Luxury Tax Not Enough in MLB

Mike ArrowsmithCorrespondent IJanuary 10, 2009

One of the most exciting things to watch in the offseason is Major League Baseball’s free-agent shopping spree. Every team is trying to sign the best available talent in order to benefit the most important needs of their organization.

Over the past few months, I have watched the New York Yankees take full advantage of the free-agent market by signing high-class players such as pitchers A.J. Burnett and CC Sabathia. They also came out victorious in a five-team bidding war over star first baseman Mark Teixeira.

After it was all said and done, the Yankees had invested nearly $423.5 million on these three players alone. Given that the Yankees are one of the richest teams in baseball, they can afford to spend big-time dollars on big-time players. The 2009 New York Yankee’s theme seems to be no price tag is too high for a World Series championship.

Unlike the NFL and NBA, who instigate a salary cap to keep teams from overloading on talent, Major League Baseball uses a luxury tax. The luxury tax enables teams to spend as much money as they want as long as they are willing to be taxed after a certain amount. After their newest acquisitions, the Yankees were handed a $26.9 million luxury tax bill.

This, of course, is no problem for an organization that could potentially finance a small country. The Yankees and the Detroit Tigers were the only teams to be taxed this year. However, one has to wonder if the lack of an MLB salary cap really promotes fairness around the league.

While Mark Teixeira was on the free agent market, he was drawing interest from the likes of the Yankees, Orioles, Red Sox, Nationals, and Angels. Over the course of a few months, Teixeira’s price tag became higher and higher and soon reached a mark that only New York dollars could satisfy.

While the Yankees cashed in on another big acquisition, the other four teams were left to pursue less proven veterans or bring up young talent from the minor leagues.

This year, I have a strong feeling that the Yankees will return to the playoffs. However, it won’t be because of their strong farm system. It will be because unlike most teams, they can afford to bring in the most talented players that money can buy.

I believe that more teams should rely on their farm systems to propel their way into the World Series like the 2008 Tampa Bay Devil Rays. A salary cap needs to be established to promote fairness around the league. This would give every team an equal chance to experience the sweetness that is October baseball.