Key Issues in Baseball Labor Talks

Payroll tax: This is the biggest hurdle. Under the union plan, the minimum payroll subject to taxation would be $125 million in 2003, $135 million in 2004 and $145 million in 2005, after which point the tax would end.

Under the owners’ proposal, a team would be taxed at 35% the first time it exceeded the threshold, 40% the second time, 45% the third time and 50% the fourth time. The players proposed tax rates of 15% to 40%. Management adopted the union’s tax-rate formula, but increased the threshold to $107 million in the first three years of the contract and $111 million in 2006. Owners want payroll to be calculated using 40-man instead of 25-man rosters, plus benefits, pushing many clubs toward the proposed threshold.

Based on projections, the New York Yankees and Texas Rangers are the only teams that would be affected by the union’s tax plan next season. That’s unacceptable to the owners, who insist that the next agreement include a viable mechanism to slow escalating player salaries.

Revenue sharing: Owners reduced their proposal from $282 million to $263 million. The union’s current proposal is $242.3 million in the last year. Because of the phase-ins, the sides are $222.8 million apart on the amount of money that would be transferred from high-revenue to low-revenue clubs over four years.

The basic concept of revenue sharing is that the entire sport benefits if high-revenue clubs share their profits to enable low-end teams to spend more money on players, increasing competitive balance. So, what’s the holdup on this issue?

Well, the union views the combination of a payroll tax and revenue sharing as a salary cap by another name. There is some wiggle room here, but apparently not much.

Amateur draft: The sides have agreed to a worldwide draft, but the number of draft rounds is at issue.

The union had previously proposed conducting a worldwide draft in two phases, international and American, creating two sets of first-round draft picks and more big bonuses. It wants to reduce the draft to 16 rounds from the current 50-round format, creating more free agents. Owners want a 38-round draft.

Also at issue is the fate of the baseball academies teams operate in Venezuela and the Dominican Republic.

Minimum payrolls: Owners have been rebuffed in their attempts to implement a minimum $45-million payroll, which the union considers to be another restraint of business.

Drug testing: The union has ended its long-standing opposition to random testing for steroids. However, there are details still to be resolved.