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Reasons for Not Having a Salary Cap in MLB Are Numerous PDF Print E-mail
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Written by Maury Brown   
Friday, 06 November 2009 15:30
Should talk of a salary cap  be
about the Yankees, or a far
broader topic?

As soon as the Yankees won the World Series, the conversation broke into a chorus. There had been discussions about it before, but once the moniker “27th World Series Champion” was attached to the Bronx Bombers, the conversation kicked into high gear… and it hasn’t stopped.

Whether it was Baseball Daily Digest (and Baseball Prospectus’) Joe Hamrahi, or the New York Post’s Bart Hubbuch, calls for a salary cap in Major League Baseball sang out, and that’s just on Twitter.

First of all, I’m not one to say that baseball’s system is perfect; far from it. It’s that a salary cap is (mostly) a reaction to the Yankees, and doesn’t move much beyond that (Hamrahi offers up great conversation on the overall salary cap topic via Twitter, if you look through his posts)

There is lots of talk of a cap, but then, there's little about how to implement it. What there really is a lot of talk about the Yankees being the problem, but a salary floor is needed, as well (keep the Marlins, Royals, and Pirates from living off welfare).

Give me a number for the cap. Or, give me a system for a cap. It’s one thing to complain, it’s another to say the system stinks, and here’s a possible solution.

I’ve written about why a cap is, at best, difficult and create a host of issues, to understanding that perfect parity is a far off notion (some statistical details are within Ranking Who in MLB Got the Biggest Bang For the Buck in 2009). Here’s what I mean.

As mentioned, a floor is need, I believe, more than a ceiling. The Marlins expose the revenue-sharing flaw each and every year and that’s that they take in more in revenue-sharing than they spend on MLB player payroll. That’s certainly not the spirit of the provision within the CBA that says revenue-sharing should be used to improve the on-the-field product (the MLB roster).

But, if you create a floor to address the Marlins, it can create issues for others that really seem to be making a go of it with very little (i.e. the Athletics). So, if you set the floor, to say, $70 million, or around $18 million below the league average for Open Day player payroll for 2009 (actual average, $88,513,173), you’d currently have eight teams below the threshold (Texas, Baltimore, Minnesota, Tampa Bay, Oakland, Washington, Pittsburgh, San Diego, and Florida). So, let’s throw out Florida and Pittsburgh, clubs that have historically collected large amounts in player payroll, but not used it to the best effort with MLB player payroll. I can’t speak for the six other clubs that would be forced to increase player payroll, but they would most assuredly say that it would place them under duress. Possible solution? A system by which club revenues are tied to player payroll, but even that is a flawed model. After all, you do have to invest in prospects… drafting and developing players, just not to the extent that the Marlins use that as a cover for taking in boat loads of revenue-sharing dollars.

On developing and scouting players, one way of “capping” expenditures is to allow for a hard slotting system for the amateur draft, and create an international draft. This keeps costs down for bonuses in the amateur draft and gives clubs that have limited resources to scout internationally a leg up with an international draft.

As for a cap, well… Nine clubs had player payroll over $100 million. The Yankees spent over $200 million and the Mets were just under $150 million. Five of the nine made the playoffs, while four did not (Mets, Cubs, Tigers, Astros). So, what’s the proper level? $110 million? More? Less? Could it be that all a cap would do is undervalue talent? It may prevent the Yankees from gobbling up all the talent by offering more than others could offer, or… Would it?

Ask yourself if the cap has prevented conversation about players such as Labron James leaving Cleveland and going to the Lakers or the Knicks (large media markets). Or, if NFL players would prefer playing in New York due to the media market size there.

MLB is no different. A player that would look to choose between Kansas City or New York, given the same salary offering, where do you think they will look to play? New York where they can garner the most in sponsorship activity.

So, if this is about grossly overspending for free agent talent (cornering them), why not simply do this...

Make the Luxury Tax have teeth. Set the penalty so that it's a dollar for dollar figure (for every dollar over the threshold, the club pays in), or make the tax escalate the higher a club goes over.

In the history of the Luxury Tax (or, as it is more properly called, the [ahem] Competitive Balance Tax), the Yankees have busted through the threshold each year. The Red Sox were the same, until recently, the Angels have done so once, as the Tigers did so this last year. As those that follow this stuff will tell you, the Luxury Tax was designed to go directly after the Yankees. So, if the problem is the Yankees, the Yankees don't seem to care; they simply keep breaking through the soft cap and pay the penalties. So, apparently (at least for the Yankees) the thresholds don’t work (while it does seem to work for the other 29 clubs to one extent or another).

But, the notion of a salary cap is unneeded. MLB has the least amout of revenues going to player payroll ithan any other sport (52% compared to 56.7% for the NHL, 57% for the NBA, and 59% for the NFL), a sign that the uncapped league functions in a "cap-like fashion" better than capped leagues; a cap does not stop high revenue making clubs from having advantage, it is politically challenging (see '94 work stoppage), and if you have a ceiling you need a floor (which could have consequences for clubs that run into economic head winds).

So, the talk of a salary cap should remain that: talk. The system is not perfect, but taking a wrecking ball to it is not the solution. Put in a hard-slotting system for the amateur draft. Create an international draft. Make breaking through the Luxury Tax threshold painful – very financially painful – for those clubs that dare to flirt with it.

And finally, there’s this: Remember that no matter what system you put in place, you are not going to get parity nirvana. You can create an ability to retain talent, but in the end remember… The smartest team will win given the right circumstances. Money or no, there will always be inadequacies due to market size, which attracts talent looking for the most coverage. So, even if every red cent were centralized – shared between each club evenly – players would gravitate to the New Yorks, Bostons, Chicagos, and Los Angeleses of the sports world. Sorry, Kansas City, Pittsburgh, and Cleveland, no salary cap will fix that.


SPORTS BASH: Yankees Make Some Want to Eat the Rich






Maury BrownMaury Brown is the Founder and President of the Business of Sports Network, which includes The Biz of Baseball, The Biz of Football, The Biz of Basketball and The Biz of Hockey. He is available for hire or freelance. Brown's full bio is here. He looks forward to your comments via email and can be contacted through the Business of Sports Network.

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