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Report: MLB could tax low-spending clubs

Nov 18, 2011, 5:54 PM EDT

Bud Selig AP

This tweet comes from Jayson Stark, who has done a great job of covering the soon-to-be-announced CBA for ESPN.com:

There have been lots of rumblings there will also be a tax on teams that spend too little on big-league payroll. Looking forward to details

There are none of those available yet, so what kind of floor is being talked about is unclear. In 2011, one team opened with a sub-$40 million payroll (Kansas City), while four more came in at under $50 million (Tampa Bay, Pittsburgh, San Diego and Cleveland).

On the one hand, it certainly seems like a good idea for MLB to try to do something to prevent teams with super-low payrolls from making a profit based mostly on revenue-sharing funds. But one would think actually withholding those revenue-sharing funds in certain cases would make more sense than a tax.

But perhaps the best way for the league to do this would be to base things on total expenditures and not big-league payroll. Much to their credit, teams like the Royals and Pirates have been spending big in the draft in recent years, something that makes much more sense for them than bringing in an extra big-league veteran or two. However, with MLB’s new attempt to curb draft spending, there probably won’t be as much variance between the teams in that category than there has been in the recent past.

  1. dodger88 - Nov 18, 2011 at 6:10 PM

    Agreed, while complicated some sort of minimum that accounts for the draft, international signings and other forms of development along with the big league payroll would make sense.

  2. djpostl - Nov 18, 2011 at 6:16 PM

    Couldn’t agree more. Factor everything in, even include the money spent on facilities for minor league systems, scouting costs etc…and do it. Sounds like a great idea. Teams have been openly crying about a competitive imbalance for a decade now while accepting luxury tax/revenue sharing checks that pay for their entire payroll and turning a tidy profit for sometime.

    Don’t let em have both ways, whine about “we can’t compete” then not even try to.

  3. icanspeel - Nov 18, 2011 at 6:24 PM

    They should have a minimum spending cap in MLB, but it’d be wise to open the books and come up with an educated value instead of just picking an amount.

    I could be wrong, but I don’t understand this..
    I’ll use the Padres as an example with their yearly attendance and Salary
    2011 – Attendance – 2,143,018 Salary – $45,869,140
    2010 – Attendance 2,131,774 Salary – $37,799,300

    After all expenses, how could a team not be pocketing quite a bit of money just on attendance alone?

    • JB (the original) - Nov 19, 2011 at 9:52 AM

      If you go here: https://www.teammarketing.com/public/files/2011_mlb_fci.pdf

      you’ll see that the Padres average ticket price is under $16; times 2.1M in attendance is under $35M (yes, not including concessions, memorabilia, etc., but also not including draft costs, administration, etc.)

    • JB (the original) - Nov 19, 2011 at 10:14 AM

      Oh, I’m not a low budget apologist, just providing some info…. If there were to be something I’d like it include all the costs the team has, otherwise you’d see salaries artificially driven up just to meet the minimum salary floor; I guess I look at the Rays; should they be forced to lay out more $$$? Maybe on field performance could come into play? If you’re under a certain $$$ amount, AND you finish with a .450 winning percentage (or some other TDB value), you have to pay up?

      • JB (the original) - Nov 19, 2011 at 10:16 AM

        *Edit function*

    • paperlions - Nov 19, 2011 at 11:13 AM

      You also have to realize that many tickets are sold at big discounts during promotions. The vast majority MLB tickets are not sold at the sticker price, but in bundles for discounts or as some promotion….teams know that times are tough, and they are doing anything they can to get people to the park….selling a $50 ticket for $10 is far better than having an empty seat.

  4. thekingdave - Nov 18, 2011 at 6:32 PM

    Sucks for Jim Crane. First he was stiff armed by Bud into moving to the AL, and now he might tax him after he inevitably cuts payroll.

    • stex52 - Nov 19, 2011 at 2:34 PM

      I’d be surprised to see the payroll get to 50 MM$. Carlos Lee, Wandy Rodriguez, and Brett Myers alone will account for nearly 40 MM$. Rodriguez might go, but Lee is locked in and Myers won’t have that much interest.

      • stex52 - Nov 19, 2011 at 2:38 PM

        By “get to 50 MM$”, I meant “get as low as 50 MM$.”

  5. mcsnide - Nov 18, 2011 at 6:51 PM

    And now we know why the Marlins are talking about spending money.

  6. skeleteeth - Nov 18, 2011 at 7:29 PM

    Stark has been talking about this for well over a year, initially billed as the only talking point to come out of the potential agreement. Guess he didn’t factor in the Astros sale/conversion to the AL.

  7. dan1111 - Nov 19, 2011 at 2:18 AM

    I don’t like this. A couple of problems:

    1) There is a difference between a perpetually cheapskate team and one that temporarily lowers payroll in a rebuilding phase..Forcing a minimum would hamper rebuilding.

    2) What if a team tries and fails to sign the players they want? They have to go out and spend on someone they don’t want.

    3) What if an underperforming team wants to trade away their higher-paid players? Can they do this? If yes, that’s a huge loophole. If no, it really stinks, too.

    4) including draft bonuses and minor league investments would be better, but I would be surprised if it happened. They are negotiating with the MLBPA, and this would not be in their interest.

    I think the problem of low-spending teams does exist, although it is overstated. But any attempt to solve it with a minimum would hamper small market teams that are trying to spend wisely in order to win.

    • paperlions - Nov 19, 2011 at 11:18 AM

      I agree, 1 & 2 are huge potential problems.

      We’ll have to wait and see how such a “tax” or penalty is implemented. If it is simply designed to prevent teams from pocketing revenue-sharing money, I have no problem with it even in the problem scenarios you outlined. An easy fix (which means MLB won’t do it) is to calculate a 3-yr running average, which would allow teams to dip below the threshold from time to time, but require them to be above the threshold on average of any given 3-yr time period. It shouldn’t matter if the money is spent on baseball expenses in year X, just that it is spent and not pocketed.

  8. boston992 - Nov 19, 2011 at 1:11 PM

    It’s amazing to me that MLB has allowed this to go on for so long. How could they not force these teams to spend the money they are collecting from the other teams who are over the cap? The owners of these teams have been lining their pockets with the money from the other teams who are over the cap, while putting sub-par teams on the field. It’s ridiculous that this hasn’t been addressed up until now

  9. stex52 - Nov 19, 2011 at 2:36 PM

    As long as you have Tampa Bay on the list (or Oakland, once upon a time) it is hard to just arbitrarily assign a penalty. Some teams are just very efficient with their money.

    • JB (the original) - Nov 19, 2011 at 6:52 PM

      That’s why I said they should factor in team performance (perhaps like the ”3 year avg” payroll suggestion above). If you’re a low spender AND your team sucks (again, some determined winning % avg. over 3 years) you fall into the penalty. That way heavy injury years, or trading away of the big, last year contracts could be buffered somewhat.

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