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AFL DROPS SALARY CAP IN FAVOR OF PAYROLL TAX
Published May 2, 1995
The Arena Football League announced yesterday it will eliminate its salary cap and replace it with "the first player 'payroll tax' in American sports history." AFL Commissioner James Drucker: "The payroll tax helps solve the dilemma faced by all leagues -- how to dramatically increase player salaries without forcing teams in small markets out of business because teams in large cities can generate more revenue -- from sponsorships and ticket sales -- than teams in smaller cities." A.C. Nielsen ranks the 13 AFL markets between No. 5 (San Jose) and 73 (Des Moines) in terms of TV homes. The tax is funded by teams, not players. The program requires teams to pay a 40% tax on player salaries over $240,000 with funds divided among teams below the $240,000 level. Drucker maintains the tax will benefit AFL players, fans and teams: "The tax eliminated the salary cap so large market teams can sign better players by increasing their salaries and the tax redistributes money within the league to strengthen small market teams" (AFL).