From the USA, home of all that is evil in sport, I can tell you that salary caps do some good but it’s really complicated.
First, revenue is a lot more level between teams to begin with because all revenue is shared evenly except stadium income and local broadcast rights. That the Lakers sell 100x more swag than the Memphis Grizzlies doesn’t matter, it’s all whacked up evenly.
Second, there are so many exemptions and alternatives built into the system in the NFL and NBA that it kind of defeats the purpose- it’s like the tax code, your tax is supposed to be X but then there are all these fiddles.
I posted elsewhere about baseball’s luxury tax. Teams can spend what they want, but any spend over the threshold is taxed and the money redistributed to certain player benefit compensation funds and to low payroll teams (revenue varies much more in baseball than other US sports.
From Wikipedia:
Just as with the old system, teams would have to pay a percentage of every dollar by which their payroll exceeded the set threshold. Under the 2002 and 2006 CBAs, the agreement brought about a progressive taxation system. They agreed that first time offenders would pay a fee of 17.5% of excess payrolls (later increased to 22.5%), second time offenders would pay 30%, and third time offenders would pay 40%. In the 2012 CBA, after seeing teams go over more than three times, the agreement added a 50% taxation level when teams went over the limit four or more times. Under the 2016 CBA, first time offenders would pay a fee of 20% on the dollar, second time offenders would pay a 30% on the dollar, and third or subsequent time offenders would have to pay 50% on the dollar (These offenses must be in consecutive years for these percentages. If a team falls below the threshold one year the penalty re-sets the next year to the "first offense").
[2]
From 2003 to 2017, in every year at least one team has surpassed the tax threshold; only eight different teams have passed the threshold in that period.
2021 cap is $210 million for a 40 man roster (25 players ina game day squad). Baseball has a bizarre salary structure where first and second year players are cost controlled at <$1M, players in years 3-5 can go to arbitration with their teams, but in year 6 can become free agents to the highest bidder, so when a generational talent like Mookie Betts hits the market you get these 10 year $365m contracts.
It doesn’t escape notice that in the supposedly unfettered capitalist society USA, the sports leagues have monopoly and socialism, whereas in the leagues dirty socialist countries of Europe it’s straight up capitalism “red in tooth and claw,” weak ass FFP notwithstanding.
So if City spends 50m over the threshold, you could have, say, 30% or 15M diverted to direct payments to teams all the way down the pyramid, and for example, a certain amount for a pension fund for players in lower tiers who didn’t earn much in their careers,or something similar.
One issue: some low payroll teams pocket the money and don’t plow it back into the on field product. Certain miserly baseball owners don’t try too hard to compete, they just enjoy the appreciation of their franchises. Presumably the threat of relegation would prevent that, but any kind of limit on spending, cap tax whatever,
IMO should be accompanied by a floor, ie you can’t spend BELOW a certain amount, to deter the Kroenkes of the world.