Funny things happen when people sit around a negotiating table. One minute
you’re dotting i’s and crossing t’s to put a halt to years of bickering
and open warfare; the next, you’ve just agreed to swap
Manhattan for a pile of nutmeg

Something like that must have gone on in the waning days of baseball’s
labor talks in 2002, because the resulting collective bargaining agreement
is filled with odd clauses that could only have been concocted at 4 a.m.
after the coffee had run out. One of these is already having an impact
in the world of stadium-building, where the deductibility of construction
costs from revenue-sharing–aka “the
Steinbrenner dodge
“–has given teams like the Yankees a loophole by
which to build new stadiums and force their competitors to help pay for

Then there are the clauses that lurk like time bombs, lying forgotten
until years after the fact. As Chris
and Jayson
have pointed out in recent weeks, the luxury-tax system agreed
to four years ago contains an odd wrinkle in its implementation schedule:

                           TAX RATE FOR EXCEEDING THRESHOLD
                1st time    2nd time    3rd time    4th time
2003              17.5%
2004              22.5%        30%
2005              22.5%        30%         40%
2006                 0%        40%         40%         40%

That’s right: First-time offenders in 2006 are exempt from paying any
luxury tax at all, even if they sign Johnny Damon, A.J. Burnett, and John
for $20 million apiece, or something
equally silly
. And “first-time” here refers to consecutive
offenses, meaning that only teams that broke the $128 million payroll
threshold last year–that would be the Yankees and Red Sox–have to
worry about paying tax this year.

The luxury tax has hardly been the catastrophe for players that some had
feared, largely because Don Fehr managed to set the bar high enough ($117
million in 2003, scaling up to $136.5 million in 2006) that very few teams
have had to worry about it–the only clear casualty so far has been the
Yanks’ failure to pursue Carlos Beltran last winter. Still, when you’re
talking about two teams paying a 40% premium that the rest of the league
doesn’t have to worry about, that’s an economic incentive that should make
even pennant-starved baseball owners sit up and take notice. You think
George Steinbrenner didn’t notice that if he’d offered Brian Giles the
same $10 million a year the Padres did, it would have ended up costing him
$14 million next year once his tax tab is figured in? (Add in the Beltran
non-signing, in fact, and you could make an argument that the biggest
beneficiary of the luxury tax might end up being Bubba Crosby.)

Likewise, being absolved from the tax effectively gives other teams a 19%
discount on their off-season purchases over this year’s $136.5 million
payroll cap. So far, though, no one seems to have taken the bait. Of the
three teams Isidore identified as likely cap-busters this winter, neither
the Angels nor the Cards have been aggressively taking on salaries (unless
you count taking on Hector Carrasco as “aggressive”); the Mets may
have added Carlos Delgado and Billy Wagner, but they’ll still be
hard-pressed to bust the limit thanks to the dispatch of Mike Cameron to
San Diego, especially if Omar Minaya succeeds in dumping Kris Benson‘s
contract for a bag of beans. Meanwhile, the tax-ridden Red Sox continue to
pile up payroll like it’s going out of style. Clearly there’s no
accounting for accounting when it comes to GM hot stove logic, or lack

Next year, though, things could get even more interesting. Stark writes
that if the owners and players agree to play an additional season under
the current CBA rather than conduct a knock-down drag-out before the end
of 2006, “they would be extending another tax-free year along with it (a
potentially monstrous advantage for the Red Sox in 2007 if they pay no tax
in 2006).” But in fact, as the late Doug Pappas reported back
in 2002
, the luxury tax officially expires on the last day of the 2006
season, so if the two sides decide to keep playing in 2007 without a new
contract, the luxury tax disappears entirely. If nothing else, that–coupled with the possibility that the revenue-sharing structure could be
overhauled yet again in the next labor agreement–could loosen the
Yankees’ pocketbooks again next winter. Don’t sign a long-term lease,

Luxury tax shenanigans, though, pale in comparison to what could be the
baseball bombshell of 2006: The return of contraction. When Bud Selig &
Co. agreed to shut their yaps about eliminating teams during the 2002
labor talks, they exacted an enormous concession from the labor side:
Starting in 2006, MLB owners are free to eliminate two teams if they so
choose–without needing the approval of the players’ union. Owners have a
three-month contraction “window,” from April 1 to July 1, in which time to
notify the union that contraction is imminent for 2007. And–this is the
key part–they don’t need to identify which two teams are on the
chopping block

Given what we know about Bud and his gang of Seligians, it’s easy to see
how this would play out. Sometime next spring, probably a moment
conveniently picked to coincide with the Florida and Minnesota legislative
sessions, the baseball cabal puts out the word that two teams will get the
axe the following year. Immediately, panic ensues on sports pages across
the nation, as baseball writers fearful of being consigned to the
high-school field hockey beat send up the alarm that Something Must Be

Certainly, plenty of teams seem to be readying themselves for a run at
oblivion. The Marlins are the obvious lead candidate, given that Jeff
Loria and Number One Stepson David Samson–frustrated by the Florida
legislature’s unwillingness to throw money at their stadium woes–have
already announced that they intend to depart Florida, though without
actually specifying a destination. The Twins, Royals, and A’s owners are
all engaged in similarly fruitless stadium battles, and could conceivably
be persuaded to take a buyout. The Devil Rays are a perennial candidate
for extinction, given that it might take years for anyone to notice they
were gone. And even the newly minted Nationals could find themselves in
the rumor mill, if the D.C. city council carries through with threats to
reject the team’s lease agreement for its yet-unbuilt stadium amid
steadily rising construction cost estimates.

Of course, there are lots of reasons not to take threats of contraction
seriously. It would be hideously expensive, for one thing–can you
seriously imagine MLB giving up $450 million in Nats sale price just to
marginally increase everyone else’s share of the pie, or even paying the
$300 million or so that it would cost to buy out Loria or Carl Pohlad?
Add in the inevitable legal tangles–the states of Minnesota and Florida
each threatened lawsuits the last time contraction was floated–and
wiping out teams quickly looks like more trouble than it’s worth.

But contraction doesn’t have to be a serious threat to be an effective
bludgeon. If all these stadium deals are still in legislative limbo next
summer, MLB can play the contraction card and set up a game of musical
chairs: Last two cities to build stadiums get left out in the cold!

And best of all from MLB’s perspective, there’s nothing in the CBA saying
that if baseball announces it plans to contract, it has to go ahead and
carry out the threat–meaning that even if its bluff is called, it could
back off and suffer no worse than a bruised public image. Heck, Selig
could probably sell himself as a hero for lifting the stay of execution
and maintaining the status quo.

Maybe his labor negotiators knew what they were doing after all. Even
without coffee.

Thank you for reading

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