The latest episode of the MLB Trade Rumors Podcast is now live on Spotify, Apple Podcasts, and wherever you get your podcasts! Make sure you subscribe as well! You can also use the player at this link to listen, if you don’t use Spotify or Apple for podcasts.
This week, host Darragh McDonald is joined by Tim Dierkes of MLB Trade Rumors to discuss…
- Tim’s recent post looking at MLB’s economics and issues of parity (1:20)
- The possibility of a salary cap coming into existence at some point in the future (5:25)
- Comparing the salary cap path to alterations to the current revenue sharing system (8:40)
- The public relations battle with fans knowing all about players and their salaries but not necessarily knowing so much about the owners and their finances (17:35)
- Is there any hope of the owners working out some new revenue sharing arrangement? (20:45)
- Are deferrals a massive problem or is the Shohei Ohtani deal just an extreme outlier that had led to increased angst? (26:50)
- What kind of compromise are we likely to get in the next collective bargaining agreement? (32:45)
- The Yankees re-signing Cody Bellinger (37:35)
- The Mets acquiring Freddy Peralta from the Brewers and Luis Robert Jr. from the White Sox (47:20)
- The Brewers‘ end of the Peralta trade (53:20)
- The White Sox‘ end of the Robert deal (56:15)
- The Rangers sending five prospects to the Nationals to acquire MacKenzie Gore (1:02:00)
Check out our past episodes!
- What The Tucker And Bichette Contracts Mean For Baseball – Also, Nolan Arenado And Ranger Suarez – listen here
- The Cubs Land Cabrera And Bregman, Remaining Free Agents, And Skubal’s Arbitration Filing – listen here
- Contracts For Imai And Okamoto, And Thoughts On The Pirates And Giants – listen here
The podcast intro and outro song “So Long” is provided courtesy of the band Showoff. Check out their Facebook page here!
Photo courtesy of Michael McLoone, Imagn Images
Without the square root of negative one it’s a party.
“ The public relations battle with fans knowing all about players and their salaries but not necessarily knowing so much about the owners and their finances”
Not every owner can defer 2.2 billion dollars, lower their cbt tax hit from 500-600 million to 300 million. One team having 10 of the top 30 most deferrals on contracts is just absurd That’s it’s. Thats the problem.
It’s a simple fix that if they don’t have a salary cap at a minimum they must have a floor of $100 million minimum and tax any deferred money at 110% based on total dollars of contract and that all but ends the deferred crap cause no benefit. This circumvents the taxes a player pays especially in Ohtani’s case when he goes back to Japan screwing the US of $697 million tax free when retired! Most important the tax penalty for 3rd time offenders should increase to 150% and a loss of their top 3 draft picks for that following season and install an international draft similar to current US draft based on record. This all assures any international player who wants to come to US regardless if they are a free agent must enter the draft and can no longer choose their team especially Japanese players always selecting Dodgers. This will definitely eliminate the issues and add more balance to clubs trying to compete
Id argue an even simpler fix is capping deferrals at 10% of first cbt threshold
Anthony, you hit on something you didnt intend to:
These new stadium deals are funded with expectations of certain economic impact. Those deferred salaries, they no longer pay the income taxes to those states. Honestly, im not sure when payroll tax on deferred income occurs, if it follows the same speculative rule as income tax.
But over a 25-30 year stadium lifespan, were talking potentially hundreds of millions, even into billion level of contract deferalls if the trend continues.
That if you lose that billion in taxable revenue, youre talking real losses of hundreds of millions in tax revenue.
I understand most bonds are underwritten by anticipated lease payments, hotel taxes, rental car taxes, more concrete and predictable revenue streams.
But the tax base losses are a real thing, when the state and municipality pay the upkeep on these stadiums or the loss of using both the resources and prime realestate for other ventures with a better return, and earlier.
Yeah this cba negotiation is not going to be about being pro-player or pro-owner as a fan. I strictly want them to come to some sort of agreement that is pro-fan. I couldn’t care less which side gives up concessions to make the game more even across the board. The way baseball is currently going is not good for the vast majority of markets in the game.
jd – Until MLB stops generating record-breaking revenue all the time, nothing is broken.
$10.7B 2019
$$10.8B 2022
$11B 2023
$12.1B 2024
Fever:
Climbing revenue doesnt mean the system isnt rotten at its core and beginning to collapse from within.
Ponzi schemes can be making their payouts while their foundation and exponential growth have slowed to a point projections show the future is at serious risk.
A tree can have nice leaves and a bumper crop of apples but be rotted hollow waiting to collapse.
Don’t confuse extracting every drop of untapped income with not having serious issues of losing future generations of fans and becoming irrelevant
GaSox – As you probably already know, I’m right with you in disliking the way MLB has been run since the last real commissioner (Fay Vincent) left. But I don’t see anything that indicates losing future generations of fans.
MLB is more profitable every year because more and more they are catering to various groups of people including younger generations, gamblers, and fans in other countries such as Japan.
Think about it ….
Younger generations are generally impatient, have shorter attention spans and don’t like much of anything that is “too long”. So what did MLB do? Ghost Runner, Pitch Clock, mound visit limits, and even more discussions of ways to shorten the games. A shorter regular season will probably be coming eventually as well.
And then there’s gambling. What better way to get viewers than get into bed with sports betting, which means all the gamblers who aren’t even baseball fans will be watching games to see if they will be winning money.
As long as MLB has the baseball antitrust exemption, there will never be true competition for baseball fans.
It’s really no different than Red Sox Nation disliking what Sox ownership/management has become. The choice is either continue to watch and root for the team no matter what, or go without baseball in our lives.
You and I choose Door #1, and so does most of Red Sox Nation.
Fever, a perfect comparison i recently made was the media model beong adopted…
Now, we can all agree the fact MLB has roughly 10x the games of the NFL puts less premium on the regular season, and, makes it easier to spread around.
But look at the post season.
NFL had one largely irrelevant wildcard came.on prime video. Aside from that, *EVERY* post season game was.and will be carried by local broadcast affiliates, no paywall keeping you from seeing all the other wild cards, all the divisional, all the championship, even the superbowl.
MLB took the opposite approach. All the wild card games require one streaming contract. Then, if youre an NL fan, every NLDS, NLCS game, hidden behind a paywall. With another streaming contract. And if youre an AL fan, its *slightly* better. I say slightly because while Fox owns the ALDS, ALCS, and WS rights, they’ve put those 3 dirty letters alongside – FS1. If other sporting events and series are any guide, certain contests will quite possibly be behind a pay wall with FS1 subscription required.
Many of us at MLBTR are more highly educated, coming from more well off backgrounds – and NOT reflecting the broad crossection of America. Its VERY hard to be an actual fan of MLB compared to other leagues, and, follow your teams to actually see the games without spending $$$$ compared to the alternatives.
And with the financial pressures real America faces, outside the first world problems, spending $300 or $500 a season just to watch the games…
Kids arent following like they used to. Their parents cant waste, yes, waste, the money to buy all these fractured plans so the kid can watch the important game or form connections.
Don’t confuse prop betting thay doesnt require watching the game, but, generates revenue, with growing a fan base.
As for door 1 and door 2 you describe, unfortunately, as i question time remaining and how id wish to have spent it if things dont go my way….Im no longer a door 1 guy. They spend the resources, they put on a product *worth* my time and attention, I’ll watch. But, no, im not longer going to watch a loser in the hopes of seeing the growth of some future gem by the time Henry decides to be willing to spend.
Luckily, theres enough of a good core currently to be woeth watching. But if we were in 2019-2024 all over again? Id do something other than MLB with my time waiting for improvement.
@GASoxFan
With your Ponzi scheme analogy, who are the victims here? The minority shareholders who don’t do their own due diligence of the company’s books? Revenue growth and rising attendance means demand for the product exists. MLB also has a Debt Service Rule to ensure that teams remain solvent. If one team in this monopoly collapses, the entire league suffers.
YBC – That’s exactly why MLB took over the Expos, they were averaging less than 10K per game and were in serious financial trouble.
Everyone seems to be concentrating on owners vs players in this upcoming lockout situation. Maybe even the bigger battles will be large markets teams vs smaller market teams. Whether it’s a salary cap or stiffer penalties for going over thresholds, revenue sharing, etc. the battles will get ugly. And btw..$100mm cap floor ain’t gonna cut it…gotta be north of that. I don’t see the salary cap/floor thing happening. Much stiffer penalties will be the compromise… probably around June of next year…in time for a half season anyway.
Outfield – It won’t be large market vs small market. People tend to think teams are competitors …. but they are only on the field, off the field they are partners.
Why would small market teams want to make big market teams less profitable? Not one single team would choose less revenue sharing or smaller crowds when teams like the Dodgers, Yankees, Mets, Cubs, Red Sox etc come to town.
Think about it ….. small market teams own a business in which they are guaranteed to be revenue sharing recipients if they don’t generate much revenue. Who WOULDN’T want to own a business like that?
This is what I had mentioned previously…there are three battles going on…owners versus players, obviously, but also owners versus owners (I.e. Reinsdorf v Cohen), players versus players (the battle within the union is real).
No one is taking into concern, MLb versus ball park fans, cities and states versus owners, and I doubt the new CBA will.
Yeah, the problem though is what is good for which fans? My father had a limited income but still could afford to take me and my brothers and sisters to 30-40 MLB games per year. I make 15 times what he did and yet struggle to afford 15-20 games per year. Select fans might still be generating income for the league, but it’s not as broad a fanbase as in the past and I think this is hurting baseball.
Brew – Most, if not all, teams have affordable tickets. It’s like anything, if you can’t afford the best then you can still afford it but you just can’t have the best.
Look at Fenway, sure prices for good seats and for weekend games and games against the Yanks etc are outrageous. But you can get really inexpensive RF corner seats or bleacher seats. You can get really inexpensive box seats for April and May weeknight games, etc.
The reason you can’t afford the good seats or in-demand games is because there’s more demand, primarily due to corporations.
And if by saying “can’t afford” you’re including parking and concessions, do what I do …. park a few blocks away, bring bottled water and snacks into the park, and don’t buy any concessions.
Hey Fever. Fair point and good advice to anyone. We have field level season tickets that are quite pricey and have escalated 8x over the past 20 years. We do what we can, take the trolley, don’t get carried away at concessions at the games, etc….just to save a little. And we join friends and sit in the cheap seats now and then while listing our season tics on Stubhub..
But I stand by my general message. Even the cheap seats are $30-$40, which is about 5 times what they were 20 years ago. That’s an increase about 3 times the rate of inflation.
Brew – Your ticket prices are the result of ridiculous inflation and also team success. Making the postseason 7 of the past 8 years will naturally drive up fan interest.
Believe me, nobody is more unhappy about overall prices than I.
I just made a plain copy of my housekey, $5 …. it was only $1 before Covid.
I called for a price to replace one car headlight bulb, service only as I already have the bulb (I don’t have the tools to get to the bulb)…… $54
I stopped using StubHub years ago because of the fees. Last time I checked it was 15% Seller Fees and 40% Buyer Fees …. no thank you.
Not caring about which side gives up concessions is the most intelligent thing I’ve read on here in a long time.
The fans are simply NOT part of these negatiations at all. So expecting a pro-fan result is silliness. Players and owners both only say something is pro-fan if it helps their own side. Nobody involved in this is even remotely pro-fan.
I liked this podcast because Dierkes is correct on both deferrals (they don’t generally matter unless they are Ohtani-level crazy) and on cap issues in general. The problem isn’t unequal spending or silly contracts for stars. The problem is massively unequal revenue amongst the owners, combined with not-enough revenue sharing. I cannot fathom why the owners want the players to solve this problem for them.
The solution is simple – raise revenue sharing levels to the point that the Dodgers, Yankees, Red Sox, etc. don’t have such a massive advantage. And while you are at it, impose severe penalties on any teams that don’t invest most of their revenue-sharing windfalls in their players.
Many good points, but in general deferrals are largely irrelevant. If the Dodgers weren’t paying Ohtani $680m in deferrals they’d have signed him for 10 years in the $440m to $460m range, or since he’s signed through his age 38 season they would have agreed on a 12 or 13 year deal and lowered the AAV, or signed him for 10 years plus some easy to meet vesting options the last few years, using whatever games MLB allows at the butt end of a player’s career.
Drop – FYI the only reason player salaries are revealed is because the players union forced it.
Most non-athletes like us who are not in a union work for employers that do not reveal the salaries of our coworkers. That’s because if we know a coworker is making more than us, we would demand an increase.
DroppedBallFour
Not every owner can defer 2.2 billion dollars,
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No. Not every owner can afford to pay $2.2B.
But every owner can afford to defer 100% of the team salary. That’s straightforward math. If you can afford to pay $100k for a car, then you can afford to pay $100k next year.
@Joe
Do you even understand how deferred money work? The payout to the player is deferred but the team has to fund present day value of that money into an escrow account immediately. So as am example, if the Pirates want to have a $300 mil payroll with 100% of it being deferred then would have to immediately deposit the present day equivalent of $190 mil IMMEDIATELY. Then, if they wish to add more salary for the next group of guys they’d have to find that money elsewhere. If you’re the Dodgers owners or the Mets that’s not a problem. If your an owner worth $2 or $3 billion then that’s dead capital that earns nothing for you for the next 10 years. So it’s not that simple. In the case of the Dodgers vs the Yanks for an example. Dodgers have $1 bil in deferred contracts. The main owner of the Dodgers is worth $12 bil. The main owner of the Yanks, Hal Steinbrenner, is worth about $3 billion. But Walters isn’t taking that $1 billion from his own personal piggy bank, nor from baseball related revenue. He’s loaning it from the Guggenheim Partners firm that manages $300 billion in funds. Hal can’t do that. He would have to significantly dip into his personal money and that would sit in an account that won’t earn HIM anything for the next 10 years. That’s an absurd ask that not even his father would consider. So if that’s a difficulty for the most valued team in baseball then how much more impossible would it be for the Pirates (owner worth$1.6 bill) who’s personal income comes largely from the team’s baseball revenue and nothing else really aside from a ski resort and newspaper?
if the Pirates want to have a $300 mil payroll with 100% of it being deferred then would have to immediately deposit the present day equivalent of $190 mil IMMEDIATELY.
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1-Show me the part of the CBA that says that. I’ve heard that before, but haven’t seen it in the CBA.
2-Could Nutting not borrow against the value of the team?
I got cut off in the middle of an edit. The $300M analogy doesn’t work. The Pirates have a $95M in real salary. Assuming they have the $95M in cash, with which to pay those salaries, then they have $95M to put in a segregated account.
Same with everyone and everything. If you have $100k in cash for a car, you can put that $100k in an interest-bearing account. If you have $2B in cash to buy the Pirates, then you have $2B that you can defer.
1-you should be able to find that info in the comments of any of the articles and I bet it is in the original Shohei signing article itself. There have been a ton of very interesting depth and informative conversations.
2-Yes he can borrow but the amount he borrows is limited by MLB, they limit the amount of debt to income/assets teams can take on. Padres had this issue a year or so back.
WadeBoggsWildRide
1-you should be able to find that info in the comments of any of the articles
=========================
But I haven’t, which is why I asked the question. I read the CBA for everything related to deferrals and came up blank. I found a lot, but nothing related to deferred escrow money.
And there is a reason I ask. If I am deferring $10M of your salary, being discounted at say 4.5%, then what is the point of putting it into an account earning 4.5%? The only reason to defer at 4.5% is if I think I can do better than 4.5%.
That’s reasonable.
I am fairly sure they have to put the present value of the deferred money into an interest bearing account, knowing the interest accrued will meet the amount owed when paid. So they are basically getting a discount on the salary. For Ohtani is is significant because that is only $45M or so instead of $70M. The discount is even better because that probably doesn’t have to come from the same pool of money normal salary does. It frees up their current budget without necessarily hurting future budget. I would be interested in seeing if Ohtani’s salary in 10 years when he is no longer playing is going to be counted against their salary numbers. It should be which could be rough.
Yes they should be able to beat 4.5% and they keep the difference. That isn’t very significant though because that money invested anywhere else wouldn’t be losing 4.5%. It is just icing on the cake. The real investment is Ohtani as he is a money printing machine.
@joe
The Pirates would never defer their entire payroll because unlike the Dodgers’ billionaire Guggenheim ownership group, Pittsburgh operates on tight cash flow constraints where every dollar matters *today*. Deferring salaries means the Pirates would need to set aside massive amounts of cash reserves or escrow funds to guarantee future payments—money they simply don’t have sitting idle. More critically, their roster only has about 3 players earning over $10-15M annually—the rest are making far less, and these mid-tier guys earning $3-8M need their money *now* to secure their families’ futures during short career windows. A 28-year-old reliever making $4M isn’t interested in collecting $400K annually from age 38-47 when he could invest that money himself today, especially when he’s never getting a second big contract. Even if Pittsburgh somehow convinced players to defer everything for one season to create temporary payroll flexibility, what happens in years 2-10 when those deferred obligations start stacking? They can’t operate year-to-year like the Dodgers—they’d quickly owe deferred payments to multiple roster generations simultaneously while still needing to field a competitive team, creating an impossible financial spiral that would collapse their ability to spend on current talent. The Dodgers can juggle $1 billion in deferred obligations because their ownership prints money through hedge fund returns that dwarf baseball revenue, but Pittsburgh’s roster is overwhelmingly filled with players earning their only significant payday, and ownership lacks both the financial sophistication and capital reserves to make large-scale deferral structures remotely feasible.
Article XVI of the MLB Collective Bargaining Agreement states:
“Deferred compensation obligations incurred in a Contract executed on or after September 30, 2002 must be fully funded by the Club, in an amount equal to the present value of the total deferred compensation obligation” (Phelps Dunbar LLP)
You exaggerated the analogy too much. They are paying $100 for the car later, while having to pay a portion of that money, say $70, up front and letting it accrue interest until it reaches that $100.
It is a loan so the car example is apt. The longer you defer it the better for the buyer.
But it doesn’t matter what you buy. If you have $100k in your pocket, you can give it to the owner, or you can deposit it into a separate account.
@joe
Your acting like the Pirates can dictate top their players how their salaries will be paid. First off, most of the players having their money deferred are the top level guys who are FA meaning they’ve been thru their 6 years of control including 3 years of arbitration. Most of these guys have made $10+ milling already and are now signing big money contracts where SOME, not all the money is being deferred. In the case of the top guys like Ohtani, they make a large sum of money aside from their salary in which they can live the kind of love they want to live. But if you’re like most of the Pirates players you’re NOT earning enough money to have it deferred 10 years out and still provide for your family today. If you are making$4 mil a year so you want to live of nothing or like one of us “brookies” for the next 10 years, waiting for your deferals to be paid?
You have to have money to defer money cause you have to put the deferred money into what is essentially a savings account every year.
The dodgers for instance I think in 2027 defer over 100+ mill that year. That represents anywhere between 50% -100% of 17, SEVENTEEN, teams projected payroll for 2026
You’re telling me the athletics pirates Rockies even Dbacks mariners orioles royals can
1. Increase spending by however much the lower aav hits increase payroll obligations
2. Pay cbt taxes on overages, if they’re deferring 2.2 bill they’ll be a tax paying team for sure.
3. Pay an extra 100 mill into a savings account
Really? Please do tell us where you expect those teams to come up with that kind of extra money in addition to the current payroll they’re already running.
Cause I’d like to think if team had pay extra in taxes money or pay 100 mil into a saving account cause deferrals money they’d spend more than they already do
DroppedBallFour
You have to have money to defer money cause you have to put the deferred money into what is essentially a savings account every year.
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My assumption is that, if the Pirates have $10M to pay me, then they can take the same $10M and put it in a bank account. They already have to have the money.
@joe
Why would that player do that? If he can get $10 mil per year, why would he agree to wait 10 years from now? What is he supposed to live of of, in the case of the kind of players (age, future earning ability, past earning) that most of these small market teams have? Ramirez has earned $97 million already. Nost if the Pirates, Marlins, etc haven’t. They need their money liquid and they need it now.
So, your assumption is a player defers his entire salary 10 years into the future and earns nothing? Sooooooo how’s he suppose to afford things like mortgage cars kids?!
Hehe borrow money at a lower rate than what your taxes would be and you are coming out on top!
True parity is structurally impossible without procedural modifications. A system where both ownership and franchise location are fluid could be employed. Failure to achieve a winning record over a period of time or an acceptable won loss percentage over a period would result in the removal of ownership. Failure to reasonably fill a stadium or have sufficient viewership would result in removal of the franchise from its location. Short term there might be some upheaval but longer term there could be stabilization and even a degree of parity.
@why
Cities and teams make huge investments into bringing a team in to a city. Some of those require 30 year commitments. You can’t just pull teams out like that without huge economic ramifications.
And yet teams do move, So it can happen.
@why
And how often did that happen? Who was the last team to move NOT including the A’s who were, for them most part, a proud and successful franchise. Before they it was the Expos, Nationals, Senators and Rangers over the last 55 years.
@whyhayzee I would dearly like to see that kind of creativity broadly applied.
Little is more absurd than allowing a few mega-rich to own sports teams when there isn’t much in the US that’s more of a community enterprise than a sports team.
If you want genuine, abiding fan interest across all 30 MLB teams, have teams owned by the public in the relevant city or state, with voting shares allowing for fans to operate as GMs—or through GMs as de facto advisors whose votes to a meaningful degree must be taken into account.
You can also get parity any time just by calculating / estimating the total salary pool (say, as a percentage of total revenue) and allotting every team the same amount of “payroll dollars” to spend that offseason.
Make it so that attendance and tv dollars all go to the relevant team, or work out instead profit-sharing that keeps everyone in the game while rewarding good performance. Or you can settle on percentages in various areas that reward good stewardship while accounting for expenses in NYC versus Arlington.
And so on.
Failure to achieve a winning record over a period of time
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That can’t happen. Over any given period of time, the entire league will play .500. Even if one considers .500 a winning record, the odds of everyone having a .500 record would require us to invent new numbers.
Failure to reasonably fill a stadium or have sufficient viewership would result in removal of the franchise from its location.
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Impossible. We have a fair amount of baseball cities that are not particularly well-to-do, with smaller populations. Punishing them would be the worst of all possible outcomes.
I have no problem whatsoever with your discussion on revenue disparities and how negotiations in the next CBA will focus on addressing that, including a salary cap/floor, adjusting penalties on teams that exceed the cap and also those teams that refuse to spend while pocketing revenue from the CBT, etc.
I do feel the need to call out the absolutely uniformed 6 minute discussion on deferrals. Tim you should be embarrassed by this segment as I know you know better. Darragh’s ignorance and passive aggressive commentary is nothing new and we have come to expect it; but, Tim you know better. This six minute blather of animated ignorance so typical of the coverage of this issue that has perpetuated the ignorant obsession so many fans (and commenters on this site) have over deferrals.
Once again, we are subjected to a lack of honest reporting on deferrals. No mention that deferrals are not a way to avoid CBT calculations, that most other teams use deferrals and many players actually prefer some deferrals as a way of managing tax liability, that the reasons Ohtani is an outlier are because of his extraordinary tax liability AND his extra extraordinary current revenue outside of his salary AND that his agent purposely misled the public about Shohei’s compensation package ($700 m inflated price tag in order to embellish the success of negotiating efforts).
Aside from acknowledging (covering your ignorance with a fig leaf) that you are “not an expert” or “you really don’t understand finance”, you and Darragh go on to spend 6 minutes perpetuating the existence of a problem that has NOTHING to do with the larger, important issue of revenue inequity, the unwillingness of team’s to spend, the differing motives of owners and players in CBA negotiations, the likelihood of a cap/floor being agreed to vs other options such as revenue sharing, etc. Tim deferrals are a nothing burger and you know it.
What makes this segment even more disgusting is that you have tried to have it both ways Tim. To your credit, you have published the work of people who do know finance and understand this issue. Unfortunately, you have also, in the past, defended your writers and this site for not engaging in the kind of sensationalist rhetoric we see elsewhere.
Shame on you both for this dishonesty.
Yikes…I think on the whole, we’ve talked and written extensively about where we think deferrals fit into this picture.
I wrote this after Ohtani signed:
mlbtraderumors.com/2023/12/why-shohei-ohtanis-cont…
And I know Steve talks all the time about other teams deferring money.
I haven’t listened to this pod since doing it yesterday, but I think I summed up my thoughts pretty well. It’s fine that you think deferrals are a nothing burger, but generally when a lot of fans are concerned about something, we’ll talk about it.
Sorry Tim, your response seems fairly weak to me. To hide behind “when fans are concerned about something, we’ll talk about” is shallow at best.
I’m certainly not suggesting that you don’t talk about it. But, how about talking about it with facts rather than innuendo and passive aggressive perpetuation of ignorant understandings many fans have about the issue? Just be consistent as a site. You’re the editor. You have a responsibility to make sure that your writers, when talking about an issue, share the facts before offering up questions and opinions that are rooted in ignorance and scapegoating. You are better than this.
Deferrals have been a part of my salary for my entire 46 year professional career. As soon as possible, I put the maximum percent of my salary into a savings account while at the same time the government was taking another piece for social security. In fact, I was even doing this when I had my paper route and lawn mowing business starting at age 12. That helped pay for college. I have never accepted 100% of my salary from the beginning. So I’m perfectly happy with deferrals. They’re not a nothing burger, heck they might even be filet mignon.
Yep, really, there’s just one player whose deferrals stand out and perhaps one team operating a little differently than the others. Mutual options (they are never exercised) are another means of deferred income, so lots of teams are doing deferrals to some level or another.
Also, I suspect there would be a ton of backlash if foreign-born players deferred money to avoid paying state or local taxes. Many have written on that aspect of Ohtani’s deferrals.
Just like at your work, MLB just needs to get everyone on the same page with deferrals.
What “facts” are you talking about ?
1. Deferrals do circumvent the cbt. It’s not avoidance its reduction. Deferring money reducing cbt calculations and cbt penalties
Simple question: does deferring money change the aav of a contract?
The answer is yes.
Ohtani agreed to the largest contract ever 10 years 700 mill, an aav of 70 mill
By deferring money into the future which is worth less then dodgers dropped the present day value of the contract to 10 years 460 mill or 46 mill aav.
So yes deferring money changes a contracts aav and changes the cbt tax hit
2. Even without the Ohtani deferral dodgers still have
120mill deferred in Betts
66 mill deferred in Snell
57 mill deferred in Freeman
50 mill deferred in Will Smitn C
30 mill deferred in Tucker
25 mill deferred in Edman
23.5 mill deferred in Teoscar Hernandez
21 mil deferred in Scott
13.5 mill deferred in Diaz
Of the most deferrals ever offered in the entirety of the sport dodgers own 10 of the top 27
Mets have 3 players deferred contracts at a whopping 100 mill
Blue jays have 2 players at a whopping 121 mill
With Ohtani the Dodgers have deferred over 1 billion
Without Ohtani Dodgers have still deferred nearly 300 mill almost triple the Mets and Blue Jays respectively
Fans have every right to say what they want about Dodgers abusing the deferral system to an absurd level, the impact it’s having on their interest on the game, and the ramifications being projected
You carrying water for the LA deferrals is such a you move NorCablue
Instead of listening to any counter points regarding use of deferrals you stick your fingers in your ears like a toddler and throw a tantrum when someone has opinion that differs from yours. Grow up.
Facts. Great post. Nice work
“This six minute blather of animated ignorance”
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That was beautiful. I’m definitely stealing it.
As soon as possible, I put the maximum percent of my salary into a savings account
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This is a bit underrated. For those that can afford to, they should get their 401k money into the system earlier in the year rather than later in the year. As long as you don’t screw around with any possible company matches.
And it can be helpful if your employment status is tenuous. If you think your employer might relocate in September, max out your contributions by August. Assuming you can afford it.
Fans have every right to say what they want about Dodgers abusing the deferral system
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But it is not abusing the system. You correctly point out that Ohtani’s real salary is $46M, because that is what it is worth right now. That Ohtani is effectively lending the LAD $40M+ a year, and getting interest on that money, has nothing to do with how much he is effectively receiving.
FWIW, if KC ran into a cash flow issue, and told the players that they would get a 10% bonus if they waited until 2027 for their salary, does that impact what their real salary is?
When you’re deferring billions of dollars, taking a 500-600 mill payroll and reducing it to 300 mill for cbt purposes, and have 10 most deferrals ever offered in the entire history of baseball yes you’re abusing the deferral system .
Idc care if dodgers spend 500-600 mill on player salaries
I do care they aren’t taxed on 500-600 mill
I do care dodgers can offer someone like Tucker an outrageous amount at 60 aav or Ohtani at 70 aav but use deferrals to lower their payroll obligations to said player and turn around and use the savings to sign more players
Yes dodgers are abusing the deferral system and any attempt to say they’re not isn’t dealing in facts
@Joe
And those KC players who are NOT to earning guys would support their families and live a comfortable loudly how over the next 10 years? How are they paying their agents, their mortgage, etc? You’re missing a lot of details here.
oh my god the salt
won’t anyone think of the smol bean dodgers
I’ve yet to hear anybody make an argument that deferrals improve the sport. Just get rid of them and the whole thing becomes a lot cleaner. The big revenue teams will always be able to leverage this tool better than the small ones PERIOD.
The big revenue teams will always be able to leverage this tool better than the small ones PERIOD.
======================
This, on the heels of Cleveland’s large deferrals on Ramirez?
Well yeah, many teams have deferred money over the years. Ramirez is one player with what $70 mil deferred? Which frees up a little space in Clevelands meager budget. Maybe they can squeeze some solid runs out of that situation which is great. However the point I’m making is that the Dodgers have over $1 billion in deferrals right now. That is something that Cleveland and most other teams could never dream of doing and it is a decisive competitive advantage.
@Joe
The critical factor is that as of 2025, Jose Ramirez has earned approximately $94 million throughout his MLB career . Ramirez is financially secure—he’s already made generational wealth. This allows him to accept deferrals without suffering lifestyle impact, especially since he still gets $15M annually plus endorsement income.
The Guardians’ roster reality makes this impossible to replicate broadly: Ramirez is the only player on the team over the next 3 years earning more than $7M annually. Most of the roster is making under $5M, with many still in arbitration years. These players are pre-arbitration guys making league minimum or young arbitration-eligible players earning $2-5M—this is their chance to secure financial stability before injury or performance decline ends their careers. A 26-year-old arbitration player making $3M who hasn’t earned his big payday yet simply won’t defer half his salary for a decade when he hasn’t achieved financial security and may never get another significant contract. Ramirez essentially gave Cleveland a hometown discount by agreeing to massive deferrals because he’s already wealthy from $94M in career earnings, a luxury virtually no one else on Cleveland’s roster—or most mid-market rosters—possesses.
I think all of the analysis I’m seeing on here is kind of unnecessary and beside the point. Again I ask: WHY DO WE WANT OR NEED DEFERRALS IN THE FIRST PLACE?! What purpose do they serve ultimately? Yes, the Guardians were able to use it to potentially put a slightly better team on the field for the next few years, but what does that matter when they face off against the Dodgers? They’re still at a huge disadvantage. Furthermore, the Guardians wouldn’t need to use deferrals if they didn’t exist in the world of rich and poor teams that is the MLB. The game is fundamentally unfair and deferrals are just an extension of that. They create payroll flexibility in the short term but that is proportional to a team’s financial firepower. So the Guardians can use it to get x amount of payroll flexibility and the Dodgers can use it to get 10x amount of payroll flexibility. It’s really that simple. From where I stand they just confuse and exacerbate the problem of competitive balance. Somebody tell me I’m wrong, and why.
Thank you for discussing this issue and exploring all angles. I have a few suggestions:
1. The assumption that the players will lose money under a cap-based system is unsupported. Cap models guarantee players a certain percentage of league revenue. That guaranteed percentage should equal or exceed the net amount of money currently going to player salaries. Moreover, this should be a pretty easy item to research–did the NFL, NBA, or NHL lose money when they moved to a cap-based CBA model?
2. Revenue sharing among teams is negotiated under the CBA. So, a majority of owners must agree to adjustments AND the players must agree to adjustments. Multiple reports from five years ago indicated that the MLBPA sought to reduce revenue sharing among teams. You’ve covered the MLBPA’s skepticism that some teams don’t use revenue-sharing money to fund better rosters.
3. There is a major benefit that cap-based systems bring compared to MLB’s current model: they align Owner and Player interests with growing their games. If you will look back over the last ten or so years, you will see that the NFL and NBA league revenues have grown faster than those in MLB.. In fact, the NBA has surpassed MLB over the last year in terms of league revenue. Under a cap-based model, owners and players are incentivized to listen to their fanbase and adjust their games accordingly. Team spending and CBAs are rarely discussed in other leagues.
Hopefully, these thoughts will prove useful as you continue to bring the best insight to this topic of any national journalist.
Thanks for the thoughts here.
On point 1 – if players didn’t make less money under a cap system, I don’t think caps would exist. I have been reading about the origination of the cap in the NBA, and it was definitely about keeping player salaries down.
Certainly there was/is the idea of the players sharing in the growth of the league. But I don’t think it is easily researched whether those groups of players “lost” money, because the only real comparison would be two alternate universes where they splinter off and one has a cap and one does not with other conditions the same.
With the capped sports, just the fact that there is a cap, and many teams spend up to it suggests that they would spend more if they could and therefore players would get more money. I’d venture to say NBA and NFL players each lost billions from their caps. The leagues have financial parity, and the players paid for it.
On point 2, you’re right, I remember finding it odd that the MLBPA wanted less revenue sharing. Eventually I learned that that was because MLB was rewarding teams that stayed under the CBT with revenue sharing money, which I think has ended.
Particularly if rules and penalties can be put in place on the existing soft floor, I’d think the MLBPA would want as much revenue sharing as possible.
On point 3 – are you suggesting NBA and NFL players have done something to grow the game under a capped system that they otherwise would not have done? What would that be?
Owners are already incentivized to grow their own revenue. This is cynical but they’re only incentivized to listen to fans to the extent that it affects their revenue.
I am not qualified to say exactly why NBA/NFL revenue now exceeds that of MLB, though I have some theories. One of them is that the salary cap causes league revenue to grow. You could say that helps players, unless it grows faster for owners than it does players.
“I am not qualified to say exactly why NBA/NFL revenue now exceeds that of MLB, though I have some theories. One of them is that the salary cap causes league revenue to grow. You could say that helps players, unless it grows faster for owners than it does players.”
CBAs using the cap model have three components: (1) a salary cap, (2) a salary floor, (3) a guaranteed percentage of revenue to players, usually within a band (e.g., 48 percent min, 49 percent max). Players absolutely benefit when league revenues grow.
“The only real comparison would be two alternate universes where they splinter off, and one has a cap and one does not, with other conditions the same.”
Also, we can explore the two alternate universes by evaluating MLB’s model against the other three pro sports leagues. The fact is, the others are growing faster, and their players with a guaranteed percentage of revenue are enjoying faster salary growth than MLB players. In labor negotiations, what is happening at other companies within the same industry is the standard used to evaluate proposals.
“On point 3 – are you suggesting NBA and NFL players have done something to grow the game under a capped system that they otherwise would not have done? What would that be?”
What they’ve done is create leagues where teams win or lose based on making good moves or bad moves, not because one team has more resources than others..As a result, there is far more national TV revenue. Take a look at the NBA’s massive TV contract. Would that have been possible if the Lakers and Knicks dominated their respective Conferences? Market size does predict success in either league as it does in MLB, and that matters when negotiating national TV contracts, which are the biggest drivers of league revenue across all pro sports leagues.
Again, don’t read any of these critiques as negative. You are doing the best job covering this subject, and I believe you are making every effort to do so fairly. Like many aspects of our economy, sports journalism has become pretty specialized. One of the problems with this discussion is that there are few journalists who speak to players in other leagues to get their views on labor. I get it, there are only 24 hours in a day, but it’s harder than ever to objectively make a case that baseball players are doing better under their current system than they would under a cap model.
Is your theory that a cap actually would benefit players, but the MLBPA doesn’t understand that? I find that hard to believe.
On the percentage of revenue point – I am still early in my research, but I’m pretty sure the capped leagues have chipped away at the players’ percentages over the years.
It’s true that you could determine the exact percentage of revenue players are receiving and make that their cap percentage. But by no means can you guarantee that the percentage stays the same beyond that one CBA.
Additionally, the capped sports do not have guaranteed contracts. It’d be a huge loss for MLB players.
It is my limited understanding that both the NFL and NBA have their books more open to their unions and the public than the MLB. Any revenue sharing, salary floor or cap would necessitate the MLB to be less secretive. Salary caps would absolutely lower player income. If they didn’t the owners wouldn’t be proposing them.
“Is your theory that a cap actually would benefit players, but the MLBPA doesn’t understand that? I find that hard to believe.”
I’m saying, I want to see support for your statement that a Cap-based model would harm the players. I’m specifically pointing to the NBA’s CBA as one that appears to be more lucrative to its players than MLB’s. I understand that revenue-sharing is easier in the NFL as all games are covered by national TV contracts. The NBA cracked the nut on growing national TV revenue to the point that it overshadows local revenue. That’s the catalyst that propelled them past MLB in terms of revenue. However, I believe their outsized revenue growth is a byproduct of better competitive balance.
It’s also clear to me that there is a strong feeling within current MLBPA leadership that agreeing to a cap would be a slap in the face to the players and union leaders who went on strike to avoid one. I’m asking you as a national journalist to avoid making assumptions that the MLBPA has legitimate economic concerns with avoiding a cap. Show me the math–I don’t care which side wins. I just don’t want to have to read about competitive balance every time a team has a transaction, and as the follower of a small-market team, I’m ready to stop closely following my team if the issue isn’t addressed. Ultimately, fans fund the league. I’m ready to spend my money elsewhere.
The NFL players’ revenue share went up by one percentage point in the 2020 CBA from the 2011 CBA. My source is an NFLPA post from their website.
nflpa.com/posts/nfl-economics-101
This article by Sportico describes NBAPA wins of both an expanded definition of basketball-related revenue (BRI) by $250M and calculation changes that were likely to ensure NBA players get 51 percent of revenues throughout the current CBA (they are guaranteed 49% to 51%). The article notes they achieved 51% every year under the prior CBA except for the year affected by COVID.
sports.yahoo.com/nba-players-score-shared-revenue-…
Lastly, players in both the NBA and NFL can have guaranteed contracts. The use of incentives allows portions of MLB contracts to be non-guaranteed, as do option years. I agree that more MLB contracts are fully guaranteed, but so are most NBA contracts. I’ll also note that neither side, owners or players, benefits from having a high percentage of dead money in contracts. There should be near-universal agreement that the players actually playing deserve the lion’s share of payroll.
Thanks again for your interaction and thoughtful work on this subject. I appreciate it very much.
It has potential to lower player salaries but also has potential to raise them too
People seem to just look at the upper elite players but forget that Joe Blow during his pre arb and arb years would make more money with more revenue sharing
Yeah we may not see as many 40 50 60 mill aav contracts but we would certainly see an increase in lower player earnings compared to before which I’m fine with
Idc if Soto earned 400 mill 500 mill 600 mill
But Givem DaYacker earning a couple extra 100k on top of his pre arb salary I’m sure would be appreciated
I’m not worried about the guys signing lucrative life long contracts
I’m worried about guys who wash out earning as much as they can while they can
Tim – I hope everyone here reads this: “they’re only incentivized to listen to fans to the extent that it affects their revenue.”
Owners are running a business. The business would suffer if owners didn’t listen to fans (customers), because fans (customers) drive revenue.
I got bashed here for saying the Red Sox were forced to appease the fans by extending Devers. It didn’t take long to prove that was correct with last year’s events, as ownership couldn’t wait to get rid of him.
Same thing with Ranger, he should give Bregman a Rolex or new car because if Bregman had signed with the Sox then Ranger never would have. Red Sox Nation was livid the Sox hadn’t signed even one major league free agent up to that point, ownership had no choice but to give Ranger everything including no deferrals.
Spot-on correct. Everything starts with giving players a percentage of the gross. They refuse, and I honestly think the owners wouldn’t want to accept either, since I think revenue is growing faster than salaries.
Pitchers & Catchers report in two weeks, time to wrap the off season up.
“Why do the players have to bear the burden?” Framing it this way is discriminatory because players benefit — as opposed to just “stars” — collectively as evidenced by the salary cap/floors in the other three professional leagues.
I don’t see evidence that the players in the other leagues have benefited financially from the cap. Also don’t think non-stars appreciate non-guaranteed contracts.
Since 2021, the NFL salary cap has increased from $182M to $304M, and increase of 67%. The MLB salaries have increased by 32.7%, roughly half of the increase the NFL players received.
Common misconception: a salary cap means the PLAYERS bare the burden. Wrong! It means the Top 1% of players bare the burden, but the other 99% get more money. Based on Roster Resource numbers, the average payroll for 2026 across the 30 teams is $175 million but that is a skewed number as it goes from $69M to $386M. Are the Top 1% of player contracts on the teams in the bottom half? No, they are on the teams in the top half, in fact, the Top 10 teams. If you set the salary cap at the current average of $175M and all teams were required to be within 20% of that cap, the amount of total money spent on MLB players will be exactly the same. The difference: more players will make more money. Yes, the Top 1% will earn less because a team will not be able to hand out $30M contracts to 10 players, but more players will be able to earn more money, and those $30M contracts will still exists, does spread-out over different teams. This is what fans (who PAY for all this) want: the chance at having the best players.
Deck – Sorry you were given bad information.
Right away I noticed that when you said the Top 1% of player contracts are all on Top 10 payroll teams.
Trout has the 4th-largest contract right now, the Angels were 13th in team payroll last year.
Regardless, there is a trickle-down affect that the highest paid players have on their teammates. We see it all the time. My team put a halt on spending after the 2019 season because they had the highest payroll in MLB and couldn’t sign new free agents until the existing big dollar contracts expired or were traded. It is very, very common to go cheap after splurging, even the Mets did it last year after signing Soto.
I can think of quite a few non-star MLB players who would lose a lot of money if their contracts weren’t guaranteed. I don’t see why you’d give that up.
I think more likely is the stars would get really good contracts and everyone else would be left fighting for scraps from a finite pool of money.
Tim – Don’t look at deferrals as 10-year delays in payment with zero interest, then you’ll see why players would want to do it.
Getting back to Ohtani, it’s actually $44M getting deferred annually ($46M minus the $2M he’s receiving up front) at an interest rate of 4.5% compounded annually. After the 10 years the escrow balance is $68M for every year which, combined with the $2M annually he already received, comes to the $70M.
So the benefit is regardless of what happens with the fed interest rate over the next decade he is guaranteed to earn $240M in interest. On top of that, federal law states any salary deferred for at least a decade will be taxed based on where you reside at the time you collect, rather than where you “worked” or lived at the time you earned the salary. So Ohtani will make out really, really well between the interest income and tax savings.
The thing to remember, the Dodgers were never gonna pay him $70M annually up front. They were gonna pay him $46M annually if he didn’t agree to the deferrals. It’s only the $240M in interest that brings the total contract up to $700M.
@Fever
Ohtani’s money will not accrue interest. It’s not agreed to into his contract. He might save money in taxes friendly in what’s he lives when he cashed it in but that’s it. meanwhile? the Dodgers can and will benefit by using the money to invest thru Guggenheim Partners and earn the capital gains on it.
Knicks – The money that goes into escrow accrues interest at 4.5% compounded annually. That’s how you get from $44M to $68M.
If he doesn’t get interest on it, who does? And how then would he end up with $700M by the end of his contract?
Or maybe I should have simply put this link in. LOL
x.com/JoePompliano/status/1734665319438766104?lang…
@Fever
Shohei Ohtani’s $680 million in deferred compensation with the Los Angeles Dodgers is not accruing interest. The payments, deferred until 2034–2043, are paid without interest, meaning the nominal value of the deferred money does not increase over time.
Key details about the contract structure:
No-Interest Structure: Ohtani receives $2 million per year during the 10-year contract (2024–2033), with the remaining $680 million paid out over the following 10 years without interest.
@Fever
from Cots:
Shohei Ohtani rhp-dh
10 years/$700M (2024-33)
10 years/$700M (2024-33)
signed by LA Dodgers as a free agent 12/12/23
24-33: $70M annually, with $68M deferred each year
deferred money will be paid without interest in equal $68M installments each July 1 from 2034 to 2043
@Fever
I think ppl dint have a diem understanding of what the real dilemma is regarding the Dodgers and Mets vs the field. The Dodgers have $1 billion dollars of deferred money. There is nothing in the CNA that states that money has to come from baseball related revenue. The Dodgers can “borrow” that money from Guggenheim Partners transfer it to Guggenheim Sports, fund the deferred money into escrow and then have access to that money and do what? Invest it as they normally do by GP. As investment experts they will conservatively earn 7% or more ANNUALLY on that $1 billion until it’s due to be paid out. They pay out that $1 billion, and for specifically the $680 mil owed to Ohtani, interest free, and they get to pocket the capital gains for themselves which, in essence devalued the cost (or pays down) what they actually paid to Ohtani. In effect, they’re using deferred money as an invest tool. $1 billion at 7% annual returns over a 15 year period is about $2.8 billion. They will profit about$1.8 billion once you subtract the $1 billion owed to players. So That $1.8 billion more than covers the outlay to the deferred money and they member had to dip into their baseball related revenue. It’s not chess vs checkers, it’s a whole now game they the other owners can’t play.
Knicks – It’s just sloppy reporting by one source, not surprising.
Contract is valued at $46M AAV for a reason.
There’s zero chance the Dodgers are depositing $68M annually and not getting any interest on the deposits for the entire 10 years.
I’m thinking if the escrow amounts accrue more than 4.5% compounded annually, he doesn’t get the excess. That is most likely what it means by “without interest”.
Either way, Dodgers are depositing $44M and Ohtani is getting $68M. How you get from Point A to Point B is up to you. LOL
Knicks – Now that I agree with, Dodgers are probably going to earn more than 4.5% and pocket the difference.
@Fever
No Mandatory Account Type: The CBA does not mandate that the deferred funds be placed in a specifically named “interest-bearing” account, only that they are protected and managed as a liability on the team’s books.
@Fever
Dodgers are depositing $680 mil owed to Ohtani into escrow but they will use those funds as investment money which will be used via Guggenheim Partners and they will retain the annual gains and pay out the money to Ohtani as per the date agreed upon in his contract. Conservatively, they will likely earn at least 7% annually. Yes, masterful.
Knicks – I’m with you now.
Did you hear the new report that the Dodgers will pay $6B less in revenue sharing because of their bankruptcy. Yes, masterful indeed.
And if they don’t make 4.5% they have to pay the difference.
Shohei is not accruing interest on $68M.
The Dodgers are accruing interest on $44M.
Just semantics.
@Fever
My apologies. Let me clarify what I meant. The account the Dodgers are depositing the money DOES gain interest but it’s not interest above the $68 mil he’s due it’s interest that’ll get the $46 mil they deposit to $68 mil due 10 years later. The Dodgers are benefiting because they’re hedging that by using those funds in escrow they can invest and get a return far above the 4.5% interest rate and pocket the difference themselves because, at the end of the day, that’s what the Guggenheim Partners do best. They’re using player salaries to invest and earn capital gains them keep. But only they can pull money from a $350 billion fund and put towards $1 bil in deferred money. That’s like 0.33% of what they have at their disposal.
Knicks – No worries, that’s kinda what I wrote twice … or three times …. or four times. LOL
Yeah using other people’s money to make money is always a great idea.
So how can you like both the Knicks and the Cavs? isn’t that a conflict of interest or something? ;O)
Tim, One question I have is why can’t a salary cap system be in place that also keeps guaranteed money? I just don’t ever see the MLBPA giving up guaranteed contracts. As a player I would be willing to let the sport die before I gave that up.
a salary cap means the PLAYERS bare the burden.
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The phrase itself is meaningless, since we don’t know if there is even a “burden” to share. NFL players have done extraordinarily well by taking a %.
And not only that, by having owners and players sharing the pie, decisions are based on marginal revenue/marginal cost. Before revenue-sharing, players would’ve laughed at sacrificing their bodies for a 17th and 18th game, and rightfully so? Why risk getting hurt so that owners can get richer.
Now that the players get half of every dollar, they will will weigh their extra revenue versus their extra cost. They will add the 18th game, but they will check with their player reps to find out how to best structure the system.
That’s EXACTLY how this should work, even out here in the real world.
lengthy but please read….
The Real CBA Battle Nobody’s Talking About: Limiting Outside Money
If there’s going to be a serious labor dispute or lockout in the future, here’s what it should actually be about: restricting owners from using funds that don’t come from baseball operations.
Right now, Steve Cohen can funnel money from Point72 Asset Management into the Mets. Mark Walter can tap Guggenheim Partners’ resources for the Dodgers. Rogers Communications can subsidize the Blue Jays with telecom profits. They’re essentially playing with house money that has nothing to do with ticket sales, TV deals, concessions, or merchandise.
A fair competitive framework would limit teams to spending only what they generate from baseball-related revenue: ticket sales, local and national TV contracts, advertising partnerships, stadium naming rights, licensing deals, and merchandise. That’s it.
Under this model, the Dodgers couldn’t just write a check from Guggenheim to cover Ohtani’s deferrals. The Mets couldn’t tap Cohen’s hedge fund billions to outbid everyone. The Blue Jays would be constrained by their actual baseball revenue, not Rogers’ corporate war chest.
This would create actual competitive balance—not through punishing success, but by ensuring every team plays by the same financial rules. The Yankees, Dodgers, and Red Sox would still have advantages from their massive markets and revenue streams, but it would be based on what they earn from baseball, not what their owners can extract from completely unrelated business empires.
Of course, this will never happen. Owners would never agree to restrict their own spending flexibility, and the union would fight it because external money means higher salaries. But if we’re serious about competitive balance without salary caps or floors? This is the conversation we should be having.
Level the playing field by making baseball teams operate as baseball businesses—not as billionaires’ checkbooks.
KFCF
“But if we’re serious about competitive balance without salary caps”
This is, for all intents and purposes, a salary cap. It restricts the amount of money teams can give to players
Stearns’ buffoonery is inexplicable.
He was willing to sign Manaea to 3/$75m for his age 33 to 35 seasons solely because he had a lucky last 10 regular season starts in 2024 (w/ a .191 BABIP, never to be repeated)—but he wasn’t willing to get serious about Ranger Suarez, available for 5/$130m for his age 30 to 34 seasons.
Meanwhile, Stearns is giving up 12 years of Jett Williams and Brandon Sproat (a #3-4 SP projection with an outside shot at being a #2) for Peralta and change. If you’re never going to sign a pitcher to more than three years, and you’re going to trade a MOR+ prospect (and Jett) for a single year of a #2 SP in order not to sign that type of player for five years, what can you possibly be thinking?
In any case, Freddy’s not a #1 SP. He had a great 2025, but it was an extremely lucky year when for context, from 2022-2024, his ERA+ was 113 in 417 innings. Good, but no resemblance to great.
JSB
“Stearns’ buffoonery is inexplicable.
He was willing to sign Manaea to 3/$75m for his age 33 to 35 seasons solely because he had a lucky last 10 regular season starts in 2024 (w/ a .191 BABIP, never to be repeated)”
There’s some buffoonery all right – your claim.
You really think that Stearns doesn’t understand BABIP as well as you do? Really? Really?
@Tim of MLBTR
PLEASE EXPLAIN TO ALL
This isn’t about spending more. This is about financial engineering that’s only available to ownership groups with specific corporate structures. It’s a competitive advantage that has nothing to do with market size, revenue, or even willingness to spend—it’s about what kind of company owns your team.
And that’s why the current system is fundamentally broken. The luxury tax doesn’t address this. Revenue sharing doesn’t address this. When one team can turn payroll obligations into a billion-dollar investment opportunity while everyone else just has expenses, you don’t have competitive balance. You have a structural advantage that no amount of “small-market creativity” can overcome.
The Dodgers aren’t just outspending everyone. They’re playing a completely different financial game.
The problem is that the Dodgers got a revenue sharing exemption as part of their 2011 bankruptcy, then MLB handed the keys to a group that manages over $500B. So they know how to run a business and can make money on those deferrals. Plus they had one of the better developmental systems in baseball that has only gotten better over the years.
If you really want to get serious about capping the biggest contracts than start with higher MLB minimums and less-tight salary controls for younger players. I could justify huge contracts for unicorn players like Ohtani and Judge…people want to see them, they draw attention and revenues to the industry. But no one goes to Yankee Stadium saying :”I gotta see Bellinger/Grissom” In the meantime, the White Sox field a team which has roughly 2/3 of the roster close to MLB minimum–and don’t care about fielding a competitive team.. I’m not buying the idea that if you added a hard cap, it would change the behavior of the teams that simply bank most of their revenue sharing dollars. There’s a mindset here–it’s not just because there are economic inequities between the home cities.
@mike
It’s not just one thing. Consider this.. the Dodgers have 8 players earning $20 mil or more annually with Tucker and Ohtani at the top, including deferred money earning $60 and $70 mill each. If the White Sox spent ever single cent of their revenue share money to sign those guys, how many do you think they could afford at the same time? One…. maybe even two of they aren’t more than $25 mil each? So no… it’s not just a “spend more of the revenue sharing money” problem. The fact that the Dodgers can spend a billion dollars NOT DERIVED from verbal revenue AND then invest the money and turn a profit is the BIGGEST problem because only the wealthiest owners who’s money source is not from baseball can do that
That’s basically the Dodgers, Mets and Jays. They make the Steinbrenner’s look broke.
White Sox don’t get revenue sharing. They are a large market teams.
@wade
not really my point but ok
I think you have to be careful about unintended consequences. If the goal is to keep the big spenders from being as big, then you pick a number and define max spend–but you have to find a way to phase it in, because these teams are already locked into long term contracts, some with deferred money. You could limit the number of FA a team could sign–but the Union would (rightfully) resist that. You can’t ask players to adhere to a scale, and you can’t tell them that even the best of them can only “charge” what the lower revenue teams are able to spend. So, look for a long CBA war because what this really involves is getting the players to take less so the owners can make more–competitiveness is at best a side issue for them.
@miken
It’s not really a question of “how much they spend” is a about the incomparable resources the Dodgers (Guggenheim) and Mets (72Point) have at their disposal and their financial infrastructure that allows them to invest deferred money for profit. Dodgers don’t have to spend any money from baseball revenue when they can just transfer $1 billion to find deferred contracts and then invest and earn capital gains off of they money. 28 other teams can’t do that.
Tim, you did an excellent job of explaining the other options available besides a salary cap to bring greater financial parity to MLB. Thank you!
I’m strongly in favor of the owners working out how to level the playing instead of expecting the players to fix the owners’ problem by accepting limitations on their earning potential that ultimately will just keep more money in owners’ pockets.
Tim: players make so much money that they can never win the PR war against even wealthier people who make even more money
This guy doesn’t even make sense, his article came off exactly like the emotional rantings of many in this comment section. Players should not support this website that is calling to limit the money they can earn. Money that is a small % of what they make for owners
Baseball needs a franchise player tag so teams like the pirates can keep guys like scenes and it’s paid for across the league by a pool of TV money proportionate to teams revenue.
How about this: a CBT that actually disincentivizes stratospheric spending. A tax distribution system that is actually transparent and effective at creating more competitive teams at the bottom. A draft pick system that actually penalizes top spending teams across the spectrum of player types and status. AND a hard cap somewhere above the tax thresholds which only serves to prevent a few teams from going nuclear on the market. AND a floor system that offsets any inequity between owners and players that might result from the cap. No more deferrals period. Boom, Done. You’re welcome.
Thanks.
Seriously that is about the simplest and best answer I have seen. Don’t think it happens.
Agreed, perhaps a more likely scenario that would still create real change would be to simply crank up the volume on the stuff they already have in place. The tax doesn’t seem to be doing what it’s intended to do so make it 150% (or whatever). Teams aren’t using enough of the tax revenue on payroll apparently so bake that into the rules. Whatever draft pick compensations there are now, double that (or whatever). I do think they ought to just get rid of deferrals all together though. Maybe I’m missing something, but it doesn’t seem to benefit the owners over the players or vice versa. It’s only the outliers like the Dodgers and Ohtani who have a major stake in allowing it.
Agreed that seems like the likeliest outcome. I don’t care about deferrals because they don’t really matter. Ohtani is a unicorn and the other deferred contracts in the league aren’t that bad. It would be a PR move to keep the rabble from rising.
I think the biggest flaw in the CBT is how flaccid the penalties for not spending that money on players is.