MLB Owners Wanted to Count Player Meal Money Toward Luxury Tax Figures
In a “best and final” offer that was never really intended to succeed, Major League Baseball owners proposed a competitive balance tax threshold that would remain at $220 million for the first three years of the new deal. While that figure represents a $10 million bump from the previous mark, the CBT hasn’t kept pace with revenues that have skyrocketed over the last two decades.
Even prior to issues stemming from the pandemic, it’s clear that the “soft cap” served to limit payroll spending. One need look no further than the divergence between the yellow and red lines below to understand why players are fighting for changes to the sport’s financial structure, so maintaining a static CBT threshold was a non-starter.
Believe it or not, even that $220 million mark was too high for the Angels (Arte Moreno), Diamondbacks (Ken Kendrick), Reds (Bob Castellini), and Tigers (Chris Ilitch). According to Evan Drellich of The Athletic, those four objected to the proposed CBT increase before it was ultimately included in the final offer Tuesday afternoon. It seems strange that Moreno was in that group, but Drellich noted that “personal feelings toward costs and baseball’s economic system” were at play for some detractors.
One has to imagine that at least as many owners were in favor of a larger increase, making $220 million something of an acceptable midpoint. Except that it was never going to be acceptable in the players’ eyes, so what was even the point? A better question is whether the owners were simply unserious or whether their ranks are so divided on this particular topic that finding an amenable solution is nigh impossible.
The most damning indictment of the owners’ collective frivolity, and perhaps an indication of the fractious nature of their alliance, is the inclusion of per diems and/or stipends toward luxury tax calculations. Yes, the owners wanted to count the money players receive for food just like salary. If you happen to be thinking they all make plenty of money and can just buy their own food, I will ask that you exit this page right now.
Speaking of food, this little wrinkle feels like a carrot one or more owners put out there for some of their colleagues who weren’t so keen on a CBT increase. And I don’t just mean the four mentioned above because it only takes 23 owners to approve a new deal. It’s entirely possible there were at least three others who needed to be persuaded to okay the last offer.
Drellich reported that the meal money stuff “irked the players,” which is understandable, but it should also have given them a better idea of exactly what they’re up against when it comes to affecting CBT increases. As with so many other matters in this labor battle, it’s about trying to even the playing field to whatever extent possible. The problem there is that, as seen above, the growing financial disparity of the last two decades or so means the owners have to cede more ground than would be the case under more equitable circumstances.
For additional perspective, it’s important to understand that only nine current owners had their teams during the last work stoppage of 1994-95. Then you add that 15 current owners* have taken over since 2003, when the league began a run of 17 consecutive years of unprecedented revenue growth. Hell, revenue increased by 43% from 2012-19 alone.
There were eight teams purchased from 2006-12, nearly the same number as those who were still around from the bad old days of the mid-90s. Five of those teams, including the Cubs, were purchased in 2009 or later. What I’m driving at is that you’ve got a group of folks who woke up on third thinking they hit a triple after most of them had already grown up eating with silver spoons. All they’ve ever known is wild, and wildly disproportionate, revenue and asset growth.
We could take it even further to look at how a good number of those teams still under the same ownership from the last strike are merely in the same family. The people running those teams aren’t the same as they were 30 years ago, though it’s at least mildly interesting that the notoriously frugal and abrasive Jerry Reinsdorf is reportedly not stirring this particular drink.
So let’s break this down quickly and get out of here since I know one or two of you have better things to do with the coming weekend. The owners’ primary goal is asset appreciation, not stewardship of a sport, and most of those owners have never experienced true labor strife. At least half of them had never even dealt with a prolonged dip or stagnation in league revenues during their tenure, so there’s an expectation that hardship is little more than eight letters arranged just so.
Given the nature of this group, I’m growing ever more pessimistic that a deal can get done in time for us to have regular season baseball prior to mid-May. Even then, I fear the players will end up accepting an arrangement that leaves them stewing in further acrimony for the next five years. I just really hope I’m wrong.
*Steve Cohen of the Mets is actually an outlier there because he bought his team during the pandemic, but even COVID didn’t hurt franchise values. For all his warts, Cohen is also a potential change agent because his extreme wealth dwarfs that of his colleagues and allows him to spend with little or no regard for penalties. That scares some other owners.