Inflation is hitting you hard at the checkout stand. The Russians are behaving horribly in Ukraine. The stock market has been slumping. COVID-19 is still out there. Who wants to read about the money problems of millionaire major leaguers in the middle of all of that?
You do if you read on. After a three-month lockout and nine straight days of meetings between the players union and management, negotiations have been suspended and Major League Baseball has canceled the first week of the season. It’s the first time since 1995 that games have been lost to a labor dispute.
Can you find any sympathy in your heart for the players or owners in an issue that will ultimately decide whether they will be able to afford five Lamborghinis instead of four?
In case you’re wondering, the crucial issue of the dispute is the competitive balance tax (CBT), which is what the NBA calls a luxury tax, which is what the NFL calls a salary cap — a ceiling on the amount of money teams can spend each season on player salaries. It’s supposed to prevent teams from stockpiling talent, spreading it more evenly among more teams and thus creating parity (competitive balance), or, as one CBS sports writer called it, “parody.”
The players of course want to raise the “luxury tax,” because they are more concerned about their own pocketbook than parity or even parody, and of course the owners want to keep the luxury tax as low as possible.
How do professional sports leagues achieve parity while also satisfying the players’ insistence on being rewarded whatever the market will bear? It’s the eternal challenge of professional sports (except for the NBA, which just doesn’t care).
The NFL has a hard cap — teams are not allowed to exceed the salary cap, period. The NBA/MLB luxury tax system is a soft cap — it allows teams to exceed the salary cap but forces them to pay a punitive tax. The flaw — and it’s a big one — is that teams with deep pockets are willing to pay a hefty luxury tax in a gambit to win a championship.
The Cleveland Cavaliers paid tens of millions annually to fund LeBron James and his friends, including $54 million during the 2016 championship run. The team lost $40 million that season, per a Forbes report. In 2017 they lost money again after paying a $22 million luxury tax — their $126.5 million payroll was well above the $113 million luxury tax threshold. For owners such as Dan Gilbert, the team is a growth stock, not an income stock.
The same thing happens in the major leagues. One writer, trying to demonstrate that the CBT system works, noted that only six franchises have ever exceeded the CBT “multiple times,” but those teams include the New York Yankees, Boston Red Sox, L.A. Dodgers, San Francisco Giants and Detroit Tigers, who have all appeared in multiple World Series since the CBT was instituted in 1997. During that time the Yankees exceeded the CBT threshold 15 times, the Red Sox 10 times and the Dodgers five times, and those five “CBT teams” made six World Series appearances (and won five) during the years they exceeded the tax.
Some point to the major leagues as a model of parity, noting that there has been no repeat champion since the New York Yankees in 2000. A deeper dive into the numbers paints a different picture.
There have been 22 World Series since then, which means 44 team participations. Of those 44 teams, 23 of the slots were filled by just six teams — Dodgers (3), Yankees (4), Giants (4), Astros (4), Cardinals (4), Red Sox (4) — and four of those are among the aforementioned teams that paid a luxury tax.
Three teams — Red Sox, Cardinals and Giants — have accounted for nine of the last 20 championships
Per writer John Griffin’s research, a closer examination of that era reveals that six teams participated in back-to-back World Series. The Astros advanced to the league championship series five straight times. The Dodgers reached the National League championship series five of the last six years, the Cubs three straight, the Cardinals four straight. The Dodgers won eight straight division titles, the Astros four straight, the Braves four straight. The Dodgers and Giants have won all but one NL West Division title since 2011.
If baseball’s goal is to achieve parity — or parody — the game still has a ways to go.