How would you setup a fair and balanced financial plan for MLB?

[gehringer_2]

2 hours ago, chasfh said:

As long as there is no requirement to spend the money on payroll—how could that effectively be proven, anyway?—at least half of the luxury tax will always be a transfer from the biggest spending teams directly into the pockets of the teams that are purposefully not spending. Who wouldn’t want to buy a business where the competition is compelled to give you money as a reward for not spending to improve your product?

IDK what the 'right' answer is. We point to the NFL as the model for parity, and the one virtue in the NFL is that good ownership wins by being good ownership, without having to worry about the other guys having more resources. The Lions have been the poster child for this - years of failure under WCF because he didn't know or maybe just wouldn't run his football team the way it needed to be run to win. Shiela comes in, cleans house, and puts a winning team on the field with exactly the same resource base. Now the question is, if you are a fan, is it any worse to live in a major market NFL city and be doomed by a bad ownership (say the NYG) or be a baseball fan in a small market city doomed because despite good management your team doesn't have the resources to compete? It's futility for the fan either way. And in at least one sense you can argue that the MLB system is better because by making fans in big markets happy more often you are making more fans happy. That is an argument, but of course that the NFL's cash flow now dwarfs MLB's that argument hasn't really proven out overall.

Edited January 2 by gehringer_2

[Edman85]

15 hours ago, gehringer_2 said:

just for context, ESPN is reporting that 9 teams are paying at total of ~$400M in luxury tax this season, led by the Dodgers with a $169M levy. 

What I didn't know about the LuxTax  is that the first 50% goes to the MLBPA pension funds, not the low revenue teams. So that only leaves about $9M per team in LuxTax revenue payments, and even that money is distributed not equally, but based on some formula by the commissioners office that rewards teams that are building their fan base. (See Wikipedia https://en.wikipedia.org/wiki/Major_League_Baseball_luxury_tax ). Basically LuxTax transfers amount to about 1 WAR of payroll per receiving team. IOW -  hardly moves the needle. 

According to the same Wiki, MLB's main revenue share system requires teams to pool 48% of their non-media income (basically gate revenues) after deducting "stadium expenses" and that is then split equally 30 ways. Very roughly, a team that sells 3M ~$50 tickets would have $75M more gross gate revenue, maybe call it $100M since rich teams probably make a bundle more on luxury boxes as well,  than a team that sell 1.5M tickets, but who knows what is left net after what the teams are allowed to deduct as 'stadium expenses'.

Be careful using Wikipedia. Best to just go straight to the CBA itself.

[Tiger337]

2 hours ago, Edman85 said:

Be careful using Wikipedia. Best to just go straight to the CBA itself.

tldr

[Tiger337]

Just looked it up now.  426 pages.  

The constitution is less than one tenth of that.  

Edited January 3 by Tiger337

[RedRamage]

On 12/19/2025 at 8:03 AM, chasfh said:

That sounds fine and all to us fans, but how would they actually manage the payrolls of currently $300MM+ teams like the Dodgers and Mets and Yankees and Blue Jays to bring them into compliance with that payroll band? Grandfathering current rosters and working toward the cap across an X year period sounds like a solution, but there is probably an entire competitive parade of horribles lurking within a solution like that, one that might disadvantage the Dodgers and Yankees on the field for some period of time, and I promise you Baseball would have explicit antipathy for that idea. That itself might be enough for them to continue rejecting the idea as being completely unworkable in the real world.

 

This would definitely be an issue, but, at least in my opinion, a rough few years of figuring out how to get to a better system is not a reason to abandon the better system... that assumes the new system is better of course.

And my idea to handle this would be to make the band huge to start with, then year-by-year close the gap. Let's say your numbers are right and the cap would be 202 and floor 181.5 for 2026 if the implemented it right away. So, instead of that let's set the cap at 352 and the floor at 101.5 for 2026.

In 2027 the cap goes to 342 and the floor to 111.5. In 2028 the cap goes to 332 and the floor to 121.5... and so on.

This gradual approach would allow for teams with super bloated salaries to have time to get some of the major contracts off the books and allow smaller market teams to ramp up their spending rather than just needing to add 40 or 50% of the payroll so throwing it at undeserving players just to meet the floor.

[chasfh]

19 hours ago, RedRamage said:

This would definitely be an issue, but, at least in my opinion, a rough few years of figuring out how to get to a better system is not a reason to abandon the better system... that assumes the new system is better of course.

And my idea to handle this would be to make the band huge to start with, then year-by-year close the gap. Let's say your numbers are right and the cap would be 202 and floor 181.5 for 2026 if the implemented it right away. So, instead of that let's set the cap at 352 and the floor at 101.5 for 2026.

In 2027 the cap goes to 342 and the floor to 111.5. In 2028 the cap goes to 332 and the floor to 121.5... and so on.

This gradual approach would allow for teams with super bloated salaries to have time to get some of the major contracts off the books and allow smaller market teams to ramp up their spending rather than just needing to add 40 or 50% of the payroll so throwing it at undeserving players just to meet the floor.

OK, but I also would also think they’d need to close the gap a lot faster than the ten or fifteen years it would take to get there under your illustrative example. I think the longer they make that period, the more likely they abandon it along the way as being unworkable or undesirable.

[RedRamage]

On 1/10/2026 at 8:27 AM, chasfh said:

OK, but I also would also think they’d need to close the gap a lot faster than the ten or fifteen years it would take to get there under your illustrative example. I think the longer they make that period, the more likely they abandon it along the way as being unworkable or undesirable.

Hmm... that's a valid point. I'm trying to find a way to not penalize teams for creating huge contracts under the old system, but you're right.

The other option might be to allow teams to go over the salary cap for a period of time with ever-increasing penalties. For example (just pulling number out of thin air for demonstration), year one if you're over you pay a luxury tax of 10% on every dollar over the cap. Year 2 you pay 20%, year 3 you pay 30%, etc.

Maybe combine this with an overtly large window for Cap and Floor but that closes the gap faster? I dunno... As much as I'm in favor of a salary cap/floor situation, I also don't want to be draconian in applying it so that it unfairly punishes teams which were operating properly under the rules as they existed.

In the end this is just wishful thinking I'm afraid. Any Cap/Floor system is going to require the majority of the owners onboard AND the players as well. Plus it will almost certainly require opening the books, at least to the players union. I don't see any of those three things as likely.

[buddha]

On 12/31/2025 at 12:45 AM, IdahoBert said:

I think the guillotine and the terror of the French Revolution is a good solution. 

you've always struck me as more danton than robespierre.  actually, youre more of a desmoulins, idealistic and young!

[AlaskanTigersFan]

Ok. Very cool segment on MLB on XM today. They were talking about this and how there may be a lockout. Eduardo Perez came up with a great idea.

His idea is when a team signs a player at least two years prior to them becoming a free agent to an extension, the team gets to write off 20%-30% of the AAV from the luxury tax. He stated this would allow players to get paid, but also incentivize teams to sign their players. So take a player that makes $40 mil/year. A team could write off $8 million of that from the luxury tax. You do this with multiple players and you can essentially save some entire players salary allowing teams to retain players.

Steve Phillips brought up, well what if teams still don't come close to the luxury tax and Eduardo said it still helps them in the grand scheme of things. He said this would allow teams to retain players and the big buyers (like the Mets, Dodgers, Yankees etc...) would have to develop their own players instead of teams like the Brewers, Marlins and Rays acting like a farm club to the rest of the league.

While I like the idea in general, I didn't really like the response from Eduardo. But what I'd like to expand on that idea, is allow smaller teams to be able to trade the access AAV they are able to save to bigger clubs for players/draft picks. So for example, the Dodgers are constantly at or above the luxury tax. Lets say Tampa Bay signs three players with a $20 mil AAV. Lets say teams get to bank 20% of that AAV. Well that produces $12 million in luxury tax space. The Rays could then trade that $12 million per year to the Dodgers for a player or draft pick that would then help both teams.

Curious on thoughts on that? 

[gehringer_2]

IMHO, the biggest issue for baseball fandom is too much player mobility. Whatever they come up with needs to allow players to get paid without having to move to do it so teams can build their identities long term around their stars. Perez has identified the issue but his proposal does nothing for teams not paying the tax, and they are ones losing their players.

[RedRamage]

RE: Write off for signing players:

While I like the idea of incentivizing teams signing their players long term, I don't see that this change the math much, except for the big boy teams. In some ways it only helps the big teams stay big.

If you're a small team that isn't interested in spending big money, this does nothing for you. You're not going to spend big anyway, so who cares?

If you're a middle of the road team, you're probably not butting up too much on the luxury tax, so there isn't a huge benefit here. You might have 1 to 4 teams that could look at this and say: "Yeah, we want to sign player X to a contract, but that puts us over the cap, so we're not going too because can't afford the contract AND paying the tax." 

If you're a big market team, now there's more incentive to sign your players long term, sure... but that just gives you more money under the tax so you have even more funds to spend on other FA.

This plan doesn't provide funding for small market teams and it also doesn't provide incentive (or force) those teams to spend more. It does help Big market teams lower their tax burden.

RE: Trading "cap space" for players/picks:

This at least gives some resources to smaller market teams, but I fear it will only be a smallish help. It might allow the Rays (in the example provided) get more talent into their club, but it isn't going to provide them the revenue to retain those players, especially as we've given the big markets yet another way to avoid tax payments, which means they have more funds to spend on FA again.

TL;DR: It's an interesting approach I guess and might help in a few specific areas, but I fear it also exacerbates the existing issue of Big Market out spending the small markets while the small markets have no incentive to actually try to gets better or spend more on their roster.

[RedRamage]

4 hours ago, gehringer_2 said:

IMHO, the biggest issue for baseball fandom is too much player mobility. Whatever they come up with needs to allow players to get paid without having to move to do it so teams can build their identities long term around their stars. Perez has identified the issue but his proposal does nothing for teams not paying the tax, and they are ones losing their players.

If they setup a cap/floor, I think there's actually a pretty good way to do this. It's actually and idea I had many years ago with the NFL, and it's pretty simple:

For every consecutive year that a player is with a team, 5% of their AAV is not charges against the team's Salary Cap. For a very simplistic example: The Tigers sign a player to a 5 year, 10,000,000 contract. It doesn't matter how much is paid each year, the average is $2M per year, so that players contract would normally charge $2M against the cap. Therefore:

In 2026 the cap hit for this player is $2M
In 2027 the cap hit is $1.9M ($2M - 5% for one year)
In 2028 the cap hit is $1.8M ($2M - 10% for two years)
In 2029 the cap hit is $1.7M
In 2030 the cap hit is $1.6M

Now in 2031 that player is a free agent and the Yankees come in and offer him a 1 year deal for $3M. That would cost the Yanks $3M against their cap for that year. But the Tigers could look at that and counter with $3.5M know that this would only hit $2.625M towards their cap.

The percentage off could be adjust to see what makes the most sense of course. And also, of course, this only works in a cap/floor situation where teams have at least similar resources to spend enough towards the caps.

[chasfh]

I believe the effort to reduce payroll inequality among teams has to focus on incentivizing small market teams to start spending and become actually competitive, at least as much as clamping down on the biggest-spending teams. The ownerships of too many organizations are phoning it in because as owners they will get good and paid, with increasing franchise valuations, anyway, no matter whether they win eighty games or seventy or sixty. I don’t have to out which organizations—you already know who they are. Fix that end of it and they will fix a big chunk of the competitive balance problem—if Baseball even acknowledges there is one, or even cares, both of which are legitimate open-ended questions. 

[gehringer_2]

25 minutes ago, RedRamage said:

And also, of course, this only works in a cap/floor situation where teams have at least similar resources to spend enough towards the caps.

A lot more things become possible if you get past this hurdle.

[CMRivdogs]

I posted something like this in the Skubal thread. Would love to see a workable solution with a solid floor and a soft spending cap.

Make the floor around 80-90% of the league median payroll (not average) if median payroll for all MLB teams is $165 Million then the floor spending should be in the ballpark of $140-150 Million. Anything below and the teams get dinged in terms of loss of draft picks, and possible revenue sharing revenue. All MLB contracts, no phantom injuries. No reset year "tanking". They must spend the minimum amount.

The spending cap would probably be around  125-135% of median payroll, say $210-215 Million. Teams can go over, but they get dinged with loss of draft picks, their international pool gets reduced. This is all in terms of actual payroll every year. No long term deferred money. No artificial contract voiding. They're stuck with their mistakes. Penalties will be enforced on a sliding scale.

Big spenders will spend, but not outrageous amounts, Stars will still get payed.

A median-based floor forces teams like the Pirates to field real rosters every year, while a soft cap reins in the Dodgers’ excesses without destroying their ability to contend — shrinking the gap without flattening ambition.

 

[RedRamage]

18 hours ago, chasfh said:

I believe the effort to reduce payroll inequality among teams has to focus on incentivizing small market teams to start spending and become actually competitive, at least as much as clamping down on the biggest-spending teams. The ownerships of too many organizations are phoning it in because as owners they will get good and paid, with increasing franchise valuations, anyway, no matter whether they win eighty games or seventy or sixty. I don’t have to out which organizations—you already know who they are. Fix that end of it and they will fix a big chunk of the competitive balance problem—if Baseball even acknowledges there is one, or even cares, both of which are legitimate open-ended questions. 

I totally agree. A floor is obviously one way to force them to do this, but I'm unsure of other ways to encourage it. Any bright ideas? (Not that MLB really cares about us discussing it in a sports forum... at least now that Dumbrowski isn't a member of the Tigers organization.)

[RedRamage]

17 hours ago, CMRivdogs said:

Make the floor around 80-90% of the league median payroll (not average) if median payroll for all MLB teams is $165 Million then the floor spending should be in the ballpark of $140-150 Million. Anything below and the teams get dinged in terms of loss of draft picks, and possible revenue sharing revenue. All MLB contracts, no phantom injuries. No reset year "tanking". They must spend the minimum amount.

The spending cap would probably be around  125-135% of median payroll, say $210-215 Million. Teams can go over, but they get dinged with loss of draft picks, their international pool gets reduced. This is all in terms of actual payroll every year. No long term deferred money. No artificial contract voiding. They're stuck with their mistakes. Penalties will be enforced on a sliding scale.

Two modifications I'd make here... and one crazy idea that I'd be interested in hearing feedback on:

For the floor I'd be willing to look at a teams average over the last two or three seasons. What I mean is if their payroll in (2024 + 2025 + 2026) / 3 is over the floor, then they aren't punished. This gives a bit of flexibility in if it's just an off year for a team. Or maybe they were hoping to land big name free agent A, who instead went to a different team... now they have to pay free agent B more than they (or anyone else) normally would or they'll be under the floor. 

For the cap I guess I'd be okay with going over as long as the penalties scale exponentially. I mean we have the luxury tax right now and teams regular blow WAY past it. There's two teams that are spending more beyond the luxury tax than two other teams are spending period on payroll. The penalties need to scale up sharply as team go more and more over the cap. 

Here's my crazy idea: If a team is under the floor, they fined the amount they are under, and that fined money is give to the players on that team. This would mean there is zero benefit to the owner to be under the floor as they're going to be paying that money anyway.

[RatkoVarda]

1 minute ago, RedRamage said:

Here's my crazy idea: If a team is under the floor, they fined the amount they are under, and that fined money is give to the players on that team. This would mean there is zero benefit to the owner to be under the floor as they're going to be paying that money anyway.

this is the current NBA system; has happened a few times, where a team has payroll lower than floor, and the players all got one share of the delta as a bonus

[RedRamage]

18 hours ago, CMRivdogs said:

Anything below and the teams get dinged in terms of loss of draft picks...

Teams can go over, but they get dinged with loss of draft picks...

Another thought I had. I'm not sure I like the idea of lost draft picks being a penalty. I'd rather see it as a financial hit for a few reasons. And I know you did mention financial penalties in various forms as well, I'm just saying here that I don't want to see draft picks as a penalty at all, because I think this won't matter as much to the small markets that aren't interested in spending, nor to the big markets who have plenty to spend.

If I'm small market owner who doesn't care about being competitive as much as just making money, what do I care if I get dinged draft picks? I'll just keep complaining that I don't get enough revenue so I can't afford to meet the floor and now it's even worse because they're taking away draft picks from me, making my product even worse, so less revenue, less I can spend, etc. etc. etc.

If I'm a big market owner who's already using the small markets are a sort of minor league system and then just buying up all the big names when they become FAs, what do I care if I get dinged draft picks? Now, I'd prefer to get my own home grown stars as it's cheaper, but given how few draft picks ever become star MLB players, am I really going to be THAT upset? Will I actually NOT pay extra to get that big name FA because I'll lose a pick or three when that draftee has like a 1:100 shot of even making it to the majors, let alone being a star player?

[Mr.TaterSalad]

On 12/16/2025 at 11:26 AM, AlaskanTigersFan said:

- Institute a hard salary cap for competitiveness. No defferred payments. Owners and Players association get a vote and the Commissioner acts as an arbiter. Cap goes up 5% each year.  (Owners win - Their biggest ask by far)

- Free agency though, comes to players after 6 years of being drafted or originally signed. No more Qualifying offer allowed. (Drastically speeds up process of reaching Free Agency) (Players win)

- Salary floor being 40% of the Salary Cap. So example: if Cap is $400 million, the floor is $160 million.  (Players win)

- Allow Private Equity groups to buy into MLB Franchises (Helps if owners can't afford the minimum salary floor. They should probably sell their team then anyway.) (Owners win)

- Eliminate draft pool amounts, but put a floor of draft pool. Something like $8 million. (Players Win)

- Greatly increase league minimum to let's say $250,000. (Players win)

- 15% of all MLB revenue profit, is put into a pension fund for players. Tiered system based off players time (Players win)

- Owners get 20% of all marketing money made by players under their team's logo (Owners win [NIL anyone])

- Create an International Free Agent draft (Owners win)

- Allow contracts to be performance based instead of guaranteed in addition to guaranteed contracts (either or); Example: A player has OBP over .350 they get 5 million salary, over .360 is 6 million salary and for each home run is $500,000. (Both Owner and Player win as Owners pay for production and players can bet on themselves if they choose to do so).

_______________________________________________________

Just a couple of thoughts there to get started. 

 

I was going to make a post sharing my ideas but this pretty well sums it up. The hard salary cap, hard salary floor, and earlier free agency periods of players were my big points.

I don't support allowing private equity firms to have ownership stakes in an MLB franchise. Private equity in America generally exists to run something into the ground, strip off its assets, and sell it for parts or make the company file bankruptcy. If private equity took over a franchise it would worsen the problem for small market teams. They would run barebones franchises with minor league players and rookies that come on the cheapest deals possible. Think of the fire sale that Wayne Huizenga did after the Marlins did in 1997. I worry that would be what any private equity firm would do should they take over a team or be given partial ownership control. You think the Pirates are bad now? Imagine Bain Capital taking them over. Skeens would be sold off for peanuts almost overnight.

To me, that's most likely what any private equity firm would do. They would ride off the coattails of the broadcast revenue sharing, merchandise, and copyright deals MLB has. Now, if they could get away with it, I'd venture to guess that most private equity firms would potentially try and contract the franchise, sell off its assets ala what they've done to companies like Art Van, K-Mart, Toys R'US, etc., and then continue making money on what ever residual income there is from licensing and merchandising. The Pirates LLC would still exist to sell merchandise to fans who have fond memories of the franchise's past, but the team wouldn't be fielded and the stadium ownership and all equipment would be sold off.

Fortunately, MLB has rules against taking over a team and contracting it. But given the way private equity works in America, this is a likely outcome if a firm is given carte blanche and full control.

Edited 3 hours ago by Mr.TaterSalad

[chasfh]

3 hours ago, RedRamage said:

I totally agree. A floor is obviously one way to force them to do this, but I'm unsure of other ways to encourage it. Any bright ideas? (Not that MLB really cares about us discussing it in a sports forum... at least now that Dumbrowski isn't a member of the Tigers organization.)

If the several ownerships I alluded to are basically harvesting their franchises, then I’m not really sure what could incentivize them to spend to compete, since they happily see revenue and valuation gains occur completely irrespective of the on-field performance.

[papalawrence]

MLB could try a different approach, aka the Tanya Harding method

[chasfh]

On 12/16/2025 at 12:26 PM, AlaskanTigersFan said:

- Greatly increase league minimum to let's say $250,000. (Players win) 

 

So this point just now really registered with me. Seeing how league minimum is already somewhere near $800,000, did you mean to say greatly increase league minimum to $2,500,000? Because hell yeah that would be a player win. Just trying to understand in the context of your whole post.