AP story: Luxury tax for Yankees, Red Sox, Angels

by SA on Dec 27, 2004 3:31 PM PST Comment 17 comments

Would be interested if folks know how the this money from the Yankees, Red Sox, and Angels is divided up and how much, for example, would the A's be expected to receive. I assume the payroll threshold only runs at the current level until the next collective bargaining agreement. If it stays at this level for several years, inflation alone would probably push more teams to pay at least some luxury tax. The players union and the Yankees (and perhaps other teams in the future) would like the threshold to be lower.

The Boston Red Sox got an extra bill after winning the World Series...
RONALD BLUM
Associated Press
NEW YORK - The Boston Red Sox got an extra bill after winning the World Series.
Boston and Anaheim must pay baseball's luxury tax along with the New York Yankees, according to final figures compiled by the commissioner's office.

The Yankees are required to pay $25,026,352, according to a Dec. 21 memorandum that was sent to all major league teams. Boston owes $3,155,234 for exceeding the payroll threshold of $120.5 million and Anaheim got a bill for $927,059.

Checks for the competitive-balance tax, as it is formally known, are due at the commissioner's office by Jan. 31.

"The CBT is now an important part of baseball's economic landscape," Red Sox owner John Henry said in an e-mail Monday. "From my perspective, even though it costs us, the stronger the CBT is in the future, the stronger the sport is going to be. It is a much more productive form of taxation than that of strictly revenue taxation because the economic incentives for teams are not damaged."

In 2003, the first year of the new luxury tax, the Yankees were the only team to pay, owing $11,798,357, according to the team's latest revised bill. Because they exceeded the threshold a second time, the Yankees were taxed at a rate of 30 percent for the amount they were over. Boston and Anaheim were taxed at a 22.5 percent rate.

If the Yankees go over the 2005 threshold of $128 million, which appears certain, they would be taxed at a 40 percent rate.

New York also estimates it will give up about $60 million as part of baseball's revenue-sharing plan this season, meaning the Yankees will send the commissioner's office about $85 million of their estimated $315 million revenue in 2004. Boston's revenue-sharing payment is estimated at approximately $42 million on revenue of at least $220 million.

The Yankees easily finished ahead of other teams in the regular payrolls figures for the sixth straight season, winding up at a record $187.9 million, $28 million above the previous mark they set in 2003.

Boston, which overcame a 3-0 deficit against the Yankees in the AL championship series and won the World Series for the first time since 1918, was second at $130.4 million.

Anaheim, defeated by the Red Sox in the first round of the playoffs, was third at $115.6 million, followed by the New York Mets ($103.2 million), Los Angeles ($101.7 million), the Chicago Cubs ($100.7 million) and Philadelphia ($97.4 million).

St. Louis, swept by Boston in the World Series, was eighth at $92.8 million.

At the other end, Tampa Bay finished with the lowest payroll for the third straight season. At $24.4 million, the Devil Rays had the lowest figure for any team since 2000.

Milwaukee was 29th at $29.6 million, down from $43.3 million, and Pittsburgh was 28th at $32.5 million, down from $53.3 million.

Texas fell from fifth at $103.3 million to 13th at $79.2 million, Atlanta went from sixth at $98 million to 12th at $79.4 million, Seattle dropped from seventh at $97.7 million to 11th at $81.8 million and Arizona declined from 11th at $83.8 million to 15th at $68.4 million.

Anaheim rose from 12th at $80 million to third, the Cubs increased from 10th at $84 million to sixth and Philadelphia went up from 15th at $71.5 million to seventh.

Payrolls include salaries, prorated shares of signing bonuses, earned bonuses, buyouts of 2004 options and cash transactions.

For the luxury tax, which is based on 40-man rosters, the average annual values of contracts and includes benefits, the Yankees finished with a payroll of $203.9 million, while Boston was at $134.5 million and Anaheim at $124.6 million.

Many midlevel teams appear to be spending money on free agents this offseason, possibly because of the shift in economics created by increased revenue sharing. That could push the average salary higher next season.

According to the players' association, the average dropped 2.5 percent this year to $2,313,535 from $2,372,189, the first decrease since 1995 and only the third since record-keeping began in 1967.

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Bad economics

The cost of a world championship - Boston's $134.5 million

The cost of a division championship - New York's $203.9 million

The cost of an AL West division championship - Anaheim's $124.6 million

The cost of a bad team - NY Mets' $103.2 million

The cost of a HORRID team - Arizona's $68.4 million

Any idea what the A's paid last year? (Other than less than $60 million)

Seems like some pretty horrid economics to me

by jumperjh on Dec 27, 2004 3:49 PM PST reply actions 0 recs

I think Schott quoted as saying...

it ws $59 mil

"I still stand firm that Johnny Damon is really Jesus, The Unfrozen Caveman Lawyer..."

by Zonis on Dec 27, 2004 4:00 PM PST reply actions 0 recs

If you think about it...

The entire luxury tax system is kind of whack. Anaheim gets taxed, what, a million? That's hardly going to be the difference between me, as an owner/GM, deciding to go over or not. The entire idea of being taxed only for the amount over (which I never realized) gives this soft cap absolutely no teeth-- not to mention that it's at a ridiculous 120.5 million at the first place. If teams are taxed for their entire payroll, then going over would be a lot more difficult a decision, I feel... even Steinbrenner may halt at having to pay another 25-30 million for a tax.

Then again, I doubt it'll get fixed that way. :P

by Trocmagic on Dec 27, 2004 4:00 PM PST reply actions 0 recs

MLB is "Krazy King George's AAA farm system!

And "Selig the Subserviant" throws bones to the hungry currs (Team owners) lest they form a pack and attack K K G and take over the game.

Team Owners should find their balls, meet, set a meaningful cap, and save baseball. With or without "Selig the Subserviant" and Krazy King George.

The Yank's run this poker table called baseball and set "no limit raises" as house rules. If other teams court a player the Yanks want, too bad, Krazy King George opens one of the Yank's treasure vaults and raises until he gets the player.

Yanks own MLB. No team or teams challenge this dominance, the status quo. Even the player's union aligns itself with Krazy King George and Selig the Subserviant. The PU rewards K K G for his largess with preferential treatment and "pick of the litter". Even court jester, boros, circles K K G's table for scraps. They know everytime K K G goes looney with money, all player salaries hike up another notch and domination is a little more complete.

"Krazy King George" and "Selig the subserviant" run the 27?-team farm system and whenever the serfs get too restless or threaten to overthrow the monarchy, they just throw the mangy currs a few bones!

The deck is stacked folks. We fans are very obliging to turn this "rigged game" into David (us) and Goliath (Yanks) or Evil Empire (Yanks) vs everyone.

Sad

Billy Ball 2005; Lightning in a bottle!

by A s Eh on Dec 27, 2004 8:55 PM PST up reply actions 0 recs

Toothless...

That's pretty much the description of any policy in the MLB that regards players. A toothless steroid policy and a toothless salary cap, er, luxury tax.

"Evil will always triumph, because good is dumb." - Spaceballs

by secret ASian man on Dec 28, 2004 1:10 AM PST up reply actions 0 recs

it goes up

for every consecutive year that you are subject to it. . . the yanks are up to paying like 40% of the amount they go over

by kotsbots on Dec 28, 2004 10:05 AM PST up reply actions 0 recs

It is really up to the owners. When they are ready

to change the system for the better, ...it will change.

Billy Ball 2005; Lightning in a bottle!

by A s Eh on Dec 28, 2004 10:47 PM PST up reply actions 0 recs

It is not Selig

It was hard enough getting this meaningless tax past the players union, or do you forget we almost had another strike. Simply stated the players won't stand for any limitations on them making obscene amounts of money, and until that day when enough teams are losing enough money the owners can't or won't stop it.
The problem is that most teams are making money, you can see it in their payrolls and the discrepancy in revenue. The Yankees start with $300 million, the Bosox with $200 million BEFORE THEY SELL A TICKET. The A's start with $10-15. It is not a fair playing board unlike the NFL or the NBA. Revenue sharing is the only answer, and that will never happen.

by china bob on Dec 27, 2004 9:23 PM PST reply actions 0 recs

Uh

"Revenue sharing is the only answer, and that will never happen."

Don't we already have revenue sharing in MLB?

by OaktownTribesman on Dec 28, 2004 6:43 AM PST up reply actions 0 recs

Uh

yes, MLB has something that could be called "revenue sharing," but it's not nearly what revenue sharing is like in the NFL, where each team gets a slice of those $5-billion (or whatever) TV contracts, MLB revenue sharing is on a much smaller scale. . . what I'm trying to say is, MLB teams (the yanks, bosox, cubs, mariners, angels, dodgers, mets, etc.) share a lot less money than gets spread around in the NFL. Sooner or later MLB will get wise up and get rid of Selig and get somebody in there who actually cares about the good of the game. Until then, here's looking forward to being able to trade draft picks. . .

by kotsbots on Dec 28, 2004 10:12 AM PST up reply actions 0 recs

How about revenue sharing with the players?

Each team throws a chunk of its revenue into an MLB-wide pool, and each player gets a cut. End result: Money spread around, rich teams subsidize poor ones... and the players have nothing to gripe about, as they're making money and have an incentive to provide quality product for all fans of the sport.

by AlamedaAphid on Dec 28, 2004 8:05 PM PST up reply actions 0 recs

Baseball: An Ugly Mirror of Society At Large

I worked in minor league baseball (as a broadcaster & VP) for several years and what astounds me is how the union fights for mid-level stars and superstars (less than 1% of the baseball population combined) to get more millions upon their current millions, but allows minor league players (well over 90% of the baseball population) to make a pittance.

I guess baseball is desperate to mirror the rest of the country...but still...it's just amazing how a community of poor people (remembering that most minor league players never spend a day in the bigs) are asked to struggle so that its richest 1% can get richer at their expense. UGH.

Nico

by Nico on Dec 28, 2004 8:48 PM PST reply actions 0 recs

Same for the entire entertainment industry

Baseball players are entertainers, just like musicians and actors... and there are thousands of struggling "minor league" musicians and actors who toil for starvation wages so they can get a shot at the big leagues. It reminds me of the scene in Treasure of the Sierra Madre in which the Walter Huston character gives Bogart a nice Marxist explanation of why gold has value- it's the accumulated work of all the thousands of gold seekers (the vast majority of whom go broke) who hunt the stuff.

I don't begrudge big-league ballplayers their vast salaries, any more than I object to my favorite band getting rich. But I would sure as hell respect those ballplayers a lot more- maybe even think of them as the sacred representatives of something more than just raw capitalism- if they fought for better pay and conditions for minor-leaguers and the starving kids toiling in the Dominican baseball academies. Right now, most big-league ballplayers don't deserve any more or less of my respect than any entertainer who gives me a good show for my dollar.

by AlamedaAphid on Dec 29, 2004 10:51 AM PST up reply actions 0 recs

Depends on organizing the minors

which the MLBPA seems to think is kind of irrelevant to them. This is a stupid thing to think, since organizing the minors would give the players far more bargaining power -- no more scabs! But as a typical, old-fashioned craft union, they probably feel that the union preserves their priviledges as part of the labor aristocracy, and organizing the less-skilled would dilute their benefits. It doesn't really work that way, but that idea has been around for over a century, and the MLBPA certainly didn't invent it.

At the same time, organizing the minors would be seen as a major disaster by the owners, probably the single worst thing that could happen to them -- infinitely worse than this little episode with the steroids. BALCO is embarassing -- minor leaguers organing a union would take power away from the owners, who would spare absolutely no expense in busting any kind of organizing campaign for the minors. My guess is that the MLBPA would like to organize the minors, all things being equal, but know that they like the idea a lot less than the owners hate it.

Incidentally, if the players ever do contemplate any kind of salary cap (which I think they shouldn't), they should offer it in exchange for what's called a "neutrality and card check agreement" for the minors: that is, once a majority of minor league players signs union membership cards, the owners recognize the union and negotiate a CBA, and the owners won't spend any resources fighting the organizing campaign while it's going on. I doubt the owners would agree to that, but it sure would make them look bad to say "no" to the salary cap just to keep the minor leaguers from having a contract.

Nico, as to why MLBPA does nothing about the minors: players not on the 40-man roster are not represented by MLBPA, so their working conditions are none of MLBPA's business, from a legal perspective. Of course they could still say something about it (especially as part of a campaign to organize the minor league players), but it's not like they can actually negotiate anything with the owners regarding them.

by Nick on Dec 29, 2004 12:57 PM PST up reply actions 0 recs

The organizing of the minors is probably

very complicated and expensive to attempt.
Defining ownership could be extremely problematic.
Does a union contract every minor league team individually, Minor Leagues baseball as a single entity, the MLB team at the head of the minor league teams, MLB, or all or some of the above?

An argument can be made that each minor league team is a private owned entity.

When prospects are shuttled back and forth terminology like "contract purchased", "released outright", "waivers", implies that the player has signed a contract with entities other than the MLB team.

Another implication is that the minor league team(s) have "contractural agreements" with the MLB team(s).

Again, I don't pretend to understand these things, but after hearing the terminology over and over, you percieve some of the legal contractual gyrations of the various parties.

A very tangled web to me.

So anyway, when the union goes to organize the minors, exactly who do they organize? and is it worthwhile for minor leaguers? and would MLB lose minor leagues teams under this new burden? And would teams already on the fence go belly up? And with fewer teams to hire them would salaries drop for the lack of job openings?

I'm sorry I brought it up!

Billy Ball 2005; Lightning in a bottle!

by A s Eh on Jan 1, 2005 12:25 AM PST up reply actions 0 recs

Depends on the legal structures

There's no quick answer to the questions you've asked, which is one small example of how awful US labor law is -- even if say 80% of the minor league players wanted to organize, the teams/leagues could tie it up for years potentially by arguing about "proper bargaining units" and whether the teams, leagues, or systems are employers. Maybe MLBPA uses these uncertainties as an excuse to avoid trying.

I don't really think there's too much question about the ultimate employer, though: with the exception of the indepedent A leagues, minor league players are drafted and/or signed by major league teams and assigned ("farmed out") to the minor league teams they control. But the bosses could argue for a different contract for each "level" or league, which would be a big pain in the ass for the players.

As to whether it would be good for the players to organize a union, to me that's like asking if it's good for people to live in a democracy. Right now minor league players (the non-roster ones) have no power. Organizing a union gives them collective power. I don't think it would shut down any leagues or hurt the minors at all. The only businesses that close because their workers organize are (a) so ideologically hostile to their workers that they'd rather close than treat their workers as people, or (b) businesses which can just outsource work (often overseas) to keep rolling in the money and keeping it from the workers. The second condition doesn't apply to the minors; the first is up to the owners.

by Nick on Jan 3, 2005 10:00 PM PST up reply actions 0 recs

It's Up to the Players, Too

They love the Yankees dominating baseball. If the only thing you care about is player salaries, having the richest team in the game set the market is perfect for the players.

by jrbh on Dec 29, 2004 8:13 AM PST reply actions 0 recs