Blog Entry

Mutually Inclusive ?

Posted on: January 16, 2011 5:28 pm
Edited on: January 2, 2012 1:11 pm
 

How much is payroll a factor in making the playoffs in baseball.  You could focus on the Yankees who outspend every other team in baseball and by a ratio that can be 5-1.

For this entry, I went back nine years to 2003 which was the first year of the ‘Luxury Tax’.  The Luxury Tax is relevant to the topic as it is a threshold agreed upon by the players union and MLB as a point where those teams that spent over that threshold would pay a tax to the MLB (for the development of baseball and player benefits).  I looked for the number of teams in the top ten payrolls of each season that made the playoffs, and made the World Series.  In each season the spread from the NYY (#1) to the tenth team was an average of 2.1-1 an indication that even the tenth highest payroll was already at a major disadvantage.

In the nine seasons there were a combined total of seventy two playoff positions available,  Thirty eight (53%) of these went to teams in the top ten in payroll in those given years.   Of the teams that landed in the World Series in those nine years only six of the eighteen (373.3%) were teams in the top ten payroll bracket.  2009 was the only year that both World Series teams, the Phillies and the Yankees were top ten teams.   

Big spending teams tend to remain big spenders, the Yankees, Mets Red Sox, and Cubs are on the list for all nine years.  The Angels have made it eight times. 

Returning to the Luxury Tax, only four teams during the nine year history of this version of the tax have crossed that line in the sand, the Yankees every year, the Red Sox twice, Angels, and Tigers.   Of the eightAL components of the fall classic 50%, the Yankees and Red Sox twice each have gone to the World Series and then wrote a check to the MLB to pay the tax.  However going to the World Series is not the goal for the Yankees, winning it is.  In the past 12 years 2001- the Yankees have won one championship and have spent more than 2.5 Billion in payroll to do so.  That one championship was won in 2009 after the addition of Marl Teixeira, CC Sabathia and A.J. Burnett and 424 Million to the payroll.

A large payroll seems to give a team a better than even money chance to make the playoffs and a decent chance to reach the World Series.   Each of the other major sports in theUnited States, the NFL, NBA, and the NHL have a salary cap and equally important a salary floor.  MLB has a new CBA and while they don’t have and no one should have expected a salary cap there were some changes to the Luxury Tax.  The Red Sox who paid the tax at a percentage of 30% on salary over the 178 M threshold will move to the 40 % level while the Yankees will be taxed at 42.5 %.  The new CBA will allow a team that falls below the threshold (189 M in 2014) to reset its tax rate at 17.5 percent and also recover some of its revenue sharing cost.   For the Yankees with a 2011 payroll of 213 M and no relief insight that may not happen for many years.  The Red Sox who paid a tax of 3.4 M are far closer.  Their 2011 salary was 189 M and with the loss of Jonathan Papelbon and David Ortiz accepting arbitration may edge them close to the threshold.  Andrew Bailey and Ryan Sweeny obtained in a trade with the A’s will add less than 2 M to the 2012 payroll.   

 

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