Commentary

Pushing for a minimum payroll threshold

Why not just put a tax on teams that pocket the money they get from revenue sharing?

Originally Published: November 19, 2009
By Jayson Stark | ESPN.com

The Yankees just won another World Series (as you might have heard someplace) -- and we all know what that means:

The crying game is on.

It isn't fair. … We need a salary cap. … The system's broken.

Sound familiar?

Well, the system may be broken, all right. But don't just look at the top.

Anybody checked out the bottom teams lately?

If you live in Pittsburgh or South Florida, you've probably gotten so used to blaming The System for all your team's problems, there's an excellent chance you never noticed something every fan of these two "small-market" operations should know:

Your team collected more money this season -- before it ever sold one ticket -- than it spent on its entire major league payroll. In fact, it collected more than it spent on its major league payroll and its player-development system combined.

But it isn't just the Pirates and Marlins who are cashing checks larger than their payrolls before the ticket offices open. By some estimates, a third of the teams in the sport are doing exactly the same thing.

So how big an issue is that for baseball? We've spent the week exploring that topic with people who work in virtually every aspect of baseball management. We'll let you judge for yourself.

Nobody wants you to know, of course, exactly how many dollars each team takes in from a humongous pot that includes revenue sharing, TV-radio money, merchandising, sponsorships, etc. And, depending on which side of the sport you reside on, estimates of those amounts vary. But after numerous conversations, we now have a pretty fair idea. So here goes.

Our first conclusion: Scott Boras flunked math class.

Before we get into documenting all of this, we need to start with the man who lit the match on this issue.

Just a few days ago, everybody's favorite agent threw baseball's pooh-bahs into a serious froth. All it took was Boras telling the Boston Globe's Nick Cafardo that some teams are collecting $80 million to $90 million from Major League Baseball just in revenue sharing and central-fund welfare -- and essentially stuffing much of it in their mattresses. Well, not quite.

Not that there weren't some shreds of truth in there someplace. But we've run those figures past all sorts of people who ought to know. None of them thinks that particular number adds up. However …

Boras would have been a lot closer to the actual facts if he'd just included teams' local TV and radio payouts, which are heftier than you might think. So we did that. And that led us to …

Our second conclusion: If you add in that local TV-radio money -- and if you add only that money -- you'd be astounded by how many clubs seem to be running up higher revenues than payrolls before they print a ticket. We've added up all the revenue streams. And here's what we found:

If we just use the raw numbers, it appears that at least 10 teams collected $90 million-plus this year before they opened their ticket windows, let one car into their parking lots or sold one slice of pizza.

That number, once again, was $90 million-plus. By at least 10 teams.

But not everyone in baseball thinks that's a valid figure. Some argue that $10 million of that $90 million-plus shouldn't count -- because each team is required to pay $5 million into a pension fund and another $5 million into an MLB operations fund.

OK, so fine. Make it $80 million-plus.

Whichever it is, we're convinced our estimate is on target. Do the math yourself.

• Central fund (includes national TV, radio, Internet, licensing, merchandising, marketing, MLB International money): Each team, from the Marlins to the Yankees, gets the same central-fund payout. And that check comes to slightly over $30 million per team if you deduct the $10 million in pension and operations fees, or just over $40 million if you don't.

• Revenue sharing: Only income-challenged teams get a revenue-sharing check. But you should never forget that those checks are a lot larger than your average rebate check from Target. This sport shared $400 million in revenue this year -- more than the gross national product of Western Samoa. Now every club's payout is different. But the five neediest teams -- which we believe to be the Marlins, Pirates, Rays, Blue Jays and Royals -- averaged somewhere in the vicinity of $35 million in revenue-sharing handouts per team. And that still left over $200 million -- more than $20 million a club -- for the rest of the "payees" to divvy up.

• Local TV/radio/cable: Good luck getting these exact figures. But we know that 29 of the 30 teams make at least $15 million a year in local broadcast money, and no team rakes in under $12 million. Obviously, some clubs collect much, much more than that. Or own their networks. Or both.

So everybody have your calculators out?

Add $30 million, plus $35 million, plus $15 million, and what do you get? That would be $80 million. At least. Before these teams spin their turnstiles once.

OK, now let's head back to the payroll list. We count a minimum of a dozen teams, depending on how you define "total payroll," that aren't spending that same number -- $80 million -- on their major league payroll. So it isn't just Scott Boras who has the right to ask: What's up with that?

Our third conclusion: It's getting ugly out there.

We raise this issue at a time when the relationship between owners and players seems to be growing more contentious than it has been in years.

Even if you ignore the regularly scheduled Boras conspiracy theories, most agents make no secret of the fact that they believe baseball is exaggerating its financial throes in a $6 billion industry.

They see the payroll figures we see. They see a dozen teams that have wiped at least $30 million in salaries off their books (in departing free agents) this winter. So while they recognize that certain teams -- like the Tigers -- have had a rough year, agents everywhere are clearly skeptical that those cries of poverty they're hearing from almost every club are legit.

But when people like us try to separate reality from illusion with actual numbers, what we hear from the powers that be at MLB is that even those numbers are misleading.

Are there teams that collect more money before they sell a ticket than they spend on their major league payroll? MLB's chief labor negotiator, Rob Manfred, doesn't dispute that. What he vociferously disputes is the meaning of those figures.

"When you evaluate a baseball team," Manfred said, "you need to understand that these teams have expenses in addition to the 25-man roster on the field. They have multimillion-dollar benefit costs. They have the cost of paying 15 players on the [40-man] major league roster who are not in the big leagues.

"They have the cost of their player-development system, which averages $15 million [per team] a year. They have the cost of acquiring [amateur] players through the [June] draft and internationally, which averages $9 million [per team] a year. So for anybody to take a club's revenues and say that 60 percent should go to major league payroll, that's just a fundamental misunderstanding of this business."

But the other side asks: Don't teams also have streams of income we haven't discussed here? Parking? Nine-dollar beverages? Sponsorships? In-park souvenir sales? Etc., etc.?

The fingers point. The pulse rates escalate. The Collusion Watch has started over at union headquarters. There's a new labor deal to negotiate in two years. And there are more than 100 free agents looking for work. These are not fun times.

So what do we do about it all? Well, we can't solve all of this. But we do have an idea that has gotten great reviews wherever we've floated it. So …

Our final conclusion: Don't just tax the Yankees.

Let's get back to where this column began. If this sport has problems, they don't begin and end with the Yankees.

At least the Yankees take the revenue they generate and plow it back into their franchise. At least the Yankees finance more than just their own little $215 million baseball team. They also pay $150 million a year (in luxury taxes and revenue sharing) to help finance everybody else's baseball teams, according to The Wall Street Journal.

Those are the rules. That's the system. And that system gives the Yankees a choice -- to roar beyond the payroll threshold and pay an extra 40 percent in luxury taxes for doing it. But if they do, they understand both the upside and the downside of that choice.

So our idea is: Why not extend the same choice to the teams that opt not to spend what other teams spend?

If the Marlins, Pirates or Padres think it's unnecessary to spend $70 million or $80 million -- or even $50 million -- on their big league payroll, hey, no problem.

Just tax them for it. That's all.

A few years back, during a previous labor negotiation, MLB proposed a minimum payroll, which we believe this sport needs. It was the union that rejected it, for philosophical reasons. We think that was a mistake, but nobody asked us.

So why not impose the same sort of tax on teams with payrolls below some minimum threshold, exactly the way baseball taxes teams like the Yankees that spend over the maximum threshold? That's the official proposal of Rumblings and Grumblings.

How would it work? Well, we hear teams argue constantly that sometimes, the only way to get better is to blow up their roster and start over. So we'd allow for that.

First time a team goes under the threshold -- and we'll let the owners and the union figure out whether that "minimum" should be $60 million or $80 million or something in between -- we'd impose no tax. None.

But if a team stayed below that "minimum" for a second year in a row, we'd tax it at 20 percent for every dollar below the threshold. The third straight year, that tax rate would grow to 30 percent. And for every year afterward, it would be 40 percent.

Would we solve all this sport's problems with that tax? Heck, no. There still wouldn't be enough pitching, for one thing. And owners and agents would still find whole new reasons to be suspicious of each other.

But it's one small step toward fixing a broken system. And who knows? Maybe it might even inspire everyone else to take one giant leap toward repairing the rest of it.

Ready to rumble

Milton Bradley
Bradley

• Tampa Bay, Texas and Toronto look like the three most feasible destinations for Milton Bradley these days. But the Cubs are telling teams that (A) they're not interested in digesting all or most of Bradley's money (two years, $21 million) just for the sake of moving him, and (B) the hiring of his old hitting coach, Rudy Jaramillo, means they no longer think they have to trade him. So they seem to be zeroing in on clubs that might be willing to swap one messy contract for another. Pat Burrell would be that guy in Tampa Bay, but the money doesn't match up and the Cubs would have to find a third team interested in Burrell. Lyle Overbay seems to fit that mold in Toronto, but the Cubs would need a third team to take him, too, since Derrek Lee is still occupying first base. And Kevin Millwood might still be a possibility with Texas, but certainly not one-for-one. Potential deals with the Angels (for Gary Matthews Jr.) and Diamondbacks (for Eric Byrnes) look dead at the moment.

• We're hearing that the Marlins' Dan Uggla trade talk with the Giants and Rangers got "pretty hot and heavy" at the GM meetings, according to one baseball man. Florida has told other clubs that if it doesn't get what it wants, it will keep Uggla and deal someone else from its pool of arbitration-eligible players -- a group that includes Jorge Cantu, Cody Ross, Alfredo Amezaga and Ricky Nolasco. But Uggla still looms as the runaway winner of all Most Likely To Be An Ex-Marlin contests.

Hideki Matsui
Matsui

Johnny Damon
Damon

• Sounds as if the Yankees haven't ruled out bringing back both Johnny Damon and Hideki Matsui. But indications are that they're also going to take a hard line on both -- a one-year deal for Matsui, period, and no more than a two-year deal for Damon, with a preference for something shorter. At the moment, there are no signs the Yankees are in on either Matt Holliday or Jason Bay.

• Teams that have talked to the Braves say they don't want to deal for just another bat. They want a cleanup-hitter kind of bat. So Javy Vazquez, Derek Lowe and Kenshin Kawakami are all out there as big-time Rumor Central fodder. But when teams zero in on Vazquez, they find the Braves are trying to steer the conversations toward Lowe, who has three years and $45 million left on the contract he signed last winter. If the Braves can move Lowe, they're expected to try to work out an extension with Vazquez, who is a year away from free agency. But can Lowe -- who allowed 299 baserunners in 194 2/3 innings -- get them the kind of bat they need? And is there even going to be a true cleanup hitter available, aside from Adrian Gonzalez? Probable answers: No … and no.

• Third base appears to be the Phillies' first order of business once the free-agent negotiating period starts. But they don't seem to have a clear-cut top choice among Mark DeRosa, Placido Polanco and Adrian Beltre. DeRosa is a great fit in many ways, but there are concerns that he's never played 75 games in any season at third base. Polanco has sent signals he's open to playing third for his old team, but he has started only 38 games at third base in the last seven seasons combined. And while Beltre is probably the best pure baseball fit, he figures to want a longer contract than the Phillies are interested in offering. So this hunt could still move in a lot of different directions.

Pedro Martinez
Martinez

• Pedro Martinez may be itching to come back and pitch a full season. But two clubs we surveyed said he's better off doing exactly what he did in 2009 -- pitch a half season, with as much downtime between starts as possible. "At this point," said an official of one club, "he's sexy in name only."

• One scout's review of the best player he saw in the Arizona Fall League -- 19-year-old Cubs middle-infield stud Starlin Castro: "A young Hanley Ramirez."

• Fun with numbers, Part 1:

Josh Beckett's season: .244 Opp. Avg., .296 OBP, .395 SLG, .691 OPS
Johan Santana's year: .244 Opp. Avg., .296 OBP, .395 SLG, .691 OPS

• Fun with numbers, Part 2:

Cole Hamels' season: .273 Opp. Avg., 7.8 strikeouts per 9 IP, 1.286 WHIP
Cliff Lee's season: .272 Opp. Avg., 7.0 strikeouts per 9 IP, 1.243 WHIP

OK, so Lee's numbers include his stats in Cleveland. But all those people in Philadelphia who think it's time to trade Hamels ought to look those stats over one more time.

Best of the decade honoree of the week

Who made the most right turns at first base over the last 10 years? You're about to find out.

Most outs in the '00s:

1. Miguel Tejada, 4,706.

2. Orlando Cabrera, 4,621.

3. Jimmy Rollins, 4,532.

4. Derek Jeter, 4,472.

5. Johnny Damon, 4,461.

Late-nighter of the week

From David Letterman: "Here is how we're going to run tonight's show. I'm going to be hosting for eight commercials, and then we bring in Mariano Rivera."

Jayson Stark is a senior writer for ESPN.com. His new book, "Worth The Wait: Tales of the 2008 Phillies," was published by Triumph Books and is available in bookstores and online. Click here to order a copy.

Jayson Stark | email

Senior Writer, ESPN.com