Definition-Harp03

Rob Manfred, Put on Your Thinking Cap

Every year, baseball fans preemptively get psyched for the upcoming MLB season. From the second that the World Series concludes until Opening Day, a majority of baseball fans have hope, both for a surplus of riveting offseason acquisitions and for a successful season. But there are also fans that are dreading their team’s future. These fans root for teams that seemingly have no shot at any sort of postseason contention, as well as teams that have no intention of spending any money or making any significant trades in the offseason. Why are some teams afraid to make moves while other organizations spend money big?

Major League Baseball actively enforces a luxury tax, rather than a salary cap, making it the only league of the four major American professional sports: National Basketball Association (NBA), National Football League (NFL), and the National Hockey League (NFL), to not have a salary cap on spending. Major League Baseball’s salary tax, also known as the Competitive Balance Tax, is an outdated model from 2002 that sets a limit of spending for teams before a tax penalty is distributed. The maximum spending number is declared in the Collective Bargaining Agreement each year, which is constituted by the Major League Baseball Players Association and Major League Baseball’s commissioner. As Jerry Trotta notes in his 12up article “MLB Luxury Tax Explained,” the luxury tax is a boundary that causes teams to pay a tax if they exceed the payroll threshold, and the tax will increase in cases where a team repeatedly exceeds the predetermined boundary. In essence, staying below the luxury tax is only a recommendation, and it is a recommendation that is often disregarded by richer teams.

Meanwhile, the NFL has a “hard cap.” These hard caps, similar to MLB’s salary tax, are enforced by their respective leagues in order to maintain balance between all teams and to ensure that no team has a spending advantage. Preventing big market teams from “buying championships” by signing all the best available players is the primary reason why the caps and taxes are created. However, hard caps allow no leniency, because according to the NHL and NFL collective bargaining agreements, any team that surpasses the hard cap is subject to any of the following: fines up to $5 million, loss of future draft picks, suspension or dismissal of team staff (typically the general manager or owner), voiding of player extension contracts, and forfeiture of games for the duration of a team circumventing the cap. In addition, any attempt to sign or extend a player’s contract, subsequently putting them over the salary cap, automatically issues the team a $25,000 fine.

The primary dilemma with the luxury tax, versus the hard cap, is that the luxury tax does not have a finite limit for spending, inviting big market teams to exceed it and gain an advantage. Teams such as the Yankees, Red Sox, and Dodgers are classified as “big market teams” due to their worldwide popularity, media market size/outreach, and city-based population. They are also some of the most valuable organizations in all of baseball. Nothing is stopping them from pursuing the premier and most expensive players every offseason, leaving the smaller markets to pick up the leftover scraps.

This cyclical process develops into an ugly mixture of tanking and dynasties, two concepts that many baseball fans are haunted. Tanking teams discuss losing intentionally, behind closed doors of course, in order to receive better draft picks in the following year’s draft. Tanking severely impacts the quality of games and competition in those team’s respective leagues. Big market teams rarely tank because they have the financial means to add plenty of talent with the aid of their immense amount of revenue/income. Those big market teams quickly develop into dominating dynasties due to a lack of competition, often winning multiple championships within a decade or even just a few years.

Dynasties coexist with tanking teams, and as a result, attendance and tv ratings in the regular season and postseason decrease. Tanking teams eliminate the enjoyment and anticipation behind baseball games for fans of the tanking team and fans of the opposing team. Meanwhile, the same can be said for a dominant dynasty, especially when a World Series appearance is nearly bound to happen. The San Francisco Giants were in the midst of a legendary run that started in 2010 with a World Series title. They’d go on to win the 2012 World Series and the 2014 World Series, making them baseball’s latest dynasty. At the start of 2012 they were riddled with injuries, just as they were all of 2011, but everyone knew that they were going to be lethal after those players recovered. They ended up SWEEPING the Detroit Tigers, and according to the Baseball Almanac, that series had the lowest ratings (the percentage of households watching a program, game, etc.) of any World Series ever, even to this day. Of course, the Giants achieved this while the luxury tax system was already in full effect.

League parity, fan involvement, and team-construction are directly correlated. One of the main indicators of a sport’s popularity is team attendance numbers. According to the article “MLB Wanted A Salary Cap For Decades; Now With Soaring Revenues, They’d Likely Reject One,” written by Maury Brown of Forbes, “Since 2015, the last year that MLB saw a slight uptick, attendance has dropped 7.14%, or a loss of 5,265,268 fans purchasing tickets and attending games. For 2019, the league saw 14 clubs out of 30 with attendance declines from last season.” This drop in fan engagement is in large part due to widespread belief among general managers that their purchase(s) of players will not be enough to contend with the stacked big market teams in the playoffs. Revenues may be soaring, as his title reads, but the fans and popularity of the sport are more essential to the future of the game than revenue. And fans do not want to watch a league that lacks competitive balance, one where the current luxury tax rules benefit only a small percentage of teams while scaring the others away from improving the quality of players that they put on the field.

The NFL’s tv ratings and attendance is thriving due to their consistently entertaining and drama-filled regular seasons, postseasons, and off-seasons. These attributes are achieved via the hard cap because it encourages smaller market teams to spend money, thereby opening the door for them to compete on AND off the field with the bigger markets. Only 3 teams: the Cleveland Browns, Tampa Bay Buccaneers, and the New York Jets, have not made a postseason appearance since 2014. On the other hand, a whopping 8 teams in Major League Baseball, which is more than ¼ of the league’s teams, have experienced postseason droughts since 2014! Why is there such a difference? The hard salary cap. Less incentive to tank and more (but limited) spending due to the regulations of a hard cap creates parity in the NFL. As a result, they are the king of American professional sports while MLB continues to spiral downward in tv ratings and attendance.

References

(n.d.). Retrieved March 10, 2020, from https://www.baseball-almanac.com/ws/wstv.shtml

Brown, M. (2018, May 23). MLB Wanted A Salary Cap For Decades; Now With Soaring Revenues, They’d Likely Reject One. Retrieved from https://www.forbes.com/sites/maurybrown/2018/05/22/mlb-wanted-a-salary-cap-for-decades-now-with-soaring-revenues-theyd-likely-reject-one/#231aedf12676

Trotta, J. (2019, December 13). MLB Luxury Tax Explained. Retrieved from https://www.12up.com/posts/mlb-luxury-tax-explained-01dvya40ywxd

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1 Response to Definition-Harp03

  1. davidbdale says:

    NOTES COPIED FROM YOUR REQUEST FOR CAUSAL ARGUMENT ADVICE:

    The way you lay it out, there’s a problem in your “luxury tax/hard cap” comparison, Harp, because you have a sort-of number for the cap penalty (up to $5 million), but no number at all for the tax. So it’s hard for readers to agree with you that the luxury tax is LESS of a deterrent to lavish spending than a hard cap that, despite the supposed “hardness,” can be exceeded by whoever wants to pay the penalty. So a money-to-money comparison is weak. You might want to lead with the OTHER very severe penalties of cap violations, such as the guy who approves the deals gets fired.

    I recently heard someone (I think Matt Klentak) describe the downside of incurring the MLB luxury tax in consecutive years. I don’t remember much about the specifics, and they don’t appear in the article I linked, but they went far beyond a money penalty for the first year. His point was that if you’re poised to win it all, paying the tax for a year makes sense, but NOT if you’re more than a year away from a championship. See if you can find a record of his more recent comments.

    You appear to be making a Causal Argument with your SF Giants anecdote, Harp, but you don’t tell us whether they paid the luxury tax, or in what year(s), so the cause is missing. Meanwhile, the Tigers managed to win the AL that year . . . by tanking? By staying under the cap? By paying the luxury tax? In other words, what’s the evidentiary value of the story? The Giants swept the series (with the help of overspending), but did the Tigers beat a team that did the same to win their pennant? Or did they overachieve with a low-budget payroll? What are the dynamics that prove your point?

    Regarding payroll, parity, and revenue . . . Revenue continues to climb FOR THE BIG MARKET TEAMS because of TV contracts, right? irrespective of fan attendance? Baseball is popular with TV networks because it’s one of the few programmables that still happen in real time. Nobody watches a game after knowing the outcome. Do you think changing the revenue sharing agreement would have as much or more impact on achieving parity as a hard cap (currently 48% of local revenues are shared equally among all teams)?

    Agreed the NFL has achieved a parity miracle. But they also have the advantage of a 16-game season which keeps almost everyone mathematically in the hunt until season’s end. You do a sleight-of-hand trick at the end of your essay that forces the conclusion that the hard cap and nothing else accounts for the NFL’s success. But careful readers will object that the NHL and NBA aren’t nearly as dominant as pro football. One, the games are so different that they’re different desserts, not just different flavors of pie. Two, one will always be a fringe sport and the other is BESET by tanking, which a cap has not cured. You can address these questions. They’re not insurmountable. An opportunity to shine in your Rebuttal Argument.

    But to your real question, “What do I do in my Causal Argument?,” I say, “Most of what you wrote in your Definition Argument IS a causal argument.

    It’s an attempt to prove that the luxury tax FAILS to result in parity. FAILS to prevent overspending by wealthy teams. And CREATES an uneven playing field on which rich teams have an insurmountable advantage.

    You can use much of that material in the draft of your Causal Argument. But you’ll have to thoroughly revise your Definition Argument to help us with more of the details of the differences between the luxury tax and the hard cap. I had several unresolved curiosities (some of the expressed above) as I read your description. You could provide a real service to readers with a better explanation. Willing to take that approach?

    I’m copying this to your Definition Argument also, since the Notes I made here are relevant to both.

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