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Home Maury Brown BROWN: Answers on Luxury Tax, International Draft, and Other MLB Picture Postcards

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BROWN: Answers on Luxury Tax, International Draft, and Other MLB Picture Postcards PDF Print E-mail
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Written by Maury Brown   
Thursday, 02 December 2010 14:40

Maury BrownThe bane (or boon, depending on your point of view) with the advent of social networking is that great topics for discussion come and go, normally in 140 characters, and then get lost—the ability to bookmark conversations are lost.

We can call this a “mail bag”, “expansion on twitter conversations”… what have you. Point is, there’s enough questions that get asked each year that it’s worth me putting it together so that it can be referenced at a later date. So, here’s a hodgepodge of often asked questions.

Does buyout $ count toward player payroll?

The answer is, yes. If there’s a $2 million buyout of an option year, that $2 million will show up as part of total player payroll.

Does that mean the buyout $ can be taxed if a club busts the Luxury Tax ceiling?

Yes, again. If you’re close to the Luxury Tax threshold, and you buyout an option year, it could push you over the soft cap and you’d be taxed against that accordingly.

On the Luxury Tax, is it part of revenue-sharing?

The answer is no. Spread the word on that as it is misrepresented year-in-and-year-out. In reality, the lion’s share of Luxury Tax money collected (for those that want to get technical, the CBA defines it as the Competitive Balance Tax) goes back to the players in the form of benefits. How do you think the MLBPA got the players to sign-off on a soft cap?

Are Free Agents offered salary arbitration held to the 80% rule?

The CBA has a rule that states that players that fall within the 3-6 year major league service time range (also, throw in Super 2s), cannot have a salary reduction of more than 20 percent in the next year. But, the rule only applies to those 3-6 year MLS players. Free agents that accept the offer for arbitration can be offered a salary that is more than a 20 percent reduction – they are exempt from Article VI under the CBA’s rules for salary arbitration.

Is the Luxury Tax here to stay?

Technically, no. The current CBA has it expiring at the conclusion of the agreement in Dec of 2011. That doesn’t mean, however, that it won’t be renewed in the next Basic Agreement. There’s been no talk of scraping it and some have called for more stringent tax rates to slow down the Yankees spending (they’ve broken the soft cap every year since the LT was put in place in 2003).

Speaking of caps, will there be negotiations for a hard cap in MLB?

This is an easy one. The answer is, no. MLB sees a smaller percentage of revenues going back to the players than any of the other Big-4 sports that have hard caps, or much more stringent soft cap systems. In other words, it’s a non-starter. The 9’4-’95 strike came about when owners wanted a hard cap. The sides understand that you can work on “salary compression” but a capped system isn’t necessary. After all, there’s been increased competitive balance, and league revenues are projected to be a whopping $7 billion this year. No one wants to kill the golden goose.

If everyone is saying that expanded playoffs are coming, why not next year?

I wrote about this earlier in more detail, but the short answer is, it has to be collectively bargained. There’s deciding things like how postseason shares are divided, etc. that have to be accounted for. That, and the owners and players have to vote on whether to accept it. Next quarterly meetings for the owners is in January, and the MLBPA Exec. Board meets shortly and determine whether a vote of the players could go forward. If both sides agree by vote, then the technicalities would be addressed through the CBA. Put it all together and it adds up to no earlier than 2012.

If there are expanded playoffs, will the regular season be shortened? – No. Owners that miss the playoffs, even if they are expanded, don’t want to lose even one regular season game’s worth of revenue. To make it work, the plan on the table would be the addition of scheduled day-night double-headers.

Think there will be an international draft?

It’s been some time but people forget that both the league and MLBPA agreed to try and get an international draft in 2002. They couldn’t get it wrapped up before the CBA deadline, but agreed to pursue it after the deadline passed. It withered on the vine. The point is, both Rob Manfred, the Exec VP of Labor Relations for MLB, and Michael Weiner, the Exec Director of the MLBPA have said to me that they’re not opposed to an international draft, but implementing it is another matter. Think about it: in N. America, there are high school and college players that allow for easy ranking. Internationally, that same method doesn’t exactly tie in neatly.

The Minors Have hGH testing, is it coming to the Majors?

My sense is, no, and for good reason. Minor league players have no union to back them, while the MLBPA will say that testing that uses blood draws and is inefficient should not be considered. The PA has said that when there’s a viable urine test, they’re ready to talk. We’re not there yet.

What about a slotting-system for draft bonuses?

The league wants to go away from “recommended” slots for amateur signing bonuses and make the slots hard. The MLBPA is opposed to it using the “c” word (that’s “cap”) to describe it. When the word “cap” comes into play in baseball, 9 times out of 10, it’s a non-starter.

What’s AAV?

Annual Average Value. It’s used with multi-year contracts. Take total amount and divide by contract length. So, 5-year, $40 million has an AAV of $8 million. Multi-year contracts most often run at a different pace. It could be $2M, $6M, $8M, $12M, $12M. Still, AAV is a key market driver. Just look at the Tulo deal and how it’s impacting the negotiations between the Yankees and Jeter.

Can option years or bonuses be tied to stats? Technically, no. CBA makes it clear that tying such matters to things like BA, or ERA is off-limits. It creates problems… manager changes the line-up. Pitcher doesn’t like where he is in the rotation… Stuff like that. What is allowed is things like plate appearances and innings pitched which speaks to durability. And, much to the chagrin of the BBWAA, bonuses and escalators can be added to contract provisions based upon MVP and Cy Young voting. Felix Hernandez just benefited from it, and if you look at the Troy Tulowitzki deal, he can really cash in if he wins the MVP.

Will there be expanded instant replay soon?

Probably not. If Bud Selig isn’t pushing it; his hand-picked on-the-field committee hasn’t pushed it, then it’s not likely to happen soon.

Think MLB will reap any rewards of a lockout in the NFL and NBA?

You might get a few extra fans from an NFL lockout, but I can’t see any coming from the NBA. The reason? The Association’s season begins when MLB’s is ending. There would have to be a labor gap so wide as to have the NBA regular season all but wiped out. That’s not happened before, and few think it will happen now.

Why is it FIFA can announce where the World Cup will be played in 2022. but we still don’t know if there will be a continuation of the World Baseball Classic?

While it’s not part of the current CBA, the WBC is a collaborative enterprise with the MLBPA. The sides have to bargain to see when and if it will continue. With its growing popularity, the biggest issues really center on protecting star major league talent from injury. When you throw in the addition of expanded playoffs, players will be stretched to the limit by the end of MLB’s regular season.

What odds do you give MLB addressing their television blackout policy?

I’ve given up. Zero. MLB flirts with false advertising each year with MLB Extra Innings, but it’s pretty simple: the policy is really, “Let the buyer beware.”


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, as well as a contributor to FanGraphs and Forbes SportsMoney. 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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