Does the Competitive Balance Tax (Luxury Tax) work as intended ?

[tray]

The basics of the argument with relevant facts in this article:

https://www.jackcentral.org/sports/the-mlb-luxury-tax-does-not-work/article_39840d86-a568-11ef-a5ee-a3b4e7ddb2cb.html

 

[WhiteSox2023]

The Sox have been pretty bad over the years and just set the futility record.  They seem to now be in a perpetual rebuild.  Meanwhile, Jerry still made $288 million in revenue in 2023.  So where is his incentive to actually win?  To make even more money?  

“In 2023, the Yankees made $679 million in revenue and the Dodgers made $549 million. The teams with the lowest revenue were the Oakland Athletics — now just the Athletics — with $241 million and the Chicago White Sox with $288 million.”

[Chicago White Sox]

4 hours ago, WhiteSox2023 said:

The Sox have been pretty bad over the years and just set the futility record.  They seem to now be in a perpetual rebuild.  Meanwhile, Jerry still made $288 million in revenue in 2023.  So where is his incentive to actually win?  To make even more money?  

“In 2023, the Yankees made $679 million in revenue and the Dodgers made $549 million. The teams with the lowest revenue were the Oakland Athletics — now just the Athletics — with $241 million and the Chicago White Sox with $288 million.”

Where is this idea that Jerry is just caking off the Sox coming from?  Forbes estimates we lost ~$130M over the past four years.  The issue with Jerry isn’t that he won’t spend, it’s that he allocates his resources poorly because he’s stubborn, old-school, risk-adverse b****.

[WhiteSox2023]

5 minutes ago, Chicago White Sox said:

Where is this idea that Jerry is just caking off the Sox coming from?  Forbes estimates we lost ~$130M over the past four years.  The issue with Jerry isn’t that he won’t spend, it’s that he allocates his resources poorly because he’s stubborn, old-school, risk-adverse b****.

Link?  Lost $130 million over what they usually earn?  They are still in the green with revenue.  He just slashes payroll to account for the losses.

[Chicago White Sox]

7 minutes ago, WhiteSox2023 said:

Link?  Lost $130 million over what they usually earn?  They are still in the green with revenue.  He just slashes payroll to account for the losses.

I’m not sure what you mean by “in the green with revenue” as a team can’t have negative revenue.  That being said, when you have a middle of the pack payroll (amongst other expenses) and the second lowest revenue in all of baseball you can easily have negative operating profit.

And yes, the dude cuts payroll when revenue is projected to be down.  That’s not all that unreasonable and most teams reduce spending considerably when rebuilding.  The main issue beyond just his poor resource allocation is he won’t spend big up front to try and build a best in class product that will actually draw fans.  He gradually ramps up payroll with fan attendance to help prevent large losses in any given year, but this can cap the potential upside and excitement around a young & upcoming team.  And when you pair that with his refusal to swing big in free agency you end up with a very average product unless literally everything goes right.  It’s a bad approach to business and one that wouldn’t work in other industries.

https://www.forbes.com/teams/chicago-white-sox/

[Falstaff]

If MLB had a S&P 30, the Sox rating would be CCC.

[Balta1701]

51 minutes ago, Chicago White Sox said:

 That being said, when you have a middle of the pack payroll (amongst other expenses) and the second lowest revenue in all of baseball you can easily have negative operating profit.

While it doesn’t necessarily offset all this, let’s also remember that they have essentially zero long term stadium debt thanks to the taxpayers of Illinois, so their overall balance sheet isn’t just super low revenue and moderate spending. Super low infrastructure spending as well/

[caulfield12]

“So, the Pirates received around $100 million in revenue-sharing funds for 2023, but our payroll was only about $75.7 million—among the lowest in the league. This raises some serious questions: Where did the remaining $24 million go?

Revenue-sharing funds are supposed to be used to improve the team’s competitiveness, not just padding the owner's pockets. While MLB does monitor how these funds are used, the lack of transparency makes it hard to know if the Pirates are truly reinvesting in the team.

It's frustrating as a fan to see our payroll so low when we’re getting this much in revenue sharing. Are we really putting that extra money into player development, scouting, or other areas that could help us win, or is it being underutilized? MLB could investigate if there are suspicions of misuse, but these things are often handled internally, and the details might not even come to light.

What do you all think? Are the Pirates doing enough to stay competitive, or are we just spinning our wheels while the ownership profits?”

 

The incredible thing here is generating even less revenue (supposedly) than the Pirates, Rays, Royals, Marlins, Guardians and Reds.

Miami drew roughly 4,500 less fans per game but still generated more revenue despite Sox totally controlling all their own parking fees???

https://www.mlbtraderumors.com/2024/01/each-teams-local-broadcasting-arrangement.html

Last year the broadcasting revenues were reported, which was 2022, White Sox at $60 million and Marlins $49 million.   And the Marlins somehow are generating enough viewing interest to get a renegotiated media rights deal with Diamond Sports Group even.

 

https://www.mlb.com/press-release/press-release-diamond-sports-group-and-miami-marlins-reach-multi-year-renewal-of-local-television-and-digital-rights-agreement

Edited Tuesday at 02:08 PM by caulfield12

[southsider2k5]

3 hours ago, WhiteSox2023 said:

Link?  Lost $130 million over what they usually earn?  They are still in the green with revenue.  He just slashes payroll to account for the losses.

I have been posting the Forbes numbers annually. We haven't had a "profitable" season since 2019 according to them.

[Tony]

10 hours ago, tray said:

The basics of the argument with relevant facts in this article:

https://www.jackcentral.org/sports/the-mlb-luxury-tax-does-not-work/article_39840d86-a568-11ef-a5ee-a3b4e7ddb2cb.html

 

Here are some other facts the author doesn't include:

The Milwaukee Brewers were 21st in payroll in 2024, at 115 million. They were also 16th in attendance, coming in at 2.5 million fans. 

They won 93 games and their division by double digits. 

In 2023, they won 92 games and their division by 9 games. They were 16th in payroll in 2023, and 15th in attendance. 

The Cleveland Guardians were 23rd in payroll in 2024, at 106 million. They were also 20th in attendance, coming it at just over 2 million fans. 

They won 92 games and their division. 

Additionally, the article states: 

Quote

While this seems harmless at first glance, small market teams could never keep up with such an expensive roster. If the Athletics wanted to fund a similar roster, they would be put in the negative. A baseball team shouldn’t have to worry about losing money just to fund a competitive roster. 

It has been proven time and time again you don't need a payroll in the Top 5 to stay competitive and make the playoffs consistently, but instead a strong organizational philosophy and player development. 

In the case of the White Sox, it has also been proven fans will attend when a good product is on the field. The organization historically has not held up their end of the bargain. 

The entire premise of your argument is "There should be a salary cap so teams won't be able to spend as much, and that in turn should make the White Sox more competitive." While that premise is absolutely flawed, even if we used that premise, teams would adapt and spend in other areas of the organization that doesn't impact payroll to give themselves a competitive advantage, something the White Sox have shown absolutely no interest in doing. 

But keep carrying water for one of the worst owners in sports. You're doing great. 

[nitetrain8601]

Simple answer is there is no oversight on the revenue sharing once it has been shared. And the MLB will never investigate Jerry like they didn't when he hired Getz.

[tray]

3 hours ago, Tony said:

 

The entire premise of your argument is "There should be a salary cap so teams won't be able to spend as much, and that in turn should make the White Sox more competitive." While that premise is absolutely flawed, even if we used that premise, teams would adapt and spend in other areas of the organization that doesn't impact payroll to give themselves a competitive advantage, something the White Sox have shown absolutely no interest in doing. 

But keep carrying water for one of the worst owners in sports. You're doing great. 

Dude, stop  posting false and erroneous quotes and ascribing arguments that neither I nor anyone else made.  IMO, a salary cap in MLB probably would work better than the current system but obviously it would not, in itself "make the White Sox more competitive."

I don't carry water for anyone but I do suggest that if people are that miserable with the WSox they stop joining Cub trolls who have gotten way too much joy out of the Sox record loss season. Give it a fvking break already.

[southsider2k5]

29 minutes ago, tray said:

Dude, stop  posting false and erroneous quotes and ascribing arguments that neither I nor anyone else made.  IMO, a salary cap in MLB probably would work better than the current system but obviously it would not, in itself "make the White Sox more competitive."

I don't carry water for anyone but I do suggest that if people are that miserable with the WSox they stop joining Cub trolls who have gotten way too much joy out of the Sox record loss season. Give it a fvking break already.

Yes, the way to make miserable people to see the light isn't for the White Sox to get better, it is for them to just deal with it. 

[Tony]

17 hours ago, tray said:

Without a salary cap even the off-season is not very interesting. The high salaries and payrolls ruin the game.  Why even try to add significant  payroll if other teams are just going to blow that amount away and make it a farce. You want Jerry to sell? OK, but that doesn't mean a new owner is going to play a losing game by trying to compete with the big boys. Reportedly there are only 4 teams in on Soto.

 

16 hours ago, tray said:

You can't compete with Yankees , Dodgers , San Diego etc. by signing one guy at $15 mil/year. The  salary cap is the issue, not the alleged frugality of Jerry Reinsdorf. You can't lay the blame for a broken system at the feet of one owner.

 

59 minutes ago, tray said:

Dude, stop  posting false and erroneous quotes and ascribing arguments that neither I nor anyone else made.  IMO, a salary cap in MLB probably would work better than the current system but obviously it would not, in itself "make the White Sox more competitive."

I'm sorry, were these not quotes from you less than 24 hours ago? You said "The salary cap is the issue, not the alleged frugality of Jerry Reinsdorf? What did you mean by that, other than "Teams shouldn't be allowed to spend whatever they want, if there was a more level playing field, the White Sox would have a better chance of competing?" Please, enlighten the rest of us. 

Quote

I don't carry water for anyone but I do suggest that if people are that miserable with the WSox they stop joining Cub trolls who have gotten way too much joy out of the Sox record loss season. Give it a fvking break already.

As far your second graph, I've got bad news, and then worse news for you. 1. I'll post and reply to whatever I choose to 2. You can't do anything about that, so you're just going to have to put on your big boy pants and deal with it. 

[WhiteSox2023]

9 hours ago, Chicago White Sox said:

I’m not sure what you mean by “in the green with revenue” as a team can’t have negative revenue.  That being said, when you have a middle of the pack payroll (amongst other expenses) and the second lowest revenue in all of baseball you can easily have negative operating profit.

And yes, the dude cuts payroll when revenue is projected to be down.  That’s not all that unreasonable and most teams reduce spending considerably when rebuilding.  The main issue beyond just his poor resource allocation is he won’t spend big up front to try and build a best in class product that will actually draw fans.  He gradually ramps up payroll with fan attendance to help prevent large losses in any given year, but this can cap the potential upside and excitement around a young & upcoming team.  And when you pair that with his refusal to swing big in free agency you end up with a very average product unless literally everything goes right.  It’s a bad approach to business and one that wouldn’t work in other industries.

https://www.forbes.com/teams/chicago-white-sox/

All MLB teams receive $200+ million a year through revenue sharing.  I believe caufield’s post above about the Pirates receiving only $100 million was off by an additional $100 million.

https://www.thetribune.ca/sports/mlb/

Quote

Under the new collective bargaining agreement (CBA) negotiated in 2022, each MLB team pools 48 per cent of local revenues with the total amount split equally between all 30 teams.

This results in each team taking in 3.3 per cent of the total—an estimated $110 million USD, if not more. Teams also receive a share of national revenues, totalling around $90 million USD per team.

It would be very difficult for an MLB team to lose money overall, just local profits, which are composed of ticket sales, parking, concessions, etc.  So an owner just slashes payroll to cover these losses and milks revenue sharing dollars.

This is what Jerry’s strategy is now, starting with Hahn and now starting again with Getz.  If the team does actually develop some good young players again, I’m sure Jerry will approve a higher payroll again.  But just like last time, the Sox will never go the extra mile to bring in a star player and will wind up with underperforming B class free agents.

Edited Tuesday at 10:44 PM by WhiteSox2023

[WhiteSox2023]

2 hours ago, tray said:

I don't carry water for anyone but I do suggest that if people are that miserable with the WSox they stop joining Cub trolls who have gotten way too much joy out of the Sox record loss season. Give it a fvking break already.

Could it be possible that there are Sox fans that are upset with how Jerry has run his team over the years, and which has absolutely nothing to do with joining Cubs trolls?  Afterall, the Sox and Hahn completely blew their first multi-year rebuild with poor free agent choices and Jerry hand-picking his relic of a best friend as his manager.  After all that, they just started yet another multi-year rebuild with a GM that looks as bad as Hahn at player assessment.  They are now coming off of a season in which they set an MLB record for futility.  But it’s just miserable Sox fans teaming up with Cubs trolls?  The Cubs have their own problems — they can’t seem to get over the hump, hover around a .500 record, and haven’t been to the playoffs since 2020.  They aren’t happy with their ownership and front office right now either.

[Bob Sacamano]

3 hours ago, tray said:

Dude, stop  posting false and erroneous quotes and ascribing arguments that neither I nor anyone else made.  IMO, a salary cap in MLB probably would work better than the current system but obviously it would not, in itself "make the White Sox more competitive."

I don't carry water for anyone but I do suggest that if people are that miserable with the WSox they stop joining Cub trolls who have gotten way too much joy out of the Sox record loss season. Give it a fvking break already.

[Chicago White Sox]

2 hours ago, WhiteSox2023 said:

All MLB teams receive $200+ million a year through revenue sharing.  I believe caufield’s post above about the Pirates receiving only $100 million was off by an additional $100 million.

https://www.thetribune.ca/sports/mlb/

It would be very difficult for an MLB team to lose money overall, just local profits, which are composed of ticket sales, parking, concessions, etc.  So an owner just slashes payroll to cover these losses and milks revenue sharing dollars.

This is what Jerry’s strategy is now, starting with Hahn and now starting again with Getz.  If the team does actually develop some good young players again, I’m sure Jerry will approve a higher payroll again.  But just like last time, the Sox will never go the extra mile to bring in a star player and will wind up with underperforming B class free agents.

All teams definitely don’t receive $200M.  You’re confusing multiple concepts.  The $100M of local revenue sharing only benefits team that contribute less than that amount.  The other money you’re referring is national TV money which is additional to what each team takes in locally or regionally.

[Look at Ray Ray Run]

No.

[caulfield12]

4 hours ago, WhiteSox2023 said:

All MLB teams receive $200+ million a year through revenue sharing.  I believe caufield’s post above about the Pirates receiving only $100 million was off by an additional $100 million.

https://www.thetribune.ca/sports/mlb/

It would be very difficult for an MLB team to lose money overall, just local profits, which are composed of ticket sales, parking, concessions, etc.  So an owner just slashes payroll to cover these losses and milks revenue sharing dollars.

This is what Jerry’s strategy is now, starting with Hahn and now starting again with Getz.  If the team does actually develop some good young players again, I’m sure Jerry will approve a higher payroll again.  But just like last time, the Sox will never go the extra mile to bring in a star player and will wind up with underperforming B class free agents.

"As of recent agreements, each Major League Baseball (MLB) team receives an estimated annual payment of about **$100 million** from national broadcasting deals with MLB Network and Fox Sports. This payment comes from a combination of the national television rights fees that MLB negotiates with these networks, which are then distributed to the teams as part of their shared revenue model. The exact amount can vary based on the terms of the broadcasting contracts and any subsequent negotiations."

So it's about $200 million just pooling the two together...not including game revenues as well as local media rights packages.

So the White Sox reporting a figure of under $300 million in revenues when they likely had $60 million still in 2023/24 for their RSN deal just doesn't make sense if you add in all the ticket sales, parking, concessions, corporate sponsorships/advertising as well as souvenir sales in-stadium.

 

Of course, that's the Pirates' example, as someone noted in the thread.

 

 

 

Of, course that $87 million profit was from 2017-18, when they were running one of the lowest payrolls in the game and attendance was "relatively" better as well as their RSN deal.

Edited Wednesday at 02:38 AM by caulfield12

[caulfield12]

Notably, Chicago and Oakland both have net "negative" scores from an MLB revenue sharing standpoint...Chicago 5th at +120 and Oakland at +111.

But Oakland had a "special cause" added into it to protect them due to their unique circumstances.

Edited Wednesday at 02:46 AM by caulfield12

[southsider2k5]

14 hours ago, Chicago White Sox said:

All teams definitely don’t receive $200M.  You’re confusing multiple concepts.  The $100M of local revenue sharing only benefits team that contribute less than that amount.  The other money you’re referring is national TV money which is additional to what each team takes in locally or regionally.

And here's the thing, even with the pool of money the teams receive, it isn't cheap to run an MLB franchise.  Take the White Sox numbers from  2024.  Their 2023 payroll number was $187 million according to the spring 2024 Forbes numbers.  Even with that number, the Sox had ANOTHER $129 million in operations costs NOT related to payroll, as even with revenue of $288 million, they lost $28 million on paper.  We all know the Sox operation is one of the smallest in baseball, so even if teams start with $200 million in revenue on day one, most teams are going to have more than $130 million in operations costs before they ever cut a payroll check.  Looking at revenue is a data point, but if you aren't looking at expenses too, you have no idea what you are actually looking at.  It's like looking at someone's house value and assuming they are a millionaire because their place is worth a million dollars.  It has nothing to do with their actual cash flow and liquidity.