Salary Caps Unnecessary in the MLB
Jackson Hoang
Mr. Reuter
Economics
22 October 2014
The debate about whether Major League Baseball needs a salary cap can finally end. For its entire history, salary caps have not hindered baseball’s top spenders. The leading argument to why baseball should have a salary cap is that it would increase competition between small market teams and the large market teams. Although this argument is logical for any other sport, competition in the MLB is equal across the board.
First, the MLB has made a halfhearted attempt at regulating spending through luxury taxes. All teams are required to pay a luxury tax if they exceed the league threshold of $189 million, however the percentage taxed depends on how much a team exceeds this threshold and how many consecutive years they have exceeded it. A first offense will result in a 17.5% tax, however, if a team has exceed the threshold by at least 40% over a span of a couple years, the team will face luxury taxes of 50%. The purpose for luxury taxes is to discourage large market teams from spending too much as it will cost them a lot more money, however, this has not discourage teams like the New York Yankees from exceeding the threshold. In other words, luxury taxes are ineffective because teams like the Yankees believe the marginal benefit of signing expensive star players outweighs the marginal cost of hefty luxury taxes and salaries.
Looking at the team spendings of MLB teams, there is a gigantic gap between baseball’s top and bottom spenders. While the Los Angeles Dodgers spent a league leading $235,295,219 last year, the Houston Astros only spent $44,544,174 on their players, a league low. While it is true the Dodgers were a significantly better team than the Astros last year, teams such as the Oakland Athletics, ranked 25th in spending, and the Pittsburgh Pirates, ranked 27th, saw similar success as the highest paid Dodgers. In addition to small market teams having success, large market teams also struggled in finding success. The Philadelphia Phillies, ranked 3rd in spending, tied for second worst record in the National league (73-89) and the Boston Red Sox, ranked 4th in spending, finished with the third worst record in the American League (71-91); thus, proving that a salary cap is unnecessary to improve competitiveness in the MLB.
To further support that Major League Baseball does not need to implement a salary cap, competitiveness in the MLB is much higher compared to the NBA, a sport with a salary cap, or price ceiling, between 2003 and 2013. In this ten year period, the MLB has had fourteen different World Series teams and nine different World Series champions. Also in this time frame, only five teams did not reach the playoffs, four of which made it this year. On the other hand, basketball is much less diversified. There have been ten different NBA Finals teams and only five different Finals champions. In this ten year period, the Los Angeles Lakers and San Antonio Spurs have accounted for seven out of the ten championships in this time frame. The NBA suffers from drastic competitive woes despite the utilization of “government regulations” on team spendings. In conclusion, the MLB does not need to implement a salary cap as the competition is equal across the league.
n.d. Web. 21 Oct. 2014.
Huppke, Rex. "Pros and Cons of Raising the Federal Minimum Wage." Chicago Tribune. N.p., 24
Feb. 2014. Web. 18 Oct. 2014.
"Minimum Wage or Maximum Hassle? NSCA." NSCA. N.p., n.d. Web. 19 Oct. 2014.
"MLB Playoffs Bracket." MLB Playof s Bracket. N.p., n.d. Web. 22 Oct. 2014.
"On Baseball & The Reds: Reds Payroll, Now and in the Future." On Baseball & The Reds: Reds
Payroll, Now and in the Future. N.p., n.d. Web. 22 Oct. 2014.
Perry, Dayn. "No, Baseball (still) Doesn't Need a Salary Cap." CBSSports.com. N.p., n.d. Web. 19
Oct. 2014.
"Regular Season Standings." Major League Baseball. N.p., n.d. Web. 22 Oct. 2014
Mr. Reuter
Economics
22 October 2014
Salary Caps Unnecessary in the MLB
The debate about whether Major League Baseball needs a salary cap can finally end. For its entire history, salary caps have not hindered baseball’s top spenders. The leading argument to why baseball should have a salary cap is that it would increase competition between small market teams and the large market teams. Although this argument is logical for any other sport, competition in the MLB is equal across the board.
First, the MLB has made a halfhearted attempt at regulating spending through luxury taxes. All teams are required to pay a luxury tax if they exceed the league threshold of $189 million, however the percentage taxed depends on how much a team exceeds this threshold and how many consecutive years they have exceeded it. A first offense will result in a 17.5% tax, however, if a team has exceed the threshold by at least 40% over a span of a couple years, the team will face luxury taxes of 50%. The purpose for luxury taxes is to discourage large market teams from spending too much as it will cost them a lot more money, however, this has not discourage teams like the New York Yankees from exceeding the threshold. In other words, luxury taxes are ineffective because teams like the Yankees believe the marginal benefit of signing expensive star players outweighs the marginal cost of hefty luxury taxes and salaries.
Looking at the team spendings of MLB teams, there is a gigantic gap between baseball’s top and bottom spenders. While the Los Angeles Dodgers spent a league leading $235,295,219 last year, the Houston Astros only spent $44,544,174 on their players, a league low. While it is true the Dodgers were a significantly better team than the Astros last year, teams such as the Oakland Athletics, ranked 25th in spending, and the Pittsburgh Pirates, ranked 27th, saw similar success as the highest paid Dodgers. In addition to small market teams having success, large market teams also struggled in finding success. The Philadelphia Phillies, ranked 3rd in spending, tied for second worst record in the National league (73-89) and the Boston Red Sox, ranked 4th in spending, finished with the third worst record in the American League (71-91); thus, proving that a salary cap is unnecessary to improve competitiveness in the MLB.
To further support that Major League Baseball does not need to implement a salary cap, competitiveness in the MLB is much higher compared to the NBA, a sport with a salary cap, or price ceiling, between 2003 and 2013. In this ten year period, the MLB has had fourteen different World Series teams and nine different World Series champions. Also in this time frame, only five teams did not reach the playoffs, four of which made it this year. On the other hand, basketball is much less diversified. There have been ten different NBA Finals teams and only five different Finals champions. In this ten year period, the Los Angeles Lakers and San Antonio Spurs have accounted for seven out of the ten championships in this time frame. The NBA suffers from drastic competitive woes despite the utilization of “government regulations” on team spendings. In conclusion, the MLB does not need to implement a salary cap as the competition is equal across the league.
Works Cited
Delgado, Luis. "Explaining the Luxury Tax in Major League Baseball." SportingCharts.com. N.p.,n.d. Web. 21 Oct. 2014.
Huppke, Rex. "Pros and Cons of Raising the Federal Minimum Wage." Chicago Tribune. N.p., 24
Feb. 2014. Web. 18 Oct. 2014.
"Minimum Wage or Maximum Hassle? NSCA." NSCA. N.p., n.d. Web. 19 Oct. 2014.
"MLB Playoffs Bracket." MLB Playof s Bracket. N.p., n.d. Web. 22 Oct. 2014.
"On Baseball & The Reds: Reds Payroll, Now and in the Future." On Baseball & The Reds: Reds
Payroll, Now and in the Future. N.p., n.d. Web. 22 Oct. 2014.
Perry, Dayn. "No, Baseball (still) Doesn't Need a Salary Cap." CBSSports.com. N.p., n.d. Web. 19
Oct. 2014.
"Regular Season Standings." Major League Baseball. N.p., n.d. Web. 22 Oct. 2014
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