"The Business of Baseball...The Salary Cap"

     Is a salary cap needed in Major League Baseball?  Salary caps are used around the world by the following
major sports leagues. In North America, we have The National Hockey League, The National Basketball
Association, The National Football League, Major League Soccer, The National Lacrosse League, Canadian
Football League and minor leagues in various sports. In England, the top level leagues in both rugby codes--The
Super League in rugby league and The Aviva Premiership in rugby union have salary caps.

Benefits of a Salary Cap:

     In theory there are two major benefits derived from salary caps: Promotion of parity or equality between teams
and control of costs.  First and foremost, an effective salary cap prevents wealthier teams from particular destructive
behaviors, such as signing a number of high salaried star players, preventing rival teams from accessing or acquiring
talented players and insuring victory through superior economic power.  Secondly, with a salary cap in place, each club
has the same or similar power to attract players, thereby contributing to equality---roughly equal playing talent on each team in the league, subsequently bringing economic benefits to the league and to the teams that are a part of that
league.

    One of the biggest reasons that Major League Baseball does not have what is classified as a hard salary cap in place is
because of the players' union hard, bitter and successful fight against it.  The hard cap is the cap imposed on the overall team payroll.  It is a simple prospect to envision---Once teams have reached the magic payroll number, they are forbidden to spend more.  Salaries are thus reduced in two ways: Teams going over the cap are removed from free agent bidding(or trade targets that are too pricey) which gives players fewer options and thereby reducing bidding pressures; and by causing teams below the cap to resist blowing their budgets on a single player.

     What Major League Baseball has done instead has adopted two modified cap type options or mechanisms:  Revenue
sharing and the luxury tax. The luxury tax, after a trial run in the late 1990s, was instituted in the 2002 collective bargaining
agreement.  It is essentially a soft cap.  A team can bust its budget, but at the risk or cost of being taxed.  A better word
would be "fined" for the excess amount.  The tax starts at 22.5 percent and goes higher for repeat offenders.  As a three time repeat offender(recidivist), the Yankees paid a 40% tax on their 2005 excess spending.  It's not too difficult to see
how a 40% tax would create a lag on spending.  Spending $20 million a year for a superstar player is one matter, but
adding another $8 million in payments to the league could make a deal untenable.  Look at it this way---How would
the average individual react if they had to pay a 40% surcharge on every gallon of gas purchased over the ten gallon
mark? It is almost a certainty, that unless it was a small car,  they would be filling their tank anymore. On my next blog,
I will cover the second method of this cap, the revenue sharing.david.mosher3993@my.sinclair.edu