A few weeks ago, Shawn Hoffman over at Baseball Prospectus wrote an excellent column that should be considered a must read for any proponent of a baseball salary cap.  In the article, he envisions what a salary cap might look like were one to be implemented, and examines two aspects that no one ever really talks about; a payroll floor, and the difference between local & national revenue.

A salary cap has to have a payroll floor; without it, there's no incentive for an owner with no interest in winning to do anything more than the bare minimum and walk away with a sizeable profit.  The floor usually is about 75% of the cap.  So, given Hoffman's calculations, a cap in 2009 terms would be about $103 million, with a floor of $77 million.  And here's where the problems start:

[F]ourteen teams would have been under the payroll floor, by a total of $251 million. Even discounting the Marlins' $22 million payroll, the other thirteen teams would have had to spend an average of $15 million more just to meet the minimum. Some of those teams might be able to afford it; most wouldn't...had our fictional cap/floor arrangement been instituted last year, the Pirates would have needed to increase their Opening Day payroll by $28 million. Not only would the team have taken a big loss, but Neal Huntington's long-term strategy would have been sabotaged, since the team would have had to sign a number of veterans just to meet the minimum payroll.

Not only would that cause immediate problems for smaller franchises, but the power of the big boys could wreak even more havoc for them down the road:

Now fast forward to 2009. Let's say the Pirates' sales staff runs into major headwinds, with the team struggling and the economy sinking. The team's top line takes a hit, falling $10 million from 2008. The Mets and Yankees, meanwhile, open their new ballparks, and each team increases its local revenue by $50 million. If the twenty-seven other teams are flat, total industry revenues rise by $90 million (not including any appreciation in national media revenue). Forty-five percent of that, of course, goes to the players. So even as the Pirates' purchasing power decreases, the payroll floor actually rises.

The local vs. national revenue argument is one that I don't think people fully appreciate.  Since the NFL derives so much of its income from their national TV contract, it's easy to spread that money evenly and hold the clubs accountable.  But when the Yankees rake in close to $100 million per year in local TV revenue, while smaller clubs struggle to break the $10 million barrier, that's a lot harder to place on an even scale.  I think the small market owners realize that, and that's why they haven't made a more unified push for a cap.

Even lowering the threshold of the luxury tax isn't going to help solve the problem.  Only the Yankees and Tigers exceeded the cap in 2008, and the Tigers just barely crossed the line.  The threshold is so high ($162 million) that it would have to be lowered significantly to have an effect on anyone other than the big 3-4 teams.  Even if you lowered the cap by $30 million, it would only cost the Yankees another $12 million to keep the same payroll.  Since Hank Steinbrenner is already used to paying out $25-30 million in luxury taxes, I doubt this would deter him.  Incidentally, luxury tax revenues do not actually go to the small market clubs; that happens through local revenue sharing, which is a smaller piece of the pie.

The one thing that people can take some solace in, as Hoffman concludes, is baseball's playoff system that evens the playing field greatly for the teams that make it to the post-season.  Consider that, since 1993, MLB has had 10 different World Series winners.  Compare that with an even more ruthlessly capitalistic league, like...say...the English Premier Football league, which has had a grand total of four winners over the same time period, and I think it's far more preferable to have a system like the current one that baseball does.  Besides, having the biggest payroll does not guarantee a winner; ask Hank Steinbrenner how that's worked out over the past eight years.

MLB salary cap, yankees, tigers