Is Luxury Tax Dictating The Stance Clubs Take With Star Players?

As the saying goes — especially during the offseason — baseball is a business, and in that context is the reason Cubs star Kris Bryant and his demanding agent, Scott Boras and the Players Association filed a grievance against the Chicago Cubs regarding Bryant’s service time. 

Arbitrator Mark Irvings ruled that the Cubs did not maneuver Bryant’s service time by optioning him to Triple-A for the first two weeks of the 2015 season. The ruling allows the team to have control of Bryant for the next two years and he isn’t eligible to file for free agent status until after the 2021 campaign.

This was all business. For the Cubs, they save money and service time on Bryant. For the Players Association, it was a stand against the ruling that allowed the Cubs to keep Bryant in the minors and not part of the major league roster so they could manipulate his service time. It will certainly be a hot topic when the next collective bargaining agreement between the owners and Players Association expires after 2021.

MLB is saturated with money. The players, owners, executives, and agents are rich people—the player’s union is more like a country club of millionaires, not the blue-collar worker who pays half their paycheck to attend a game. 

But, that’s the market. If fans could make the money players do, they would file any grievance they could to line their pockets with the never-ending bundle players suck out of the owners, who suck it out of the fans.

That is the system in place. 

The free agent market is not broken, as many agents claim. The one issue that should be addressed that affects many clubs is the luxury tax.

This tax is a good thing because it allows clubs in small markets to better compete against clubs such as the Yankees, Dodgers, Red Sox, and Cubs.

The luxury tax is a “competitive balance tax” used in order to level the spending by an individual club for its roster.

The system calls for teams to pay a percentage of every dollar by which their payroll exceeds the threshold—the 2020 threshold is $208 million. 

The allocation of taxes is broken down like this—The first $13 million will be used to defray clubs’ funding obligations under the MLB Players Benefits Agreements. Of the remaining sum, 50% of the remaining proceeds collected for each Contract Year, with accrued interest, will be used to fund player compensation as described in the MLB Players Benefits Plan Agreements and the other 50% shall be distributed to clubs that did not exceed the Base Tax Threshold in that Contract Year.

Not many clubs pass the threshold, but as we see contracts exploding into $200-400 million range, teams are now careful not to surpass the tax threshold and are willing to trade star players they fear will be lost to free agency without compensation.

The Cubs have been entertaining the thought of dealing Kris Bryant or other star players to bring in young talent and replenish their farm system and reduce the total payroll amount.

But why should teams, who have money to retain their star players have to let them go in fear of surpassing the luxury tax threshold?

Maybe there should be a ruling that only the salaries of free agent signees or players acquired in trades should be listed on the luxury tax budget. Players drafted by the team should not be included in the total sum of the payroll.

For example, the Cubs drafted Bryant, Javier Baez, and Kyle Schwarber. The contracts the Cubs sign them to should not be included in the luxury tax because the Cubs scouted them and developed them in their farm system.

Not including players a team drafts in the competitive balance tax would be rewarding the club for good scouting, coaching and development.

Therefore, the Cubs should be able to pay Bryant as much as they want, or can afford, and not be penalized or worry about crossing the luxury tax.

At this point, the Cubs 2020 payroll stands at $185.3 million, according to baseball-reference.com. If the team could eliminate players they drafted and developed, that dollar total would drop down to $146,865,000.

This could be a logical way in today’s game of business of keeping star players with the team that drafted them. Mike Trout, Kris Bryant, and Cody Bellinger should play their careers for one team—if both sides see that as a possibility. Bryant should not be on the trade block because the Cubs don’t want to exceed the tax threshold.

This would be great for every side involved: The player, because he would continue as a fan favorite for life in the same city. The team, because marketing star players is a never-ending benefit. And (of course) the fan, because it allows them to identify with a player for years and keep their following of an individual team strong. 

Pay Bryant and keep a tremendous talent in the same uniform for ever and dismiss the notion that the Cubs don’t have to worry about paying a penalty for rewarding their star player and alienating a valuable fan base.

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