678k tax

6000 - 3947, 2053, tax

So it would be very, very hard to end up over 4000k total after taxes.  Further, once a team gets beyond 3700k, the tax rate begins exceeding 10% of your total team worth.

If you're going to change the system, I think you have to use a tax this complicated so that the two goals are accomplished:

1) teams are encouraged to spend more in auctions/trades, because the money starts to simply disappear at unacceptable rates once a team gets over 3000k; and

2) hoarding cash becomes very difficult, since the tax would cut any amount from 4000k to 6000k back down into the 3000s.

The advantage to the proposal is that it takes care of the apparent complaint of unfairness.  Everyone over 1999k gets taxed at some rate, so no team is going to end up with less cash than someone that they had more cash than prior to tax day.  So there's the "details" that take up waaaay too much space.  If it's all clear as mud, my job here is done.

Kevin Martin on Friday, May. 27th, 2011 at 9:13 PM
 

I still think it's fine as-is.

Rob Peterson on Saturday, May. 28th, 2011 at 2:18 PM
 

But as-is a team being taxed would be better off giving their money to another team.  Surely we need a system where that isn't the case?

Andy Bate on Saturday, May. 28th, 2011 at 11:32 PM
 

We need to be careful not to over complicate the taxing issue. I am all for it but lets make it a clear rule not a complicated one

Graham Wilkes on Sunday, May. 29th, 2011 at 5:08 PM
 

Andy, the whole point is to not hoard your money. If you collect and collect and collect and don't spend, well then the tax man will come and spend it for you.

You're right, you're better off giving money to another team. That's one of the big encouragements here - go make some trades with other managers.. Pay a pretty penny for a #2 DF... or, make someone with an SL 13 FW an offer they'd be foolish to refuse. 

Rob Peterson on Sunday, May. 29th, 2011 at 11:49 PM
 

Instead of buying a player you don't want, just give away some of your money so that you pay less tax and end up better off than if you hadn't given away that money!

Under the current rules, if I have 4600 then I pay 20% tax on the total, so I pay 920 in tax, leaving me with 3680.

If, instead, I give 250 to another team, leaving me with 4350, I only pay 10% tax, or 435, so I end up on 3915.

So, I end up 235 better off for giving 250 to another team.  Surely that can't be right?

Andy Bate on Monday, May. 30th, 2011 at 9:34 PM
 

Okay, I've seen some proposals.  Andy: do you have a specific proposal?  Numbers/percentages to use, etc?

Allan Sellers on Monday, May. 30th, 2011 at 11:14 PM
 

I'll try and find some time to put something together.

Andy Bate on Tuesday, May. 31st, 2011 at 12:35 PM
 

ï»A simple proposal that will probably make most happy

ï»K3000-K4500  30% tax

ï»K4500-K6000     50% tax

ï»K6000+                 75% tax

ï»The above will I think satisfy most managers desire to tax the rich whilst still making sense.

ï»Speaking for myself I would be happier with much lower taxes as I dont think it is such a sin to hoard money for the future, I do however realise that most managers seem to want a serious tax so the above probably will make most happy.

Alon Atie on Saturday, Jun. 4th, 2011 at 6:19 PM
 

Thanks Alon for the plan.  I'm still awaiting Andy's plan as he seemed to share your heartburn over the existing rule.  Once I see that then I'll take the next steps.

For this season there will be no change.  Ideally if we are going to change it I'd like to see a plan finalized by mid this season.

But again, like the massive amount of time spent in the old Olmec on the blowout discussion, this is something that should rarely happen (at least with current limits in place), and I'm not really bothered with what the outcome is (keep it/remove it/etc).  In my opinion though there are some definite hoarding strategies that could take place...I could have hoarded even more to my advantage if I wanted to last season.  But the rule prevented me from wanting to deal with the excessive tax.     

Allan Sellers on Sunday, Jun. 5th, 2011 at 2:55 AM
 

I have had a quick play using an exponential formula (cash squared) and have a couple of proposals below.  This does mean that everyone pays tax, but it's minimal at low levels of cash.

Unless we all paid the same percentage then there will always be spots where managers would be better off giving cash away before they got taxed, but I've tried to make it such that the gain for doing so is minimal.

 

(Cash^2)/20000   (Cash^2)/23750
             
Cash Tax Tax %   Cash Tax Tax %
250 3 1%   250 3 1%
500 13 3%   500 11 2%
750 28 4%   750 24 3%
1000 50 5%   1000 42 4%
1250 78 6%   1250 66 5%
1500 113 8%   1500 95 6%
1750 153 9%   1750 129 7%
2000 200 10%   2000 168 8%
2250 253 11%   2250 213 9%
2500 313 13%   2500 263 11%
2750 378 14%   2750 318 12%
3000 450 15%   3000 379 13%
3250 528 16%   3250 445 14%
3500 613 18%   3500 516 15%
3750 703 19%   3750 592 16%
4000 800 20%   4000 674 17%
4250 903 21%   4250 761 18%
4500 1013 23%   4500 853 19%
4750 1128 24%   4750 950 20%
5000 1250 25%   5000 1053 21%
5250 1378 26%   5250 1161 22%
5500 1513 28%   5500 1274 23%
5750 1653 29%   5750 1392 24%
6000 1800 30%   6000 1516 25%
6500 2113 33%   6500 1779 27%
7000 2450 35%   7000 2063 29%
7500 2813 38%   7500 2368 32%
8000 3200 40%   8000 2695 34%
9000 4050 45%   9000 3411 38%
10000 5000 50%   10000 4211 42%

 

Andy Bate on Monday, Jun. 6th, 2011 at 3:37 PM
 

What if we cap the bank value any team can have (e.g. 5000k)?  Anything earned over that is automatically "wiped away".  Just an idea that seems simple and effective.

Brian Beerman on Tuesday, Jun. 7th, 2011 at 10:42 AM
 

Use any value/percentage you want that doesn't penalize those that are spending (i.e., those with a bank < 2500k).  However, the taxing is useless if it just makes money disappear unless we're under threat that one of these teams that has been kind enough to NOT spend money to make his or her team better is all of a sudden going to buy/bid the farm on every useful player in an auction.  With that said, there should probably be a participation limit in the auctions (maybe 3 wins and you're out).

Rob Baptiste on Tuesday, Jun. 14th, 2011 at 6:31 AM
 
 
 
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