Each team will be assigned an allotment to spend on signing players in the draft. This will be based on where they pick in the first 10 rounds, with each position having a corresponding monetary value.
If a team goes over its imposed allotment, it will face penalties. They range from clubs being taxed 75 percent of however much they go over, to losing their first-round pick in each of the next two drafts.
This will severely impact teams that know they can't afford to go toe-to-toe with big payroll teams in acquiring free agents and teams that have instead chosen to spend their dollars in signing draftees. Teams like Texas and Kansas City, who rely on the draft to acquire talent to compete, could suffer under this rule, because they aren't in a position to pay taxes and can't afford to lose the chance of a high pick the following year.
The range of the pool will be between $4.5 million and $11.5 million, Fox's Ken Rosenthal reported. Considering the Pirates, Nats, Royals and D-backs all spent more on this on the draft this year—and five others spent $11 million—that's one-third of the league, and most of the small market teams facing penalties.
If the Royals have an allowance of $11.5 million and go over by $115,000 (just 1 percent) they will face a fine of $575,000.
The rule, as MLB.com's Jonathan Mayo tried to explain it, is intended to make sure teams choose the best player available at the time they pick, rather than the best available player they can afford.
Proceeds generated by the tax will be distributed to clubs under the revenue sharing plan that do not exceed their limits. Draft picks that are forfeited by clubs will be awarded to other clubs through a lottery in which a team’s odds of winning will be based on its prior season’s winning percentage and its prior season’s revenue. More on that in the next slide.
Only clubs that do not exceed their signing bonus pools are eligible for the lottery. This is another reason why teams like Kansas City cannot afford going over their signing bonus allowance.
The problem with this, though, is that if teams are unable or unwilling to pay the draft picks the big bucks, will those same players walk away?
Will baseball lose top two-sport athletes to the NFL and dilute the talent level in the league? Will high school players opt for college instead of the pros?
Oh, and just to make this a little worse, teams can only sign players to Minor League contracts. Horrible.