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Sports Authority

Moxley: MLB and NBA need hard salary caps

| Monday, February 13, 2017

The MLB and the NBA should move away from the practice of soft salary caps, as they promote an unfair and unbalanced method of obtaining and keeping talent.

Instead, the MLB and the NBA should join the NHL and NFL in hard salary caps, which elicit a more competitive and fair league.

The MLB and the NBA already rely on a luxury tax in an attempt to dissuade teams from spending exorbitant amounts of money on players. The luxury tax is the penalty that large-market, professional teams incur in the MLB and NBA for spending too much money on players’ salaries. The reason for this tax is so that teams with high incomes can’t pick up all of the most talented players in their sport. Fan interest is derived from quality competition and if one team is able to dominate the league with their talent level, viewers’ attention will go elsewhere.

For the years 2014-2016, the threshold for the luxury tax in the MLB was $189 million. Those that violate the cap face a 17.5 percent in tax rates the first time, 30 percent the second time, 40 percent the third, and 50 percent the fourth time and so on. The tax is charged for consecutive years, meaning that if a team falls below the threshold during one year and then goes back above the threshold the next, they revert to the first-time tax rate.

This tax was introduced in 2003, and since then only seven teams have surpassed the generous threshold: the Yankees, Dodgers, Red Sox, Tigers, Giants, Angels and Cubs. The Yankees have incurred this tax every year since 2003, paying approximately $325 million, or 74 percent of the total fines resulting from this tax.

Although there is a threshold that teams are not supposed to surpass, do the teams that can afford this tax benefit from it? More specifically, it would be reasonable to believe that teams who can bear this tax are likely to have more high-paying, in-demand athletes compared to those who can not sustain the penalty.

In 2003 the Yankees were the only team in baseball that fell under the luxury tax; they were also one of the two teams that made it to the World Series that year.

The Cubs incurred the tax for the first time this season — the same year they broke their 108-year long World Series drought.

Although the MLB’s current Collective Bargaining Agreement (CBA) sets a threshold that it deems reasonable, it may not be enough to stop high-income teams from gaining a majority of the top talent. Revenue is the deciding factor in how much money a team can afford to spend on their payroll. Take the year 2015 for instance: the four top-ranked teams in order of revenue were the Yankees, Dodgers, Giants and Red Sox. What four teams incurred the luxury tax in 2015, you ask?

The Yankees, Dodgers, Giants and Red Sox.

While the point of the luxury tax is to influence teams to avoid overstepping the threshold, profit-maximizing teams are willing to pay high-dollar for their talent — plus the luxury tax — because they know not all organizations have the ability to do so.

More importantly, a vicious cycle is in place because the most relevant teams in baseball are those that win. Teams that win then generate the most revenue and can afford to sign more accomplished players, giving them a better chance to win in the future. Small-market teams like the Astros, who spend a third of the amount that the Dodgers spend on salaries in a year, no longer have a true shot to beat large-market teams.

Professional leagues such as the NFL and the NHL have hard salary caps, meaning that teams cannot exceed the salary cap. It encourages equality among organizations with different sized markets.

The MLB and the NBA should follow suit.

The views expressed in this column are those of the author and not necessarily those of The Observer.

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