Friday, November 4, 2011
New luxury-tax system anticipated
By Jayson Stark
It has been around for nine seasons now, complicating the New York Yankees' lives and, occasionally, the lives of another team or two. But baseball's Competitive Balance Tax -- a.k.a. the "luxury tax" -- quietly disappeared last week.
The tax expired at the end of the 2011 season, as stipulated by this section, on Page 104 of the current, though soon-to-be-defunct collective bargaining agreement:
"There shall be no Competitive Balance Tax in place following the 2011 championship season, and the parties expressly acknowledge and agree that the provisions of this Article XXIII ... shall not survive the expiration of this agreement."
In other words, now that the 2011-12 offseason is under way, and with a new labor deal still stuck in negotiating limbo, management and the players' union have to negotiate a new luxury-tax agreement and determine whether it will go into effect for 2012.
The assumption of both sides, however, is that sooner or later a new luxury-tax system will be back in effect.
"I don't think it's an issue," an official of one large-market team said. "Everybody thinks there will be a deal and there will be a luxury tax included in that deal."
One prominent agent echoed those sentiments, saying via email: "My interpretation of 'no luxury tax' is that there will be a deal in place soon that will apply to the present market and that will include a luxury tax."
However, with every day that goes by -- with the offseason now up and running, and no agreement on the labor front -- it becomes more difficult to change the rules in the middle of the negotiating season. So one source on the management side suggests the union is attempting to use the threat of a 2012 season with no luxury tax as leverage.
But if that's the case, said the same official quoted earlier, it's not working.
"Where's the leverage?" he asked. "Who's going to run hog wild because there's no tax? I don't see the Yankees going wild. The Red Sox certainly aren't. I don't think the Phillies are going to go wild without a tax. If anything, it's hurting the players because it creates uncertainty in the marketplace."
Nevertheless, the expiration of the tax has created one more hang-up in the labor negotiations, which sources now say will not even resume until next week. According to those sources, the owners, led by commissioner Bud Selig, continue to demand a hard slotting system for amateur draft picks, with the union holding firm in its resistance.
One source, who has been briefed on the negotiations, described the slotting tug of war as a "standoff" in which neither side has budged so far. However, the source said the slotting issue is not the only unresolved matter left on the table.
The union is pressing for a change in the free-agent compensation system for Type A free agents, one that would no longer require teams to give up first-round draft picks if they sign premier free agents. The union also wants that change to take effect starting with the current offseason.
The owners, according to one source, now have taken the position that they are willing to make that concession only if they get a hard slotting system for draft picks in return. So with neither side moving and the negotiating clock ticking, a labor deal that once seemed imminent remains in limbo.
And the first casualty, at least for now, is the current luxury-tax system, which has been in place since 2003.
Jayson Stark is a senior MLB writer for ESPN.com.