Author Topic: Competitive Balance Tax  (Read 2448 times)

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Offline dcpatti

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Re: Competitive Balance Tax
« Reply #50: March 05, 2018, 10:23:19 AM »
What accounts for the apparent increase in GM IQ over the last decade? Ten years ago, Arrieta gets a massive deal from the Yankees.

Teams figured out that it’s really expensive to do a salary dump. That Kemp-AGonz trade a few months ago was nuts. Money right out the window. Nobody wants to get stuck holding the bag any more.  That’s a big part of what is currently crippling the Tigers.

Not sure you understand. Any additional luxury "tax" they pay to MLB rescues their income (or increase a loss). If they can write that loss off against other businesses they save some federal and state taxes. Also any of their other profitable business will be paying less in federal taxes this year and in the future because of the new tax law. So they can absorb a few million more in MLB competitive balance tax if they really want to.

And they probably will, for the right player on the right deal. Arrieta (the focus of the Forbes article) isn’t that guy, unless he’ll sign on a 2-year deal. The Forbes article mistakenly implies that the luxury tax is a primary reason for the Nats avoiding Arrieta, when really it’s years 3-6 of the contract that are killing the deal.