|Head of players union: Don’t count of end of Red Sox/Yankees spending||03.22.12 at 6:06 pm ET|
FORT MYERS, Fla. — A great deal of attention has been given to the stated desire by the Red Sox and Yankees to get below the luxury tax threshold of $189 million by the 2014 season.
The two teams hope to do so both for two reasons related to the new Collective Bargaining Agreement. First, they want to “reset” their luxury tax rate (the Sox will be penalized at a 40 percent rate for every dollar spent over the $178 million threshold this year, while the Yankees will be hit at a 50 percent). Teams that go under the threshold and then head back over it will restart their tax rate at the lowest level.
Secondly, both teams want to be eligible for a rebate of some of the money they pour into revenue sharing. Teams that are under the luxury tax in 2014 will be eligible for a return to some of the money that they had been directing to lower-revenue clubs.
However, while attention has been focused on the idea that the Yankees and Red Sox are getting ready to operate in a new fashion, Michael Weiner, the executive director of the MLB Players Association, said that such an outcome might not be a foregone conclusion.
“I know that a lot of people have written about that in Boston and New York. That’s not the way we see it, and frankly that’s not the way it was negotiated,” said Weiner. “What we did was we lowered the lowest tax rate associated with the Competitive Balance Tax. That was a benefit, we thought. And we also changed the rules that applied to clubs that had exceeded the tax multiple numbers of times.
“It used to be that a team like the Yankees, if they had been past a certain number and then dropped below, that the next year they could still face one of the higher tax rates. Now they face the first-time tax rate and start clean. We thought that was a good thing. That means that maybe, if they get below for one year, now they have better incentives to spend money, either the Red Sox or the Yankees.
“And the revenue sharing feature, the market disqualification feature [which will not allow teams in the largest 15 markets to receive money through revenue sharing, with the larger-market clubs being eligible for the rebate], we understood that creates some additional incentive for a team like the Red Sox or the Yankees on a short-term basis to get below. Longer-term, again, the incentives flip for them to be in a position to spend even more.
“But what the market disqualification did with the other 28 clubs was to provide better incentive for every club in revenue sharing to try to increase their revenues, which means better incentives to spend on major league payroll. To the extent that some of those receiving clubs don’t respond to those better incentives, most of that money is going to the higher-revenue, higher-payroll clubs. If it’s not going to the Red Sox or Yankees, it’s still going to another eight or 10 or 12 clubs that are likely to use that to pay players. Overall, we’re very happy with the combination of pieces of the puzzle when you focus on the whole thing instead of one part of it.”
In other words, the Red Sox and Yankees might have short-term incentives to get below the luxury tax threshold, but ultimately, the incentives will reverse, with those clubs having additional incentives to increase their spending. Meanwhile, other clubs will be encouraged to spend more by the new CBA, meaning that the amount of money flowing from owners to players should increase.
“We were focused on, when it came to these provisions in the contract, to trying to improve incentives across the board, so that all clubs, no matter where they fall on the payroll spectrum, have money to spend on players. The Commissioner’s Office, or the clubs I should say, were focused on payroll disparity.
“What this does is, it is a compromise where there are stronger incentives across the board, but there are some additional incentives in the short-run for a team like the Red Sox and Yankees to go below the threshold, but the incentives are, to then put them in a position a year or two later, to be free, or freer, to increase their payroll.”
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