Why isn't there an MLB Salary Cap?

[crewcrazy]

Even with a salary cap, you could implement something like the NBA's Larry Bird Rule that would allow a team to resign its own players even if it would put them over the cap, just to make sure the small market teams who are mismanaged wouldn't keep losing its players. Of course, if you do that too often and aren't smart about who you commit to long term, you end up in a heap of trouble (take a look at the Knicks and how they're $30M+ over), but the Bucks never would have been able to keep Michael Redd if that wasn't the case.

[Ennder]

The real problem is the top few teams and the bottom couple teams so baseball still needs to do more. I just don't like a hard cap like in the NFL. I of course over did my post a bit, it does help small market teams but at the same time FA's still go to big market teams and more importantly winning teams and even take a paycut to do it in the NFL. They make so much more off endorsements playing for a team like the patriots than they ever could for a team like arizona.

 

I'm also not sure how you would even do a salary cap in baseball because of the minor leagues. It is sort of a unique setup where signing a new young stud means help in 3 to 4 years most of the time, not in 3 or 4 months like in the NBA and NFL.

[Thurston Fluff]

They just pocket the money and right now there is no way to stop that.

 

That's not true. The teams receiving money have to spend it on baseball operations. Some people get confused by the differance between baseball operations and spending on players. Minnesota for example could get money from NY and chose to spend it on some midlevel free agent who would help their team win 70 games instead of 68. Or use it on scouting and player development and get better prospects who could actaully help the team win a division someday.

 

 

Here is what a salary tax accomplishes..

 

a) it doesn't help small market teams, marketing keeps FA's in the big markets

b) it doesn't make people sign with small market clubs, there are almost always reasons to sign in the big city regadless.

c) it doesn't promote fair salaries, players will generally take a pay cut to play in a better sponsered location

d) it doesn't promote player loyalty to teams. In general it promotes free agent movement since you can almost always get more money from outside sources.

e) it does not promote more competitve leagues, the NFL has not had more parity than MLB other than the smaller shedule letting more mediocre teams into the playoffs.

 

I have yet to see a single positive to the salary cap personally.

 

Reggie White, Santana Dotson, Sean Jones, Charles Woodson, Ryan Pickett all came to the smallest city in professional sports.

Brett Farve had plenty of chances to leave to a bigger city and didn't. I can pretty much garuntee you he wouldn't be playing in Green Bay today if football had baseball's system.

[Thurston Fluff]

The real problem is the top few teams and the bottom couple teams so baseball still needs to do more. I just don't like a hard cap like in the NFL. I of course over did my post a bit, it does help small market teams but at the same time FA's still go to big market teams and more importantly winning teams and even take a paycut to do it in the NFL. They make so much more off endorsements playing for a team like the patriots than they ever could for a team like arizona.

 

I'm also not sure how you would even do a salary cap in baseball because of the minor leagues. It is sort of a unique setup where signing a new young stud means help in 3 to 4 years most of the time, not in 3 or 4 months like in the NBA and NFL.

 

Actaully I agree with the luxury tax approach more than a hard cap as well. While you may have overstated your case Ennder that shouldn't detract from some real issues a hard cap has. The NFL today has few great teams and a bunch of averge teams. The first round of the playoffs tend to be boring because of the low level of playoff caliber teams. Sometimes parody=mediocrity. The luxury tax system should be tweeked but not abandoned IMO.

I would like to point out that a cap does not have to mean owners would get to keep all the extra money themselves. In football the players negotiate for a % of the revenue. So if the revenue goes up so does the cap. It isn't about owners pocketing the money. It's about competetive balance. I just happen to think competetive balance can be reached without resorting to a mechanism that fosters mediocrity.

[RightFieldCoder]

Do not forget that if you look at it from an economics point of view that a salary cap makes less sense than no salary cap, due to the fact that really it is much more a free market than if you would have a salary cap/restrictions.

Do not forget that in a real free market, the Brewers would be allowed to play games in NYC, Chicago, or LA whenever they felt like it and could sign local broadcast rights in those cities. But because baseball is not a free market, they are forced by their competitors to stay in a certain geographical area.

I can pretty much garuntee you he [brett the Interception Machine] wouldn't be playing in Green Bay today if football had baseball's system.

I can pretty much guarantee that the Packers would either have already moved to another city or they would be comprised of players that couldn't make the Badger team if football had baseball's system.

And with the Salary Cap needs to be a Salary Floor to guarantee the players and the fans that every team will try to be competitive every year. Yes, the Marlins take their profit sharing and put it into the team. But the owners then take other revenue from the team that would otherwise go to baseball operations and put it in their pocket. I fully agree that the owners have the right to make a profit, but they should open their books up to the union and work out a deal that creates some cap that also guarantees that a set amount of revenue goes into player salaries.

[RobertR]

I think people are conflating Revenue Sharing with a Salary Cap there. There could be a $100 million cap, but the Brewers still would be stuck with a $70 million payroll. The Packers can resign their stars because their revenue exceeds the cap significantly. A cap without significant revenue sharing does nothing. It's also probably too late now to implement a hard cap in baseball as it would be practically impossible for the Yankees to get in line before the next CBA anyways.

 

From what I can tell, player compensation in MLB is of the same or lower proportion than player compensation in the NFL or NBA. Surprisingly, free markets actually do work and pre-arbitration players are a bargain.

 

Robert

[honuswagner21]

One thing that has been overlooked as it pertains to the MLB vs. NFL debate is the concept of a non-guaranteed contract. I think that I can safely say that this is one thing that has less chance of being implemented in baseball than the union agreeing to a salary cap. On the plus side for the NFL, teams may take a hit in one year from having to recognize the bonus money but they aren't saddled with a bad contract for several years if they don't want to. On the downside, there is no protection for the player other than maybe the occasional holdout when their contract becomes undervalued. It boggles my mind that the NFL is able to get away with being able to cut expensive players and not have a huge impact to the team.

[RobertR]

They just pocket the money and right now there is no way to stop that.

 

That's not true. The teams receiving money have to spend it on baseball operations. Some people get confused by the differance between baseball operations and spending on players. Minnesota for example could get money from NY and chose to spend it on some midlevel free agent who would help their team win 70 games instead of 68. Or use it on scouting and player development and get better prospects who could actaully help the team win a division someday.

 

 

I think any competent accountant would have a field day with that. Especially without some sort of matching fund requirement. An owner can get $30 million in revenue sharing, have a bottom rung payroll, and toss in none of his own money and honestly claim that all revenue sharing is going toward baseball operations while totally violating the spirit of the agreement.

 

Robert

[olliegjw]

Two thoughts on items while reading through the posts:

 

1. A salary cap in baseball would be impossible. Do you just limit major league salaries? Then the big market teams will spend a lot more on their minor league teams, and scouting. There are too many levels, and too many variables in baseball to make a salary cap feasible.

 

2. I saw a couple of posts wondering where all the money goes, and if the owners are pocketing a large amount of money. If they are, I say good for them. They are the ones investing billions of dollars into the franchises. They are the ones taking on huge risks. Owning a team is a business, and it is their right to do as they wish. There is a give and take with that. They can pocket their profits, and risk the long-term success of the franchise, or reinvest their earnings to create a better team.

[twobrewers]

Honestly, I used to think that MLB had the worse salary situation in the league. But many steps (not a cap) have been in place to help the small market teams.

First off, we have revenue sharing. It isn't perfect, but it has significantly leveled the playing field.

Secondly, we have compensatory picks for the loss of free agents. If a young team is unable to afford a "super-star" that came up through their system, they will be rewarded with two compensatory picks that will replace one rediculously expensive player - with two cheap players.

Lastly, the players union (and I am pretty much anti-union) has a pretty good case. They have caved on a few issues. But they need to maintain top dollar for their talent. Prince Fielder will make $415,000 next year. Corey Hart will make $392,000. Ryan Braun will make $390,000. Yovanni Gallardo will make $390,000. (You get the point)

Young players in MLB don't make much money. The union balances that by overpaying veterans.

So as a team, you have two ways to really build.
1. You can spend on free agents and lose your draft picks as compensatory picks. This will give you a very high salary (and likely lots of revenue sharing). It will also deplete your system of cheap talent.

2. You can build through your farm system aquiring top talent that will be under your control for years on their rookie contract, and then for several more years through arbitration. (Keep in mind, with the guaranteed contracts in MLB - the ability to offer arbitration and go year to year with players is a huge advantage to the owners) When these players get expense, you can trade them for more young/cheap talent - or replenish your farm with the compensatory draft picks.

I would argue that if you look at the past 10 years World Series that neither method is that much better than the other. The teams that spend a lot will have the most consistantly good teams. But Florida(!) has one two World Series using the other method.

The biggest problems facing MLB, in my opinion, is that many of the large market teams are taking notice and trying abuse the draft as well. By paying "out of slot" they are able to turn there 25th pick into a player who may have been talented enough to be draft #1 overall. If this system isn't changed to lock in the bonuses paid to draft picks, the Yankees will overpay for veterans and overpay for draft choices. They will have the best of both worlds.

[paul253]

Luxery Tax is 100 times better than salary cap.

 

I disagree. First of all, i think the major reasons there are no salary cap is because A)the fans don't make a big enough deal about it and B) The owners don't really want it.

 

If the owners REALLY wanted a salary cap, they'd do what the NHL did. They'd only renew a labor agreement with a cap and wouldn't even reconsider playing without one. The NHL skipped an entire year but came back with a cap because the players union knew the owners wouldn't back down. There is no way the public would be on the player's union side in this battle. There is no way the union could sell to the public the idea that a cap would "hurt" their players. The public doesn't generally feel sorry for people making a MINIMUM of about $400,000. All the owners would have to do is wait for the union to back down, and maybe make some other smaller concessions. It would ruin a season or two, but it would work.

 

About the luxury tax. The fact that only one team is paying it tells me its either not working, or its set way too high. The Yankees are paying it because, well, they're the Yankees and they don't care. Teams like the Mets, Angels, Orioles, Cubs, Red Sox, and maybe a few others, don't pay it now, but look at how high the team salaries are. The Devils Rays had a payroll about $25 million. The Red Sox had one about $143 million, yet neither payed the luxury tax "penalty". Doesn't sound like it's doing much.

[tomwopat]

Luxery Tax is 100 times better than salary cap.

 

I disagree. First of all, i think the major reasons there are no salary cap is because A)the fans don't make a big enough deal about it and B) The owners don't really want it.

 

If the owners REALLY wanted a salary cap, they'd do what the NHL did. They'd only renew a labor agreement with a cap and wouldn't even reconsider playing without one. The NHL skipped an entire year but came back with a cap because the players union knew the owners wouldn't back down. There is no way the public would be on the player's union side in this battle. There is no way the union could sell to the public the idea that a cap would "hurt" their players. The public doesn't generally feel sorry for people making a MINIMUM of about $400,000. All the owners would have to do is wait for the union to back down, and maybe make some other smaller concessions. It would ruin a season or two, but it would work.

 

About the luxury tax. The fact that only one team is paying it tells me its either not working, or its set way too high. The Yankees are paying it because, well, they're the Yankees and they don't care. Teams like the Mets, Angels, Orioles, Cubs, Red Sox, and maybe a few others, don't pay it now, but look at how high the team salaries are. The Devils Rays had a payroll about $25 million. The Red Sox had one about $143 million, yet neither payed the luxury tax "penalty". Doesn't sound like it's doing much.

Right now there's no reason for the owners to want it because they're making money hand over fist. Proof positive that the current system is effective in maintaining competitive balance while protecting costs. Even if they weren't, they'd think twice about basically killing the sport for 5+ years.

Just because only one team is paying the tax doesn't mean it isn't functioning as a deterrent to the rest of the teams. Who is to say that the Bosox's payroll would be $200 million without the tax?

[Thurston Fluff]

I think any competent accountant would have a field day with that. Especially without some sort of matching fund requirement. An owner can get $30 million in revenue sharing, have a bottom rung payroll, and toss in none of his own money and honestly claim that all revenue sharing is going toward baseball operations while totally violating the spirit of the agreement.

 

That's assuming there are no parameters that the teams agreed upon wiht regard to how the money is accounted for. For every accountant one team has the union and other teams have one to make sure they aren't using accountant slight of hand tricks. Just like corporate business accounting it has to be certified by someone. I suppose Enron showed us those things do happen but it also showed us they eventually get caught and what happens when they get caught.

[Big Reed]

an interesting concept. if the Yankees were forced to cut their major league payroll, they could just give out the money to their minor league players or as part of signing bonuses. i would also think existing contracts would remain intact. So if a $120 million cap was imposed for next year and the Yankees were at $200 million this year, they would just give out a bunch of long term contracts before the cap was imposed and remain at $200 million for the next 10 years.

 

You would also have to modify salary arbitration and guaranteed contracts. With baseball's current salary arbitration, a team like the brewers could be forced to go over the salary cap just to retain its players.

 

You could say baseball mimics the real world of business. if you are good at what you do, you will develop a reputation, and big corporations will offer you a job. In talking with Arthur Anderson recruiters before they ran into that Enron problem, they informed me that other corporations are always raiding their company for quality program managers. They trained them and tried to provide enough incentives to stay, but they knew other corporations would come calling with offers for their best people. That's what the Yankees do. They allow other teams to develop talent, and then they accomplish a corporate raid and sign the best talent.

[Thurston Fluff]

I think one hidden development the revenue sharing has provided is teams like the Yankees are no longer the only team paying signing bonuses to players who were not subject to the draft. That is part of what some teams spend their shares on that keeps the playing field more level without adding to the major league payroll. It used to be risky for a team like the Brewers to sign a Cuban player who may or may not develope. Revenue sharing allows them a little more leeway to take relatively small risks for potentially big rewards.

[TooLiveBrew]

An owner can get $30 million in revenue sharing, have a bottom rung payroll, and toss in none of his own money and honestly claim that all revenue sharing is going toward baseball operations while totally violating the spirit of the agreement.

 

We could call them the Florida... Marlins! That's it! Wait, no, that'd never work. Constant firesales would alert suspicion, right?

[logan82]

The problem is that the luxury tax is so high it is almost ineffective.

[mothershipconnection]

I think the closest reasonable move would be a hard cap on slot value in the draft. The union doesn't care as much about draftees because they aren't members yet. This would help create parity somewhat by at least keeping access to incoming talent level equal at the draft level. That way a big market team can't sign a 3rd rounder with signability issues and 1st round talent with 1st round bonus money. Of course, this system is already weakly in place with the slot money policy, but it's not at all a hard cap. A hard cap also isn't the greatest fix since some of the smaller markets use the draft wisely and do spend above slot money as a calculated risk.

[Baldkin]

The lack of TV revenue sharing is the biggest fault in baseball's economic model. In the NFL the Falcons get as much money from TV as the Giants do.

 

In baseball, the Yankees get 800 Million from the YES network and the Brewers get a 12 pack of brats from FSN.

[paul253]

Right now there's no reason for the owners to want it because they're making money hand over fist. Proof positive that the current system is effective in maintaining competitive balance while protecting costs. Even if they weren't, they'd think twice about basically killing the sport for 5+ years.

Just because only one team is paying the tax doesn't mean it isn't functioning as a deterrent to the rest of the teams. Who is to say that the Bosox's payroll would be $200 million without the tax?

My very first sentence said that the owners don't really want one. I was just suggesting what they'd have to do to get one. As far as the luxury tax goes, I stick with my view that is doesn't do anything. When one team had a payroll of $125 million and isn't paying it, then its too high. I think in order for it to be effective, it'd have to be set around $100 million. If the Red Sox wanted a payroll of $200, they'd have it. I highly doubt the $30 million or so they'd have to pay in luxury tax is whats stopping them. I don't know how the NFL got their system, but if MLB could get theirs similar, all would be good. Now I realize that hell will freeze over before that happens, but if you want to talk about real competitive balance, not the BS competitive balance MLB claims to have, just look at the NFL.

[Thats Freakin Sweet]

Player's Union