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January 7, 2003
The Daily Prospectus
Of the many, many dumb things in the United States tax code, there's a provision that allows teams to write off the salaries of players when they acquire the team on a limited schedule as depreciation. It's an easy, fun way for them to show massive losses while they make tons and tons of delicious cash money. The write-off lasts five years, and then you sell the team for its increased value and find something else to do, like buy an arena football team, or make a nuisance of yourself in another sport.
Here's the general view of how long teams have been owned by one owner:
5 years and less (1998-2002): 8 (ANA, BOS, CIN, FLA, KC, LAD, TEX, TOR)
6 to 10 years (1993-1997): 7 (AZ, BAL, OAK, PIT, SD, STL, TAM)
1980s-1992: 11 (CHI-A, CHI-N, CLE, COL, DET, HOU, MIN, NY-N, PHI, SEA, SFG)
1970s: 3 (ATL, MIL, NYY)
(does not count the un-owned Expos, or Mets going from dual-owner to single-owner last year)
Longest running ownership? Commissioner-for-Life Bud Selig has owned the Brewers since 1970.
Current candidates for sale include:
But there's your pattern - only one franchise currently known to be up for sale was in the same hands for more than seven years. It makes sense: there's a huge financial incentive to buy a team, and then when that incentive is gone, why hang around? Charge someone else, who has a brand new huge financial incentive to get in on the action.
This has a lot to do with what many people think is wrong with baseball.
If an ownership group buys into a troubled franchise like the Expos, they have a couple options:
When you give people an incentive to act in one way, they will act in that way unless there are greater incentives to do something different. Not all of baseball's problems are internal, but you see here how baseball doubles up on a problem to give owners even greater incentive to do nothing. Because of the way our tax system works, owners have an incentive to own teams for short periods of time, and the revenue-sharing ensures that being cheap is profitable. When they know they intend to only own a team for a while, there is no reason to make long-term investments - even if those investments could result in huge returns - when it would bring in no additional money in the time you own the team.
We lose two ways: this spurious tax write-off means in some small way we pony up more of the tax revenue for the benefit of the obscenely wealthy, and fans of bad teams have little reason to believe their lot in life will improve under new ownership.
Derek Zumsteg is an author of Baseball Prospectus. You can contact him by clicking here.