SBD/1/Leagues Governing Bodies

MAGIC NUMBER FOR MLB OWNERS: PAYROLL AT 50% OF REVENUES?

     MLB owners' latest payroll-tax proposal "appears to be aimed
at ultimately reducing player payrolls to no more than 50 percent
of club revenues," according to Murray Chass in this morning's
N.Y. TIMES.  While negotiators from neither side would confirm
the details of the owners' offer, or the players' expected
response, Chass reports the plan calls for a 25% tax on portions
of team payrolls above $44M in Year 1 of a seven-year "adjusting
tax system."  In the following years, "the tax-triggering
thresholds would be linked to the previous year's industry
revenue, and the tax rates would be based on the percentage of
the previous year's revenue that was spent on player payrolls."
For Years 2-6, the tax would be anywhere from 25-50%.  But it
would "disappear" in Year 7 if the clubs spent 50% or less of
total revenue on player salaries in Year 6.  In addition, the
threshold would remain at $44M as long as overall revenues were
below $2.2B (the proposal puts '95 revenues at $1.556B).  Once
revenue exceeds $2.2B, the threshold would increase by 2% of the
amount over that figure.  Based on 14% growth, the owners
estimate the threshold could be $68M by Year 7.  Under the new
plan, five clubs would have been taxed in '95, compared to 11
under the owners' March '94 plan (50% at $44M) and six under the
players' final counter-offer (25% at $50M).  Also, the owners
would retain arbitration for some players in exchange for earlier
free agency (N.Y. TIMES, 12/1).
     UNION REACTION:  MLBPA Exec Dir Don Fehr:  "It's premature,
but all options are open.  The question always becomes, if you're
getting into a tax, why are you doing it, what is the anticipated
effect?  What do you do with the money?  Is it used to invest in
the game's future or just to subsidize people?  Does it have the
effect of effectively inhibiting a free market or is it a tax
that has a cost attached to it but preserves the essence of the
free market?"  Chass notes, if the union accepts the idea of a
tax, "the proposal could include enough variations for the two
sides to negotiate an agreement" (N.Y. TIMES, 12/1).
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