Anthony Rizzo
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Anthony Rizzo says teams are treating luxury tax as a salary cap

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First baseman Anthony Rizzo was eager to talk about a labor issue as spring training begins for the Cubs in Arizona. Per Gordon Wittenmyer of the Chicago Sun-Times, the three-time All-Star said of the competitive balance tax (more commonly known as the luxury tax), “I think the luxury tax wasn’t meant to be a salary cap, and teams are treating it like that. Are you sacrificing winning a championship to be under the tax threshold? Who knows? We don’t know that.”

Rizzo’s own team has been concerned with the competitive balance tax threshold, set at $208 million for the 2020 season. They’re currently north of $210 million, which would result in a small tax on the overage of about $2 million. A pittance, really. But the Cubs only signed to free agents to guaranteed major league deals this offseason: outfielder Steven Souza and reliever Jeremy Jeffress. The Cubs won the World Series in 2016, but slid backwards in the years since, losing the NLCS in 2017, the NL Wild Card game in 2018, and missing the playoffs last year.

Rizzo said, “You’ve seen it the last two years with us: We haven’t gone out [and signed big free agents],” Rizzo said. “But the few years before that we’ve gone out and signed megadeals.”

The Red Sox are another team guilty of viewing the CBT threshold as sacrosanct. After winning a championship in 2018, the Red Sox disappointed with a third-place finish last season, resulting in the dismissal of Dave Dombrowski. The club focused on shedding payroll, trading Mookie Betts and David Price to the Dodgers in order to clear about $50 million, dropping their total payroll to under $190 million.

Rizzo noted this, saying to Wittenmyer, “So you see one end of the spectrum, [the Yankees’] signing of the richest deal ever with Gerrit Cole; that’s what the Yankees do as long as I’ve been alive. And on the other end, trading away [Betts] to shed payroll when you have a team that just won a World Series. It’s weird.”

The CBT is not as complicated as it seems. Each year, a threshold is set as per the collective bargaining agreement. Last year was $206 million, this year is $208 million, next year is $210 million. Teams that exceed the threshold for the first time pay a penalty, but only on the overage. Teams exceeding the penalty in consecutive years pay increasingly more expensive penalties. Teams that exceed the CBT threshold by a lot also pay a surtax. Specifically, it’s broken down like this:

  • Exceeding CBT threshold frequency
    • Once: 20 percent tax on overage
    • Two consecutive seasons: 30 percent tax
    • Three consecutive seasons:  50 percent tax
  • Exceed CBT threshold amount
    • $20-40 million: 12 percent surtax
    • More than $40 million once: 42.5 percent surtax, Rule 4 Draft pick moved back 10 places
    • More than $40 million two or more consecutive seasons: 45 percent surtax, Rule 4 Draft pick moved back 10 places

Keeping in mind that every team is worth over $1 billion, even the penalties for being a habitual CBT offender are a relative pittance. The Red Sox are the third-most valuable franchise in baseball at $3.2 billion, according to Forbes. The Cubs are fourth at $3.1 billion. It’s more complicated than this, as that value is not entirely liquid, but the teams that have self-imposed austerity measures are not exactly scrounging around the couch cushions for quarters to help keep the lights on.

Rizzo is right that teams are treating the CBT as a salary cap. The penalty for going over is, for the most part, the price of a modest free agent reliever. But front offices have held the CBT threshold as sacrosanct despite the league setting year-over-year revenue records. With so many avenues for revenues to come in, teams do not need to build a championship-caliber club in order to be profitable. Thus, they can point to the CBT threshold and shrug their shoulders as they slash payroll, maximizing profits in the process. The results have been a stagnant free agent market for baseball’s middle class, unnecessary wholesale rebuilding efforts, and a degradation of the on-field product.

Rizzo said, “How much this game is making, it’s not [out of line] for us players to speak up. There’s billions, and then there’s millions. There’s a big difference between the ‘b’ and the ‘m’.”

Rizzo is one of a growing number of players now conscious of baseball’s labor landscape. The players made concessions in order to get largely superficial gains in the last CBA like travel accomodations. The owners rejoiced as they gained even more control over the sport as a result. The players have since recognized their error. I have been writing about baseball for nearly 13 years and this is the most labor-conscious I have seen the players. Greed and overreach on the part of ownership may be their undoing. One imagines the competitive balance tax and other labor-unfriendly rules are not long for this world after December 1, 2021, when the current CBA expires.

MLBPA: MLB’s ‘demand for additional concessions was resoundingly rejected’

Rob Manfred and Tony Clark
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On Thursday evening, the Major League Baseball Players Association released a statement regarding ongoing negotiations between the owners and the union. The two sides continue to hash out details concerning a 2020 season. The owners want a shorter season, around 50 games. The union recently proposed a 114-game season that also offered the possibility of salary deferrals.

MLBPA executive director Tony Clark said that the union held a conference call that included the Executive Board and MLBPA player leaders. They “resoundingly rejected” the league’s “demand for additional concessions.”

The full statement:

In this time of unprecedented suffering at home and abroad, Players want nothing more than to get back to work and provide baseball fans with the game we all love. But we cannot do this alone.

Earlier this week, Major League Baseball communicated its intention to schedule a dramatically shortened 2020 season unless Players negotiate salary concessions. The concessions being sought are in addition to billions in Player salary reductions that have already been agreed upon.

This threat came in response to an Association proposal aimed at charting a path forward. Among other things, Players proposed more games, two years of expanded playoffs, salary deferrals in the event of a 2020 playoff cancellation, and the exploration of additional jewel events and broadcast enhancements aimed at creatively bringing our Players to the fans while simultaneously increasing the value of our product. Rather than engage, the league replied it will shorten the season unless Players agree to further salary reductions.

Earlier today we held a conference call of the Association’s Executive Board and several other MLBPA Player leaders. The overwhelming consensus of the Board is that Players are ready to report, ready to get back on the field, and they are willing to do so under unprecedented conditions that could affect the health and safety of not just themselves, but their families as well. The league’s demand for additional concessions was resoundingly rejected.

Important work remains to be done in order to safely resume the season. We stand ready to complete that work and look forward to getting back on the field.

As per the current agreement signed in March, if there is a 2020 season, players will be paid on a prorated basis. Thus, fewer games means the players get paid less and the owners save more. MLB has threatened to unilaterally set a 2020 season in motion if the two sides cannot come to terms. It should come as no surprise that the union has responded strongly on both fronts.

There have been varying reports in recent days over the confidence in a 2020 season happening. The MLBPA’s statement tonight doesn’t move the needle any; it simply affirms that the union remains steadfast in its goal to avoid a second significant cut in salaries.

As I see it, the ball is in the owners’ court. The owners can strongarm the players into a short season, saving money but significantly increasing the odds of a big fight in upcoming collective bargaining agreement negotiations. Or the owners can eat more of a financial loss, agreeing to a longer season than they feel is comfortable. The latter would have the double benefit of not damaging overall perception of the sport and would not disrupt labor peace going forward.

The MLBPA statement included a declaration that the players are “ready to report, ready to get back on the field, and they are willing to do so under unprecedented conditions.” If there is no 2020 season, we will have only the owners to blame, not the players.

Update: Cardinals pitcher Jack Flaherty, who has been quite vocal on social media about these negotiations, chimed in: