America’s long tradition as “The Land of Opportunity” is being replaced by the new philosophy of “equal outcomes,” regardless of the effort put in. The attempt to implement this idea, akin to the growing popularity of socialism, has already found a home in one of the nation’s most beloved institutions: Major League Baseball (MLB).
The results have not been good.
MLB’s luxury tax and revenue sharing practices are also known as a “competitive balance tax.” Proponents of the concept allege that it was necessary to allow teams in smaller cities to play more competitively against big-city teams. Hal Steinbrenner, a co-owner of one of those big-city teams, The New York Yankees, disagrees with the idea. The National Review quotes him as stating “At some point, if you don’t want to worry about teams in minor markets, don’t put teams in minor markets, or don’t leave teams in minor markets if they’re truly minor…Socialism, communism, whatever you want to call it, is never the answer.”
Whatever label is placed on the concept, it has not achieved the results it was supposed to, and has in fact produced a whole new set of problems.
William Ryan Colby, in a paper presented to the e Department of Economics at Amherst College noted that “In 1996, Major League Baseball introduced its first system of comprehensive revenue sharing with the goal of creating more competitive balance in the league. the marginal tax rates created by MLB’s revenue sharing systems have actually worsened balance in the league. Although the most recent sharing system begins to realign incentives, it still risks “turning a ‘good’ imbalance into a ‘bad one” by subsidizing poorly managed teams at the expense of well run teams… the incentive structures created by MLB revenue sharing had the anticipated negative effects on competitive balance.
How the system has worked in practice is described by NBC sports “MLB teams participate in revenue sharing, a system that redistributes income from the richest franchises to their less profitable partners in an attempt to improve competitive balance. Under the 2012–2016 Collective Bargaining Agreement (CBA), each team contributes 34 percent of its net local revenue into a pool that gets divided equally among every team. Higher-earning clubs put in more than they get back while lower-earning clubs receive more than they put in…Over the past four years the Marlins, Rays, Royals, Padres and A’s among other teams received a combined $642 million dollars. The franchises that keep on giving to them are the New York Yankees, Boston Red Sox, Chicago Cubs, Philadelphia Phillies and San Francisco Giants. The mountain of cash deposited since 2012 i[reached] a staggering $1.15 billion [by 2016]”
A list of World Series winners since 1996 clearly demonstrates that the revenue-sharing scheme has not achieved its goals. Instead, it has ushered in a whole new set of problems.
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Russ Roberts, writing for CafeHayek explains: “Even if the Yankees [a big-market, big spending team] share their revenue equally with other teams, the beneficiaries of that subsidy may decide to simply pocket it rather than making their teams more competitive. Revenue sharing does reward mediocrity and punish excellence and as the amount of sharing grows, the potential harm from that perverse incentive gets worse.”
According to some, that diminished devotion to meaningful competition means that teams, both in large markets and small, feel free to be less generous with player salaries.
A 2018 CBS Sports report reported that “According to the Associated Press, the average MLB salary decreased from 2017-18. It’s only the fourth time in the last half-century the average salary decreased from one year to the next…The [MLB Players Association (MLBPA)] said…its final [2018] average was $4,095,686, down $1,436 from $4,097,122 last year. Since the union started keeping track in 1967, the only previous declines had been by $66 in 1987, when owners were found to have conspired to hold down salaries among free agents; a 4 percent decline in 1995 following a 7½-month strike that wiped out the World Series for the first time since 1904; and by 2.5 percent in 2004.”
The MLBPA voiced concern that several organizations, including at least one that received up to $160 million, were pocketing the cash and not using it to enhance their team.
The Report concludes tomorrow.
Photo: Pixabay