The owners and GMs are crying for help while the agents are saying that the sport may benefit from a hurting economy. Who should you believe? On one hand, guys like Jeff Borris of Beverly Hills Sports Council are quoted as saying, “If you examine history, during the worst economic times, people spend whatever they can to entertain themselves. And baseball still is the cheapest form of entertainment.” Scott Boras was quoted at the GM meetings saying, “The downturn in the economy shouldn’t affect the kind of contracts offered to free agents. I think we have to look at the revenues today, which are historic.” These guys know what they are talking about, but it’s hard to argue with the facts.
The Pittsburgh Pirates announced Tuesday that they have put a freeze on season-ticket prices and offered an interest-free payment plan. Arizona Diamondbacks CEO Jeff Moorad says his club has lost a corporate sponsorship with their ballpark pool. The San Diego Padres, general manager Kevin Towers said, are braced to cut payroll to $40 million.
Maybe the Yankees, Mets, and White Sox will survive the economic storm unscathed, but smaller market teams may take a big hit.
Besides injecting their persuasive words into negotiations to sway owners to give up more bucks in a hurting economy, agents are looking to what the future may hold in taxes now that Obama has been declared the next President of the United States. Obama would like to raise the top federal income tax rate from 35% to 39.6%. At this point, it is merely a wish. There is no knowing whether such a plan ever goes into effect. If the tax rate were to be increased for the next fiscal year, then signing bonuses paid before Jan. 1 should not be taxed at the higher rate. Thus, some agents are thinking about getting their free-agents into an established uniform earlier this time around due to potential tax breaks over signing later on.
My thoughts are that the teams who notoriously spend money will continue to do so, while the Marlins, Rays, Royals, etc. keep their low payrolls. The real change may be seen with those clubs that spend somewhere in the middle. If sponsorships and/or ticket sales go down, expect those teams to cut salaries. However, I do not see teams adopting such measures proactively. Instead, I think that any salary cuts will be based off of lower figures once they start rolling in next year (if numbers are indeed down at all). As far as the federal income tax rate, it should be interesting to see if free-agents tend to sign earlier this year due to the potential of a raise in rate by the new Democratic administration.