Owners Offer Luxury Tax Alternative to Salary Cap

Under pressure from President Clinton to resolve their labor dispute, baseball’s owners returned to the bargaining table for the first time since Dec. 22 Wednesday and made a luxury tax proposal that in their view bears no resemblance to the implemented salary cap.

Officials of the striking players union said they wanted to study the proposal over night, but their initial reaction characterized it as another cap in disguise and unacceptable.

“If you start at (a tax rate of) 200% and bring it down to 100%, is that progress?” veteran agent Tom Reich said from Washington, where he is working in an ex-officio capacity with the union. “It’s still a luxury tax, still a backdoor salary cap. They’re still a long way apart and the gap isn’t going to be bridged in the next day or two.”

In fact, Reich said, the proposal was designed strictly “to pacify (special mediator William J.) Usery and the administration and not produce a settlement with the union. I still don’t expect any miracles through the bargaining process. It’s going to take some outside force to put the players back on the field--either the government or National Labor Relations Board.”

Clinton has told Usery that he wants the mediator to consider proposing his own settlement if there is no progress by Monday.

Both sides said there is an obvious urgency to the talks.

“Bill Usery has been very explicit with us,” Colorado Rockie owner Jerry McMorris said. “He expects us to reach an agreement, and if we don’t do it on our own, he’s prepared to make a recommendation.”

Phased in over four years, the owners’ new proposal would place a 75% tax on payrolls between $35 million and $42 million, and 100% on payrolls of more than $42 million. Using the owners’ calculations, which are based on a variety of club expenses in addition to salaries, the Detroit Tigers had the top 1994 payroll of $56.7 million. The proposed tax would have cost the Tigers another $20 million.

However, management sources said the proposed rates aren’t as important as the framework, suggesting the rates are negotiable. The fixed-rate framework, differing from the escalating rates of previous proposals, removes the cost certainty aspect, the owners contend, since there is no designated split of revenue. The owners have been attempting to lower the players’ revenue share from 58% to 50%.

“By removing the cost-certainty requirement, we have removed the chief objection expressed by players,” said Boston Red Sox chief executive officer John Harrington, the owners’ lead negotiator. “Our proposal tracks much of the framework first offered by the union.”

Harrington was referring to the owners’ willingness to form a joint committee that would give the players a voice in various industry decisions and the creation of an industry growth fund, to which both sides would contribute $30 million over the life of a seven-year agreement.

The proposal maintains two elements of the implemented cap, elimination of arbitration in exchange for restricted free agency for fourth- and fifth-year players, but it increases the implemented minimum salaries to $125,000 for first-year players, $190,000 for second-year players, $290,000 for third-year players and $750,000 or $500,000 for fourth-year players, depending on their statistical ranking.

While negotiators met for six hours, about two dozen players continued their public relations blitz on Congress in an attempt to get the antitrust exemption removed. They hosted a party for all senators and congressmen at Union Station, distributing 600 autographed baseballs.

Sen. Slade Gorton (R-Wash.) wasn’t impressed. He said Congress and the President should “butt out” of the strike and stop talk of removing the exemption.

“One of the difficulties in reaching a settlement is the union thinks it can get the Congress to bail it out,” Gorton said. “My own opinion is if the president and Congress were to make an explicit statement, ‘Settle your own problems,’ it would be over in two weeks.”