NEWSLETTER
If you had developed hopes that last week’s reporting on MLB owners possibly preparing core economic offers for later this month would somehow spur plans to talk, well, you are a fool. I am talking to myself. I keep letting myself hope stupid things. There will be zero meaningful interactions between the sides until February. If I could truly internalize that virtual certainty, I would probably stop getting so frustrated.
That is a long way of saying, Jeff Passan and Jesse Rogers today report that, much like last week, there are no plans for the players and the owners to have any discussions this week, as the lockout hits 40 days. If you want to know the first hard date, where financial pain happens, it’s probably around February 10. That’s the date by which, if there’s no deal, it becomes completely unrealistic for the first Spring Training games to happen on time. So the financial pain will kick in for owners after about February 10, though (1) it won’t be nearly as substantial as it would be if the regular season was impacted, and (2) players generally already think Spring Training is too long. So if that still feels like a pretty soft deadline.
(I’d argue the pain has already started, with Spring Training tickets going on sale this weekend – there’s just no way that sales won’t be down considerably right now.)
I get the sense, by the way, that everyone has just thrown February 1 – the previous soft deadline – out the window at this point. What I wonder is what happens when a deal doesn’t come together until, say, three weeks before the regular season is supposed to open? Are the teams really going to have to finish the offseason *AND* conduct a shortened Spring Training at the same time? What a ridiculous plan that is just begging to have significant problems crop up.
Anyway, that is all to say I’m now eyeballing that February 1 to 10 window as a time when, hopefully, serious negotiations will take place. Not that any of us have reason to be optimistic that, even if the negotiations do take place in that window, they will be particularly fruitful.
The update from ESPN is still a useful one, as it includes a number of important notes about where things (probably) stand, including a developing sense that the luxury tax is going to become the key threshold issue in the negotiations: “Multiple sources familiar with the discussions believe the competitive-balance-tax threshold could wind up as the main hinge point in negotiations. It’s too early to say whether it will be the final piece solidified before a new basic agreement, but if a deal happens to avoid a prolonged lockout, it almost certainly will involve the CBT floor being raised from $210 million.”
In other words, the sides might have to come to some kind of tentative understanding on the luxury tax level before anything else can move forward. It is a critically important issue, not only for high-revenue, big-market teams, or for huge-dollar free agents. Its impact – the way it is treated as a salary cap – is far-reaching.
As I wrote last month on the importance of the luxury tax:
A major reason overall payrolls haven’t climbed over the last several years? The luxury tax, and its progressively increasing penalties.
These final 2021 payroll numbers are instructive on this issue. Although there were two teams over the luxury tax in 2021 (the Dodgers and Padres), there were FIVE teams within $3.4 million of the $210 million luxury tax threshold (i.e., less than 2% away from the tax!). That isn’t just a flukey thing that happens by chance, and we know it isn’t – teams have become pretty open about managing their payrolls, both inside and outside the season, to make sure they don’t go over the luxury tax. It has become a near salary cap, particularly when multiple seasons in a row over the tax are at issue, and it has put a significant check on payroll growth over the five years of the last Collective Bargaining Agreement.
The owners reportedly offered to increase the luxury tax for 2022 to $214 million from $210 million, which strikes me as pretty … unserious. (And don’t get me started on the earlier offer, which would have LOWERED the luxury tax level to $180 million, and INCREASED penalties in exchange for a $100 million salary floor.)
Consider this MLBTR piece, which notes that if the luxury tax number had increased annually by 5% since 2012 – that’s less than the growth rate in MLB revenues, by the way – then the luxury tax number for 2021 would’ve been $290(!) million. Instead, it was just $210 million. Things have gotten completely out of whack.
Either the luxury tax number needs to be massively higher, or the penalties that make teams so averse to topping the tax multiple years in a row need to be changed. Without either item fixed, you’re talking about not only a de facto salary cap, but a stagnating de facto salary cap!
Note, by the way: even on the teams that do not ever approach the luxury tax level, having a de facto salary cap registers an impact. If the market for player services is artificially limited – for example, a few teams sitting out a player because they decide he’s not worth the risk that it could take them over the luxury tax – it means his price tag is going to go down from wherever he signs. I have no doubt that teams across the board dig it – that’s why even small-market teams would want a strict and low luxury tax, even aside from competitiveness considerations – but it certainly isn’t player-friendly.
