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Correcting the Falsehood that MLB's Luxury Tax is Part of Revenue-Sharing PDF Print E-mail
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Written by Maury Brown   
Sunday, 11 April 2010 10:54

We love a good plug here at BizofBaseball.com, and for that, a big thanks goes out to ESPN’s Erik Kuselias for mentioning our Luxury Tax data in the segment above. But, as we noted earlier in the week, when numbers hit the media, often times they can be taken out of context.

Kuselias mentioned the following in this clip provided, and we’re going to give you the “truth” or “false” of it.

  • “In the initial seven years of the Luxury Tax plan the Yankees have paid $175 million”….

TRUE – Erik should have stopped here as he would be, in fact, correct. The Yankees have paid $174,183,419 in penalties since 2003 for breaking MLB’s soft cap, paying $25,689,173 last season alone.

  • “In the initial seven years of the Luxury Tax plan the Yankees have paid $175 million in revenue-sharing

FALSE – Adding in that “revenue-sharing” part is where matters have gone sideways in the press. As I clarified earlier this week (see MLB's Luxury Tax, Revenue-Sharing, the Yankees and the Randy Levine Story), the Luxury Tax is not part of revenue-sharing. Total revenue sharing figures for each of the clubs have not been published for some time, but BizofBaseball.com does have the last figures that were available (2002-03, 2005) and the Yankees, in just those three years, shelled out $26,640,289 in 2002, $52,650,000 in 2003, and $76,000,000 in 2005, for a total of $155,290,289 in 3 out of the 7 years of revenue-sharing. So, in fact, the Yankees, while paying $175 million in Luxury Tax money, have paid considerably more in revenue-sharing, if you consider the growth rate of revenue-sharing each year since 2005. For 2009, $433 million in revenue went from haves to have nots in MLB.

  • … that’s 92 percent of the total revenue-sharing…”

FALSE – This is perpetuating the falsehood from the Luxury Tax figures. It is true that the Yankees have paid 92 percent of the total Luxury Tax money, but then that simply says that the Yankees are willing to ignore the system and pay the price by not being fiscally restrictive. The Yankees want to win, and have been willing to pay extra each year (because they can) than other clubs, minus the Red Sox (2004-07), Angels (2004), and Tigers (2008).  In fact, based on those last revenue-sharing figures that were available, the Yankees paid 16 percent of the total in 2002, 24 percent in 2003, and 24 percent in 2005. At the most, (and this is a finger in the wind guesstimate), the Yankees have paid no more than 30 percent of the total revenue-sharing since its inception. Remember… The revenue-sharing that Levine and Attanasio are discussing is based on net local revenues from sources such as ticket sales, local broadcast deals, concessions, parking, etc.

We’re not going to go into matters further. But, as you can imagine, when Kuselias continues to use the total Luxury Tax figures as revenue-sharing (for the record, the majority of LT money actually goes to the players in the form of benefits) the amounts going to each club completely falls apart (as mentioned, see the figures from 2002-03 and 2005 to get an idea of how much flows from haves to have-nots).

Finally, Erik, if you’re reading, we don’t lay this out to make you or ESPN look bad. MLB’s revenue-sharing system is widely misunderstood (for more see my Baseball America article Revenue Sharing Is Making An Impact). We want to lay the above out so that the media can go forward in the future with better numbers to use in the discussion. Heaven knows between now and the end of 2011, when the current collective-bargaining agreement expires, we’re going to be hearing more and more talk about revenue-sharing and the Luxury Tax in baseball. Between now and then, here’s to getting it right.

Luxury Tax (2003-2009)
Click the image above to see total luxury tax monies collected from
2003 to 2009. LT is not part of revenue-sharing

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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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