FanPost

Coronavirus and the....Luxury Tax?

Hi everyone. Long time reader, first time (I think) Fanposter.

I have made this clear in other posts, but I'd like to start with the disclaimer that COVID-19 is a huge deal. It is not overreacting to say that it is bigger than the Cubs, bigger than sports, and bigger than basically anything else going on right now. If possible, distance yourself from crowds, and be safe. Being proactive rather than reactive will save lives.

That said, I was having a baseball/COVID-19 discussion with some people, and something occurred to me. Let's assume a shortened, 144-game season (I have a hunch it could be less than that, but honestly, who knows). Question 1: are player salaries prorated? Question 2: holy crap, is THIS of all things going to be what brings the Cubs below the LT1 threshold?

So, without the benefit of the actual CBA, off to Google I went. I quickly found this article from Ken Rosenthal, titled "Baseball faces many questions as it deals with coronavirus." Here is a passage:

Would players be paid for any games they missed?

Financial concerns are trivial in the middle of a pandemic, but a potential issue nonetheless. Players in the past were not paid for games lost to work stoppage. But according to a source, the union in this case would take the position that players would merit their full salaries even in a shorter season; baseball is not a sport with a salary cap, and salaries are not linked to revenues.

An ownership representative emphatically disagreed, saying it would be unrealistic to expect teams to maintain full payrolls while operating without revenue. The official invoked the term force majeure, a common clause in contracts that essentially frees both parties from fulfilling an obligation due to an extraordinary circumstance, an act of God.

The coronavirus certainly fits both descriptions.

So, I'm no genius, but I do know that a force majeure clause would be pretty standard in any labor agreement. This would turn into a big fight, but as I see it, the owners likely have a pretty credible argument in favor of prorating here.

In this January 13 article, Al estimated the Cubs to be around $210,333,333 in tax hit. The Cubs have made a few moves since then, right? Let's say they're at a $225,000,000 tax hit. A 144-game season (elimination of 18 games) is a reduction of just over 11% of the season. Prorating that $225,000,000, that would put them at $200,000,000, below the $208,000,000 LT1 threshold.

Would the LT thresholds be prorated as well? Would the players or owners win a fight about proration? All I know is this: if THIS is how the Cubs end up below the LT1 threshold, then this is a crazy, crazy world.

Stay safe, everyone, and be well.

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