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Sunday, February 19, 2006 

Football vs. Baseball

Last week, via Baseball Musings, I found a series of articles in the Boston Herald with Red Sox owner John Henry. The passage that caught my eye was Henry's comments on baseball's luxury tax:

"Baseball has to address the disincentives created by large scale transfers of revenue from successful clubs to less successful clubs," Henry said. "At high enough tax levels the incentive is to invest somewhere else other than in baseball." ... "The commissioner and the union have radically altered the game of baseball for the better over the last few years by transferring enormous amounts of dollars. But as with all taxes, there is a point at which taxation discourages effort and investment to the point that baseball clubs one by one come to the same, unfortunate conclusion."

This topic is timely for football fans as the NFL CBA is nearing its end. The luxury tax in MLB is essentially a pseudo-cap designed to punish rich owners and give handouts to the poor owners. But it doesn't contain a "floor" like the NFL cap does, so there's no incentive for the small-market teams to spend money. When the NFL salary cap was instituted, I remember people talking about the "floor" as the "Cincinnati Bengals-clause", designed to keep historically cheap owners from taking advantage of the system. And while it took a while, Cincinnati won the NFC North this year.

The NFL has always done a better job of convincing its owners to share the wealth, creating almost a Communistic system, but it has worked to the benefit of everyone. The Patriots are a great example, as they overcame decades of mismanagement to win three Super Bowl titles. Instead of being a laughing-stock in a cheap stadium, the Krafts have built their own first-class venue, and are now looking to add some retail shopping to the area around their complex. But make no mistake, if the Patriots were still struggling there's no way Bob Kraft would have spent his own money to build Gillette Stadium, and the team might still be a candidate to move.

It's easy to understand why pro athletes hate salary caps - they want the ability to earn as much as possible, and a cap restricts that. But in the long-term I wonder if caps actually help players by fostering a more competitive environment on and off the field. For example, if you're a high-profile baseball player with a big paycheck, there are only a few possible employers who will be willing and able to meet your salary demands - New York, Boston, Los Angeles, maybe Texas and Baltimore, etc. Outside of this "big-market circle", you will be unlikely to get any offers. So if those teams are stocked at your position, you are out of luck. Contrast that with the NFL, where virtually every team has the ability to sign a big name free agent. Granted, you'll get paid less, and your contract will not be fully guaranteed (though I suspect guaranteed contracts are going to be part of the next CBA), but you'll have a wider variety of options.

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