Baseball leaders weigh in on Hamels, luxury tax
KANSAS CITY – There are a number of ways to measure the Phillies’ growth as a franchise. Five straight NL East titles is one. (The streak is in serious jeopardy this season, but that’s not what this story is about.) Economics are another.
A dozen years ago, the Phillies were on the receiving end of Major League Baseball’s revenue-sharing plan.
Now, the Phillies flirt with paying a competitive-balance tax based on their high payroll. The team came within about a half-million dollars of paying a tax last season as their final payroll, calculated by MLB, was between $177 million and $178 million, third highest in the majors behind the Yankees and Red Sox.
The tax threshold this season is once again $178 million. The Phils opened the season with a payroll over $174 million and are in danger of going over the threshold for the first time. First-time offenders pay a 20 percent tax for every dollar they exceed the threshold. The tax line will remain at $178 million next season and rise to $189 million from 2014 to 2016. The Phils already have over $112 million in salary commitments for just 12 players in 2013.
The competitive-balance – or luxury – tax has become a real concern for the Phils and could impact their negotiations with Cole Hamels. The lefthander can be a free agent at season’s end, but the team is trying to sign him to an extension. It will take a multiyear deal, possibly worth as much as $24 million per season (the average annual value of Cliff Lee's deal) for the Phils to get a deal done with Hamels. If the Phils strike out on an extension, they could look to trade Hamels later this month.
Commissioner Bud Selig and players’ union chief Michael Weiner both had separate meetings with members of the Baseball Writers Association of America on Tuesday. Both were asked about Hamels’ dealings with the Phillies and how the luxury tax might affect the team’s effort to sign the pitcher.
Selig was asked whether he sympathized with the Phillies, who could be trying to balance keeping an elite homegrown player with paying a tax, or whether he believed the organization simply had to live with the financial decisions it had made and any consequences that followed.
“I wouldn’t say ‘tough luck’ because I do sympathize with the Phillies for a lot of reasons,” Selig said. “But those are economic judgments you have to make within this structure. Of course you want to keep your own players if at all possible – and clubs have to make those kinds of decisions. Dave Montgomery and Ruben [Amaro] – they’re smart. I have faith they’ll figure it out.”
The union is always an interested observer in contract negotiations, and Weiner indicated that Hamels keeps union officials abreast of what goes on.
“Cole is the kind of player that makes the union really strong because Cole is willing to talk and is anxious to talk to us all the time about his contractual situation,” Weiner said. “His agents talk to us. There’s a lot of communication and that’s great.
“Cole makes up his own mind. He made up his own mind on the last deal and that would be the case [again]. We have no concerns about that.”
Weiner turned his attention specifically to the tax and how it could impact Hamels.
“If it turns out that any player has choices restricted by the competitive-balance tax, we’re not happy about that,” he said. “We understand some of them will. I don’t know that that’s going to happen in Cole’s circumstance. I haven’t looked through where the Phillies stand at this moment and where they project to stand next year or the year after that.
“We understand, though, that part of the competitive-balance tax is that it’s going to affect some contracting decisions and if it ends up limiting Cole’s options from the Phillies’ perspective, that’s unfortunate, but it’s part of the deal that we made.”
Selig alluded to the difficult first half that has the Phils (37-50) sitting 14 games back in the NL East.
“I know they’re in a tough spot,” Selig said. “They’ve had a lot of injuries. Baseball is like life. You have ups and downs. Some things happen you don’t expect. Some are fortunate, some are unfortunate. But you have to work your way around them.”