sports management
Hawkins Project Extra Innings pg. 353
1. What is the history behind the lack of a salary cap in MLB?
Instead of a salary cap, Major League Baseball implements a luxury tax (also called a competitive balance tax), an arrangement in which teams whose total payroll exceeds a certain figure (determined annually) are taxed on the excess amount in order to discourage large market teams from having a substantially higher payroll than the rest of the league. The tax is paid to the league, which then puts the money into its industry-growth fund. A team that goes over the luxury tax cap for the first time in a five-year period pays a penalty of 22.5% of the amount they were over the cap, second-time violators pay a 30% penalty, and teams that exceed the limit three or more times pay a 50% penalty from 2013 onwards. There is also an incentive to lower payroll; if in any year a team goes under the threshold, the penalty rate decreases to 17.5%, 25% or 40% (depending on prior record over the previous five years) for the next time the tax is paid, which will apply from 2013.The cap limit for 2011-2013 is $178 million, and for 2014-2016 $189 million.
2. Why do other major leagues have salary caps, but not baseball?
Simply put - they don’t want one. The players don't want to limit their salaries, the large market teams don't want to be told to spend less, and the small market teams don't want to give up the luxury tax money they currently receive to field really pathetic teams with no intention of improving them.
3. What teams would be affected the most by implementation of a salary cap? How would they be affected?
The Yankees, Red Sox, Angels, Tigers, and Dodgers would be affected the most. Instituting a salary cap would even the landscape of the MLB and the way players are acquired.
4. How would salary caps affect individual players? How might the decision affect fans?
A salary cap would make it easier for players and fans to stay loyal to small market teams, rather
1. What is the history behind the lack of a salary cap in MLB?
Instead of a salary cap, Major League Baseball implements a luxury tax (also called a competitive balance tax), an arrangement in which teams whose total payroll exceeds a certain figure (determined annually) are taxed on the excess amount in order to discourage large market teams from having a substantially higher payroll than the rest of the league. The tax is paid to the league, which then puts the money into its industry-growth fund. A team that goes over the luxury tax cap for the first time in a five-year period pays a penalty of 22.5% of the amount they were over the cap, second-time violators pay a 30% penalty, and teams that exceed the limit three or more times pay a 50% penalty from 2013 onwards. There is also an incentive to lower payroll; if in any year a team goes under the threshold, the penalty rate decreases to 17.5%, 25% or 40% (depending on prior record over the previous five years) for the next time the tax is paid, which will apply from 2013.The cap limit for 2011-2013 is $178 million, and for 2014-2016 $189 million.
2. Why do other major leagues have salary caps, but not baseball?
Simply put - they don’t want one. The players don't want to limit their salaries, the large market teams don't want to be told to spend less, and the small market teams don't want to give up the luxury tax money they currently receive to field really pathetic teams with no intention of improving them.
3. What teams would be affected the most by implementation of a salary cap? How would they be affected?
The Yankees, Red Sox, Angels, Tigers, and Dodgers would be affected the most. Instituting a salary cap would even the landscape of the MLB and the way players are acquired.
4. How would salary caps affect individual players? How might the decision affect fans?
A salary cap would make it easier for players and fans to stay loyal to small market teams, rather