Arthur Rhodes’ one-year deal with Rangers includes vesting option for 2012

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Arthur Rhodes and the Rangers agreed to terms on a one-year contract last week, but the deal finally became official yesterday and the monetary details have been revealed.

Rhodes will make $3.9 million this season and the deal also includes a $4 million option for 2012 that vests if he appears in at least 62 games and is not on the disabled list when the season ends.

As if making the All-Star team for the first time at age 40 wasn’t enough, the $3.9 million Rhodes will get in 2011 is more than he’s earned in any season of his 19-year career. And he’s appeared in 61, 66, and 69 games during the past three years, so there’s a decent chance the $4 million option for 2012 will vest.

Rhodes had a 5.32 ERA in 2006 and missed all of 2007 following Tommy John elbow surgery, yet returned at age 38 to post a 2.32 ERA and 138/54 K/BB ratio in 144 innings over the next three seasons. He’ll serve as one of Neftali Feliz’s setup men.

New tax law could affect MLB trades

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Jim Tankersley of the New York Times notes that a tax law passed by Republicans could affect trades in Major League Baseball. The law added the word “real” to a certain line of tax code that now only allows real estate trades to qualify for tax immunity. Previously, certain assets like trucks and machinery could have been traded tax-free.

A perhaps unintended consequence of that change could mean baseball teams could have to pay capital gains taxes when they trade away and acquire players. MLB’s chief legal officer Dan Halem said, “There is no fair market value of a baseball player. There isn’t. I don’t really know what our clubs are going to do to address the issue. We haven’t fully figured it out yet. This is a change we hope was inadvertent, and we’re going to lobby hard to get it corrected.”

Tankersley wonders how players would be valued for the purposes of this tax law:

Mr. Verlander, for example, was clearly a more immediately valuable asset to the Astros than the three prospects they traded to get him. He gave up only four runs in his five regular-season starts for the team, then won four straight starts to begin the playoffs. In very simple terms, he brought value to the Astros in a trade, and had the new law been in place last year, the team would have owed taxes on that added value.

But what, exactly, was that value? Was it the size of his contract? Mr. Verlander earned $28 million last year, while the players traded for him drew minor-league salaries. Was it the additional wins he brought to the team? Statisticians estimate Mr. Verlander gave the Astros nearly two more wins last season, a value that, depending on the statistician, could reach $20 million. Or was it some calculation of the total future value Mr. Verlander will bring to the team, minus the total future value it gave up in the prospects it traded away — and possibly adjusted for the amount the team will have to pay Mr. Verlander?

Complicating matters further is that teams value players differently, and one player might help a certain team far more than another team. A struggling club with a surplus of starting pitchers might trade one to a playoff contender in desperate need of one, in exchange for position players who could improve a struggling lineup. In that case, both teams could, reasonably, be considered to have gained value in the trade, and thus would owe taxes on it.

Republicans said they weren’t trying to hamstring sports teams, but that’s exactly what they might have done here. It seems likely that the law will eventually be amended to exempt sports teams, given that leagues like the MLB and NBA are enormous and worth so much money. Whether that will be done in a reasonable amount of time is another question entirely.