Baseball Musings: Henry on Taxes

February 17, 2006

Henry on Taxes

John Henry comes out against high luxury taxes:

“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 other than in baseball. The disincentives are just as powerful for the lower revenue clubs as for the higher revenue clubs. The Red Sox have taken an aggressive stance in investing in all aspects of the franchise. But one has to wonder how many teams will do so when the financial risks often outweigh the potential financial benefits. “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. Looking ahead the Red Sox have to take it on faith that investment in baseball on behalf of our constituency -- the fans -- will make sense. But we cannot ignore the fact that it is their hard-earned dollars we are sending to other cities.”

I'm impressed on two levels. First, he sounds like Arthur Laffer. Second, Henry is the owner of the Red Sox because he's Bud's man. Revenue sharing is Bud's big baby. Even though Henry goes out of his way to praise Selig in the article, he clearly doesn't like throwing money at the Blue Jays. He clearly wants a change in the next agreement. It's great to finally see some difference of opinion between the owners and the commissioner, especially from the inner circle.

Selig should listen to the Red Sox owner. Henry doesn't strike me as a person who wants to do away with the concept of revenue sharing. He knows it helps the game. Henry might develop a more competitive system that rewards success rather than failure.

Posted by David Pinto at 08:22 AM | Management | TrackBack (0)

Comments

If we're going to have a better revenue-sharing system it strikes me that more transparency in ownership financials might make a nice place to start. I won't hold my breath.

Posted by: Tim at February 17, 2006 12:42 PM

Will the big market owners make up their minds? Are they upset with the Royals and Pirates pocketing revenue money while keeping payrolls below $40 million...or are they upset with the Blue Jays for using their $30 million check to directly add to the payroll? I guess maybe they're upset with both...because either alternative means both the Red Sox and Yankees have less certitude of their perennial post-season birthrights, which they've foolishly depended on for meeting the bottom line.

Good God, will Red Sox and Yankee fans ever wake up to the fact it is the existence of competition -- not their romanticized legends -- that attract interest in the sport? If you do not face equal and formidable competition from the Blue Jays and others, then you're asking for professional wrestling and the Harlem Globetrotters. Keep insisting on rolling back the luxury tax and increasing the revenue discrepancy, and you'll get your wish.

John Henry doesn't make those gazillions of dollars and draws sellout crowds because the Sox play a mean game of pepper. They need other teams to play real games and to spur national interest in the game. Support a system that provides hope to millions of other fans, and let's teams like the A's hold on to their well-ripened system, then you've got yourself a monumentally more popular, and richer, sport -- and a more meaningful Red Sox post-season legacy that doesn't require your thumb on the scale.

Posted by: Glen F at February 17, 2006 01:35 PM

Glen,

Did you read what John Henry said? He never said anything that I saw about doing away with revenue sharing, just that it needs some tweaking. I've read the same from other sources as well, so this isn't a Red Sox/Yankees not wanting to share thing at all. This is about some teams who are happy to be in last place, don't do much to change that fact, and they get paid for it to boot. The system needs to reward more then the effort to show up, then we can see a few more seats filled in places other then Yankee Stadium and Fenway Park.

Right now I think the current system is starting to hurt as many teams as it helps because of how some front offices play the system.

~Mark

Posted by: Mark at February 17, 2006 02:00 PM

It would be nice to see a hard salary cap in place so that other franchises would have more than a once in a generation shot at winning the World Series.

And the front offices that are "playing the system", are stuck betwen a rock and a hard place. NY/BOS inflate these salaries to secure the services of these star players, which forces KC/MIL/PITT to in turn pay an inflated prices for 2nd tier talent.

And all those additional draft picks that these teams receive for "compensation" in losing free agents (which didn't "pan out") is a joke. Sure KC/MIL/PITT have high draft picks, but 1.)chances are good they'll pass on the best available players because they won't sign anyway, and 2.)NY/BOS have 5-6 additional compensatory picks at the end of the round. Allow these teams the ability to trade these picks. Bud thinks he's doing the small market teams a favor by not allowing this to happen. (basically protecting the from themselves)

Posted by: Chris at February 17, 2006 03:51 PM

I agree on trading picks. Basically, any commodity teams possess should be tradable or sellable, without interference from the commissioner.

Posted by: David Pinto at February 17, 2006 04:16 PM