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Wednesday, August 18, 2021

Sources: MLB proposes salary minimum funded by new tax on teams spending $180 million

Sub required at The Athletic.

In a face-to-face collective bargaining meeting in Denver on Monday, Major League Baseball made its first proposal covering core economics to the Players Association. The plan included a new tax on team spending, one that would both effectively lower the first luxury-tax threshold in the sport to $180 million, and charge teams who exceed that first mark a higher percentage than they pay today. One trade-off, people briefed on the league’s proposal said, would be a salary minimum of $100 million in the sport.

Money collected from teams paying tax would fund certain club payrolls to the minimum, but details about the mechanism are unclear, including what penalties teams might incur if they do not reach $100 million, or what year the minimum would take effect.

The current tax system includes three spending tiers, the first of which is $210 million. Today, a team that goes over that amount pays a tax of at least 20 percent. In the new system proposed by MLB, the three tiers would still exist, and the new tax would be introduced below them — making for what would function as a four-tier system. Taxation would begin at 25 percent for the teams above $180 million, and the rates would climb from there.

RoyalsRetro (AG#1F) Posted: August 18, 2021 at 05:08 PM | 30 comment(s) Login to Bookmark
  Tags: salary floor

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   1. Zach Posted: August 18, 2021 at 05:19 PM (#6034958)
Never thought it would be the owners to propose a salary minimum, but I'm in favor. Blatant tanking has been a problem the last few years.

That high draft pick doesn't sound so appealing when you have to pay $100 million in payroll win or lose.
   2. Cris E Posted: August 18, 2021 at 05:20 PM (#6034959)
Clearly there's more to this minimum salary mechanism than giving even more money to the guys that won't spend what they're already receiving. Don't they currently get around $200m per year from the big shared pots? Who are they giving this money to, as there won't be players on hand who were worth it when they signed. Color me baffled, I seek the insights of a Svengali who can see inside the mind of a major league owner.
   3. RoyalsRetro (AG#1F) Posted: August 18, 2021 at 05:23 PM (#6034962)

Never thought it would be the owners to propose a salary minimum


Well...

@cdgoldstein
Evan mentions in the piece that Cot's has 7 teams w/opening day payrolls under $100m. They are under $100m by a collective $145.7m. The teams over $180m are over by a collective $259m.

That's as of 4/1, per Cot's. This isn't even remotely in the ballpark.


The numbers can be haggled over though. There is effectively a cap now, I think the union would be wise to get a floor to get a better market for FA.
   4. sunday silence (again) Posted: August 18, 2021 at 05:33 PM (#6034968)

Clearly there's more to this minimum salary mechanism than giving even more money to the guys that won't spend what they're already receiving.


I think the idea is that until say PIT has a $100M payroll they won't get any money from the revenue sharing. But I dont have access to the article, just a guess.
   5. RoyalsRetro (AG#1F) Posted: August 18, 2021 at 05:36 PM (#6034969)
"details about the mechanism are unclear, including what penalties teams might incur if they do not reach $100 million, or what year the minimum would take effect."
   6. Kiko Sakata Posted: August 18, 2021 at 06:15 PM (#6034980)
Never thought it would be the owners to propose a salary minimum, but I'm in favor.


I thought it was always the owners who proposed this. The PA opposed it because imposing a floor is a slippery slope away from a hard ceiling. But lately, most MLB teams have begun to treat the luxury tax threshold as a hard cap anyway, so I can see the PA being more open to a floor. That said, lowering the luxury tax threshold to $180 million is a pretty steep drop. But this is an opening bid and maybe they can negotiate their way to a mutually agreeable range.
   7. Steve Balboni's Personal Trainer Posted: August 18, 2021 at 06:16 PM (#6034981)
I believe the NBA has a salary floor of 90% of whatever the cap is in a given year. Clearly, $100m is barely 55% of the luxury tax threshold.

My problem with the concept, in theory, is that if a team has a payroll of less than $100 million, you can't really make them eligible for any of the "tax" money, because before you'd give them some of the Dodgers, Yankees, etc., taxes, you'd have to figure out if the low-salary teams were low because they couldn't generate enough revenue to pay $100m in salaries, or because they won't spend $100m on salaries. Now you've got to go through their books; you've got to ascertain how hard they are trying to generate max revenue. If your principal owner is worth insane money, should that make them ineligible for "tax" money until they hit $100m in salaries? What if they could generate more money, but they just suck at running a baseball team? I mean, in the 1970s and 1980s, would you have guessed that one day the Cleveland Indians would set the record for most consecutive sellouts, and become one of the model teams in baseball? Did Cleveland get a lot bigger, all of a sudden? No - the team was run a lot better, basically.

And it is not a media market thing, either. Sure, in NYC, LA, Chicago, a few other places, the size of the market is a big deal, but Tampa is one of the biggest markets in the country, and they have one of the best-run teams in baseball. The hockey and football teams are winning championships - they sell out. So in that case, should the Rays be penalized because they are stuck playing in a lousy stadium, or because that market just doesn't want to go to baseball games? Their payroll is ~$73m this year - does anybody really think that if the Rays management really tried, they could generate that much more revenue? They have the best record in the AL, and they are begging for help getting a new stadium. What is MLB supposed to do about them?

When you have to ascertain motive to make policy decisions, you are setting yourself up to have a failed policy.
   8. DL from MN Posted: August 18, 2021 at 06:35 PM (#6034989)
The minimum MLB salary is too low, it hasn't doubled in 20 years even though revenues have nearly tripled over the same time span. It should be at least $810k ($5000 a game).
   9. Tom Goes to the Ballpark Posted: August 18, 2021 at 07:30 PM (#6035001)
MLB really does think Tony Clark is an idiot.
   10. McCoy Posted: August 18, 2021 at 07:57 PM (#6035006)
If the owners are proposing a floor it is because it benefits them to have one.
   11. snapper (history's 42nd greatest monster) Posted: August 18, 2021 at 09:19 PM (#6035023)
If the owners are proposing a floor it is because it benefits them to have one.

No. It benefits them having the luxury tax start at $180M. The floor is the trade-off to get that. The floor hurts them less than the lower penalty threshold helps.
   12. Brian C Posted: August 18, 2021 at 09:54 PM (#6035035)
I kinda feel like the entirety of #7 is written from the perspective that someone other than the owners themselves are proposing the floor.
   13. The Honorable Ardo Posted: August 18, 2021 at 10:10 PM (#6035043)
In the olden days owners competed against each other. Now, more than ever, they realize they're a cartel and act accordingly.
   14. sanny manguillen Posted: August 19, 2021 at 08:42 AM (#6035091)
The minimum MLB salary is too low


My guess is that this will be a throw-in to whatever deal is reached. The exact level of the minimum doesn't have any impact on the choice between a rookie and a veteran bench player who's looking for a couple guaranteed years.
   15. McCoy Posted: August 19, 2021 at 08:51 AM (#6035092)
Re 11.

Um, that would be a yes then not a no.
   16. snapper (history's 42nd greatest monster) Posted: August 19, 2021 at 09:25 AM (#6035095)
Re 11.

Um, that would be a yes then not a no.


They're offering a benefit in a negotiation, in order to get a concession. That's what's supposed to happen in negotiations. They'd rather not have the floor, but they want other stuff more. That's not the same as the floor being good for the owners. The owners entire offer is something they perceive as good, otherwise they wouldn't make it.
   17. McCoy Posted: August 19, 2021 at 09:43 AM (#6035099)
Um, yes I know. Thanks for explaining what I already know.
   18. JRVJ Posted: August 19, 2021 at 01:32 PM (#6035144)
What surprises me the most about this proposal is how it grossly favors cheap, miserly teams versus the high spending teams.

Why in the world would the Yankees, Dodgers, et. al. like this proposal, in which they subsidize the Pittsburghs and Baltimores of the world?
   19. Steve Balboni's Personal Trainer Posted: August 19, 2021 at 02:14 PM (#6035151)
I've read about this proposal in a few different places, and a key detail that remains unclear to me is this:

Would teams only be eligible for additional proceeds from the luxury tax once they reached $100m in payroll? Or would it be used to help teams reach $100m?
   20. The Yankee Clapper Posted: August 19, 2021 at 02:30 PM (#6035153)
I can’t see MLB getting the luxury tax threshold (and de facto salary cap) lowered to $180M, while the tax rate is raised at all levels. That would have to be a non-starter for the MLBPA, IMHO. MLB probably knows that, too, but hopes to get something not that much more generous to the players than the current deal - perhaps keeping the current threshold, or thereabouts, while tinkering with the repeater penalties.

I’m not sure MLB really wants a system in which all teams stay below the luxury tax threshold - what would it do without the $$ skimmed from the more successful teams?
   21. RoyalsRetro (AG#1F) Posted: August 19, 2021 at 02:34 PM (#6035155)


Why in the world would the Yankees, Dodgers, et. al. like this proposal, in which they subsidize the Pittsburghs and Baltimores of the world?


They'd have an excuse for not spending more than $180M and pocketing the rest.
   22. Karl from NY Posted: August 19, 2021 at 03:17 PM (#6035167)
The minimum individual salary goes up slowly because it mostly benefits future union members, not the current voters for each CBA. Current voters will soon go on to either be worth above the minimum or wash out of the league, so they don't have much reason to vote for raising it.
   23. DL from MN Posted: August 19, 2021 at 03:23 PM (#6035168)
The minimum individual salary goes up slowly because it mostly benefits future union members, not the current voters for each CBA. Current voters will soon go on to either be worth above the minimum or wash out of the league, so they don't have much reason to vote for raising it.


I don't think that is necessarily true. If the minimum is higher then veterans will be negotiating from a higher floor.
   24. Karl from NY Posted: August 19, 2021 at 03:33 PM (#6035170)
I don't think that follows. Veteran contracts should be priced according to the team's expected marginal revenue from the expected added wins. The individual minimum doesn't make fans attend or spend more.
   25. JRVJ Posted: August 19, 2021 at 03:37 PM (#6035171)
21, I'm not entirely sure that's what's driving some of those teams.

The loss of draft picks, that's what really drives them (once you put the pandemic aside, the big payroll teams have a completely different business model from the Pittsburghs and Baltimores of the world, in that they make a ton of money if they are good, and they only make half a ton of money if they are not good).
   26. 57i66135 is available to babysit, for a price Posted: August 19, 2021 at 04:28 PM (#6035186)
"details about the mechanism are unclear, including what penalties teams might incur if they do not reach $100 million, or what year the minimum would take effect."
in the NBA, if a team doesn't spend up to the salary floor, they split the difference evenly between the players on your team. so if you're 15MM under the cap and you have 15 players, each of those players gets an extra check for 1MM at the end of the season.


if the floor is 100MM, you don't get to cheat your way into spending less than 100MM.
MLB really does think Tony Clark is an idiot.

it's not even that he's an idiot, it's that clark doesn't have the votes to force a work stoppage, and MLB knows it.
   27. bookbook Posted: August 19, 2021 at 09:37 PM (#6035232)
I’d like to see a $900k minimum,a $125k minimum in AAA, $100k in AA, and $75k in A. If we got that, I might care less about floors and ceilings and the shenanigans of teams and owners.
   28. snapper (history's 42nd greatest monster) Posted: August 19, 2021 at 09:50 PM (#6035238)
I’d like to see a $900k minimum,a $125k minimum in AAA, $100k in AA, and $75k in A. If we got that, I might care less about floors and ceilings and the shenanigans of teams and owners.

Why would you pay A players well above the median salary in the U.S.? Why should a 18 y.o. earn 10 times what his work is worth to play a game, when his chances of making the majors is 1 in 100. What a bizarre thing to want to subsidize.

Major leaguers generate revenue for the owners; they deserve to be paid. Low minor leaguers are just a cost.
   29. Voodoo Posted: August 19, 2021 at 10:51 PM (#6035257)
Why should a 18 y.o. earn 10 times what his work is worth to play a game


You think a minor league ballplayer is "worth" $7500 annually? Where the hell do you come up with this notion of value? Low minor leaguers are just a cost, huh?
   30. DL from MN Posted: August 20, 2021 at 10:56 AM (#6035299)
Veteran contracts should be priced according to the team's expected marginal revenue from the expected added wins.


Yes, marginal ABOVE the minimum. If you raise the minimum $300,000 the veterans also get that increase.

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