Luxury Tax Compared To Salary Caps In Major League Baseball

Luxury Tax Compared to Salary Caps in Major League Baseball A luxury tax is used in some professional sports to add a tax on the money in which a team exceeds on it’s payroll set by a predetermined amount by the league. According to Stephan Werner, it creates a more competitive balance among teams by keeping the large-market teams from signing all the top players. It will also slow the growth of outrageous salaries. A salary cap would simply keep teams from overspending, leaving smaller-market teams behind, whereas tax money from a luxury tax will go toward these smaller teams, creating a more competitive balance among the league and keeping overall salaries lower. A salary cap is used to limit the maximum amount of money a team can spend

The difference between the NBA and MLB’s TV ratings is due to the competitiveness in each league. While the NBA caps the maximum amount of money a team can spend, the MLB creates a more efficient system with a luxury tax. As a team spends more money than the limit set by the league, a tax is set on that extra money. That tax money goes toward revenue-sharing. Although not all teams are affected, the large-market teams suffer by not being able to truly spend all the money they have, while small-market teams get extra money to spend on players, making the league more competitive. Large-market teams like the Yankees seem to suffer each year. “ Since this Luxury Tax system was put in place in 2002, the Yankees have broken the ceiling every year it’s been in place” (Brown). They invest in the best players in the league while they are in their prime. They get huge contracts and are expected to do great, but near the end of their contracts they begin to slack and the Yankees are stuck paying them still. Smaller-market teams invest in youth, helping to develop them as players. They’re able to pick up the best of the rookies with smaller contracts and create a true team who works together to accomplish their goals. Large-make teams invest in depreciating players, while small-market teams invest in developing

If at team isn’t very popular, they won’t get much from TV and apparel. So the other teams who are popular and spending too much money will be forced to distribute money to the less popular teams. As these teams continue to compete, the league will become more competitive. According to a survey given to students at Kearney High School, more than half that said they do not watch Major League Baseball would pay more attention to it if the league was more competitive. If the league would become competitive, a luxury tax would almost be