The major-league baseball owners had hoped to cure the game’s ills with the creation of a luxury tax and a revenue sharing system.
But in the end, the cornerstone of the new labor deal doesn’t appear to be the ultimate solution.
Baseball’s new Robin Hood format (taking from the rich and giving to the poor) didn’t go as far as most of the owners wanted, but it does move baseball in the direction of stable pro sports such as football and basketball.
Baseball had hoped to bridge the gap between the rich clubs and the small-market financially strapped teams. The fear is, these poorer teams can’t compete and run the risk of going bankrupt without a more equitable system.
“We wish we would have gotten a better system, but you’re not going to conquer the world in one negotiation,” Philadelphia Phillies owner Bill Giles said.
The owners went into this war hoping for the ultimate jackpot. Their initial proposal 29 months ago was for a salary cap limiting payrolls to $44 million per team.
Last year, there were five teams above that figure, including the Yankees at $65 million and the White Sox at $44.8 million. The 1997 payrolls are expected to be much higher.
Instead, baseball settled for a luxury tax that falls far short of a salary cap. In 1997, a 35 percent tax will be levied on up to five teams on amounts above a $51 million payroll.
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Had the plan been in effect this year, the Yankees would have faced a $5.2 million tax; Baltimore, $3.8 million; Cleveland, $1.1 million; and Atlanta, $1 million.
The revenue sharing component calls for 13 teams to give money and 13 teams to receive, with about $70 million to be transferred this year. The most a team can kick in is $6 million, and the most a team can receive is $6 million. The Pittsburgh Pirates stand to reap $4.7 million, with 10 other teams pulling in more than $2 million.
The idea is to help level the playing surface and allow teams such as the Milwaukee Brewers to compete with the big boys. The tax also is supposed to help deter teams with big payrolls from pursuing high-priced free agents.
Yet even with the contribution, which Milwaukee gladly will take, the Brewers still could be as much as $40 million behind the Yankees in payroll next year.
“Is it going to keep a team in a small market if everything else is against it? I doubt it,” said Allen Sanderson, a professor of economics at the University of Chicago. “It’s some deterrent (against spending a lot of money), but . . . if you have enough to pay $51 million, you probably have enough to pay the tax of another few million.”
But other experts saw progress for small-market teams. Martin Greenberg, executive director of the National Sports Law Institute at Marquette, believes “$4-5 million can mean the world to teams in terms of signing players.”
“The total amount out there will be more equally distributed,” said Rodney Fort, an ecomomics professor at Washington State. “There will be more places bidding on players.”
Big enough to make a difference? “Anything that moves those revenues closer together, it’s bound to help–maybe a little, maybe a lot. It depends how close to the margin those teams are,” Fort said. “How much more money does (a team) need to be competitive? They need a pitcher and a hitter, so a couple million bucks maybe.”
Baseball currently shares less than 20 percent of its revenue, compared with at least 35 percent for basketball and 90 percent in football, the most profitable of the pro leagues.
It remains to be seen if the new system will allow baseball to flourish.
“It’s not clear who won here,” Fort said. “That the owners have agreed doesn’t mean that one side or the other side has won.”
HOW THE DEAL WORKS
The luxury tax on high-payroll teams and revenue sharing are the two key elements in baseball’s new labor agreement. According to The Associated Press, here’s a look at how they will work:
Luxury tax
If the tax system had been in effect in 1996, teams would have paid the following tax: New York Yankees ($5,247,785), Baltimore ($3,816,795), Cleveland ($1,134,160) and Atlanta ($1,025,912).
Luxury tax money would be used to fund the owners’ revenue sharing shortfall.
Revenue sharing
Begins in 1996 and 1997 at 60 percent of the formula adopted last March.
In 1996, nine teams will pay more than $1 million apiece: the Yankees ($5.5 million), Cleveland ($5 million), Baltimore ($5 million), Atlanta ($4 million), Los Angeles ($3.4 million), Texas ($2.8 million), Boston ($2.7 million), White Sox ($2.4 million) and Toronto ($1.2 million).
In 1996, 11 teams will receive more than $2 million each: Pittsburgh ($4.7 million), Kansas City ($4.5 million), Montreal ($4.5 million), Detroit ($4.4 million), Minnesota ($4 million), Milwaukee ($3.7 million), Oakland ($3.2 million), Cincinnati ($3 million), California ($2.7 million), San Diego ($2.7 million) and Houston ($2.5 million).