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Discussion: Harsher luxury tax penalties

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So, this tweet and the fact that the rumor mill is now churning out Machado --> Yankees, Harper --> Cubs has gotten me thinking:

Does baseball need a tougher luxury tax?

Right now, here's the penalties:
 

Quote

A club exceeding the Competitive Balance Tax threshold for the first time must pay a 20 percent tax on all overages. A club exceeding the threshold for a second consecutive season will see that figure rise to 30 percent, and three or more straight seasons of exceeding the threshold comes with a 50 percent luxury tax. If a club dips below the luxury tax threshold for a season, the penalty level is reset. So, a club that exceeds the threshold for two straight seasons but then drops below that level would be back at 20 percent the next time it exceeds the threshold.

Quote

Beginning in 2018, clubs that are $40 million or more above the threshold shall have their highest selection in the next Rule 4 Draft moved back 10 places unless the pick falls in the top six. In that case, the team will have its second-highest selection moved back 10 places instead.

 

I think baseball should look at it's penalties for other areas - such as the international market and comp picks.

If a team exceeds the luxury tax, I think they could incur the following penalties in addition to the luxury tax payments.

- No draft picks may be signed for an amount exceeding $300,000 in the following draft (this is akin to the international cap punishment that the Sox suffer for signing Robert)

- Loss of highest draft pick for every $5M over the tax.

- FA signings are capped at $10M/2YR the following off-season.

Now, I know if these were all done together it might be too much, but I think any one of these penalties tacked on might start making teams think twice.

I think they'd be completely reasonable if they're only put in place for repeat offenders / a reasonable amount over the tax threshold. 

 

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24 minutes ago, Quinarvy said:

So, this tweet and the fact that the rumor mill is now churning out Machado --> Yankees, Harper --> Cubs has gotten me thinking:

Does baseball need a tougher luxury tax?

Right now, here's the penalties:
 

I think baseball should look at it's penalties for other areas - such as the international market and comp picks.

If a team exceeds the luxury tax, I think they could incur the following penalties in addition to the luxury tax payments.

- No draft picks may be signed for an amount exceeding $300,000 in the following draft (this is akin to the international cap punishment that the Sox suffer for signing Robert)

- Loss of highest draft pick for every $5M over the tax.

- FA signings are capped at $10M/2YR the following off-season.

Now, I know if these were all done together it might be too much, but I think any one of these penalties tacked on might start making teams think twice.

I think they'd be completely reasonable if they're only put in place for repeat offenders / a reasonable amount over the tax threshold. 

 

No, they need a cap/floor system. Right now, the tax is a de facto cap for 26/30 teams. Why do the Yankees, Red Sox, Dodgers and Cubs get to play by a different set of rules? 

Also, the only FA that are getting paid are the best of the best, everyone else is getting short term deals or even being forced into early retirement. Baseball's economic system is broken. All of the money is going to the ownership and superstars, and very little is going anywhere else. If you want to talk about killing baseball, this is what could do it. Young athletes could decide it pays better to play another sport. 

I could go into a rant about economics and late stage capitalism, but I'm not going to go there. 

Edited by Jack Parkman
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Trouble is, if MLB wants to change the luxury tax penalty, they have to go through the Player's Association, who happen to be much smarter than the owners.

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7 hours ago, Jack Parkman said:

No, they need a cap/floor system. Right now, the tax is a de facto cap for 26/30 teams. Why do the Yankees, Red Sox, Dodgers and Cubs get to play by a different set of rules? 

Also, the only FA that are getting paid are the best of the best, everyone else is getting short term deals or even being forced into early retirement. Baseball's economic system is broken. All of the money is going to the ownership and superstars, and very little is going anywhere else. If you want to talk about killing baseball, this is what could do it. Young athletes could decide it pays better to play another sport. 

I could go into a rant about economics and late stage capitalism, but I'm not going to go there. 

Please do.

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32 minutes ago, oldsox said:

Trouble is, if MLB wants to change the luxury tax penalty, they have to go through the Player's Association, who happen to be much smarter than the owners.

This.  It took a strike to get a luxury tax in place in the first place.

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30 minutes ago, oldsox said:

Trouble is, if MLB wants to change the luxury tax penalty, they have to go through the Player's Association, who happen to be much smarter than the owners.

What? The PA has been robbed blind the last CBAs, the PA boss seems to be absolutely incompetent.

But yeah creating a hard cap would be the players losing the last thing they still have, that won't happen.

If the owners want a hard cap they will need to give something back and they don't really want that because all but 4-5 teams actually see the threshold as a hard cap, ie. 26 of the owners wouldn't save any money with the cap.

Basically the  threshold is just  a public excuse of the owners to not spend more. 

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Not having a cap and floor system only benefits the elite talent. It does nothing but maintain the status quo for the rest of the union. The MLB PA needs to look out for all of its members, not just the elite players. That is how they let it get to this point in the first place. 

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9 hours ago, ChiliIrishHammock24 said:

Wait, are you sure there is no loss of draft pick at any time for exceeding luxury tax rules? So a team like the Red Sox would just simply move from like pick #32 to #42? That's it? 

Yep.

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I think the League and PA is going to have to agree to something harsher if they want to bring parity to the league. Interest in baseball is dropping quickly and if the big market teams are the only ones signing FAs then baseball is going to become more niche than it already is. The elite talent cant keep going to the same 4 or so destinations, it will damn the game. 

On the flip side I saw there's 200 or so FA still out there and not many teams interested. So they're going to need to do something about the tanking as well. The draft pick compensation probably needs to change significantly.

Edited by Sockin

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The penalties are harsh enough though. They are stopping the majority of big market teams from going over. Boston and Washington did it. That's it. The problem for free agents is that every team received $50 million from MLBAM this year and the small market teams still aren't spending $$. The large market teams (owners, investors) don't like putting money right into the pockets of their small market competitors. I think Yanks, Red Sox, Cubs etc should spend up to that $246 million line but I completely understand not wanting to go over it. 

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34 minutes ago, Y2Jimmy0 said:

The penalties are harsh enough though. They are stopping the majority of big market teams from going over. Boston and Washington did it. That's it. The problem for free agents is that every team received $50 million from MLBAM this year and the small market teams still aren't spending $$. The large market teams (owners, investors) don't like putting money right into the pockets of their small market competitors. I think Yanks, Red Sox, Cubs etc should spend up to that $246 million line but I completely understand not wanting to go over it. 

I think the worry here is specifically teams like the Cubs who may at some point have so much money that they’re just not going to care about the tax.

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I would love a hard salary cap in MLB with a floor (perhaps there would be some "exception" to go under the floor if you are rebuilding, etc.), but, just making things so not sure how close this would be, if every team had to spend $125M and the ceiling was $210M, what would be the negatives?

Yankees/Dodgers can still go wild, cap would continue to rise as revenues do and teams like Miami, SD, KC, Pittsburgh are suddenly players for marquee free agents.

Right now, the best free agents are typically limited to about a third of the teams and the smaller market teams only compete if they build from their systems and nothing goes wrong.

The Cubs are spending $200M+ and are being accused of being cheap by their fans for not spending (so far) this off-season - that's after some pretty expensive free agent moves that haven't worked out. Point is, the Cubs can continue being wrong and still have a top 5 payroll. Imagine being a Pirates fan - you either build 100% correctly through your farm system and hope to compete for 3-4 seasons before trading everyone away.

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Baseball doesn't need a luxury tax at all. It just needs extremely wealthy owners to stop crying "small market". 

Every team could afford a $150-$200 million payroll if they cared about winning, but they dont.

But fans still side with the billionaire owners vs the millionaire players.

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6 hours ago, LittleHurt05 said:

Baseball doesn't need a luxury tax at all. It just needs extremely wealthy owners to stop crying "small market". 

Every team could afford a $150-$200 million payroll if they cared about winning, but they dont.

But fans still side with the billionaire owners vs the millionaire players.

But the yankees could afford a 400m payroll and still make profit. No team could compete with that.

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