FanPost

This Day in Baseball and Rangers History for February 1

* 22 days until the Feb 23, 2024, spring training season opener with KC
* 56 days until the Mar 28, 2024, regular season opener against the Cubs

Today there are 2 bits of general baseball history associated with Feb 1 events -- (1) the origin, development and nature of the first version of the CBT "luxury tax" in 1995, in the context of the 1994 strike and labor negotiations; and (2) the origin of the unusual Baseball Players’ Pension Plan in 1947, which would eventually lead to the formation of the MLBPA decades later.


February 1, 1995
The MLB Proposes the Form of the First Version of the "Luxury Tax"


In the highly contentious CBA negotiations between the owners and the MLBPA in 1994, the owners had insisted on a salary cap, among other union concessions. On Aug 12, the players went on strike in mid-season. After no headway had been made on Sep 14, 1994, Acting Commissioner Bud Selig canceled the remainder of the 1994 season, including the playoffs and WS. On Dec 6, the owners' lead negotiator, Richard Ravitch, resigned, and on Dec 14, the negotiations led by federal mediator Bill Usery broke down, resulting in both parties withdrawing from negotiations and filing charges of unfair labor practices. On Dec 23, the owners unilaterally implemented a salary-cap system, beginning tit-for-tat extreme actions that solidified impasse. On Jan 5, 1995, MLBPA Executive Director Donald Fehr declared all 895 unsigned players to be free agents. On Jan 13, 1995, the owners' Executive Council approved the use of replacement players for the 1995 season. The impasse would only be resolved in Mar, after the NLRB filed a complaint in federal court against the owners for unlawful labor practices based on further unilateral moves, which was upheld in federal court. On April 2, the players returned under the prior CBA for a shortened 1995 season. A new CBA would not be agreed upon until Nov 1996, and was only finalized and executed on Mar 14, 1997.

At the time of the initial impasse, in Jan 1995, President Bill Clinton had ordered a cooling off period, with the parties to return to NLRB-led negotiations no later than Feb 6. The President had previously taken a no-comment, no-executive-intervention approach, leaving the negotiations to the top NLRB negotiators, but he stated at the time of the impasse that the next round of negotiations would be considered a "last process" and that he could ask Usery to propose a solution for executive enforcement that would end the walkout by Executive Order. As in most strikes, neither side wanted a federal resolution. The NLRB and both parties scheduled talks to begin again on Feb 1.

The central demand of the owners through 1994 had been a player salary cap based on 50% of total baseball revenue. The owner's claimed that 1993 salaries had reached 58% of revenue. Of course, there was great ambiguity and disagreement over what exactly constituted "baseball revenue".

The owners had offered in earlier bargaining in Nov and Dec 1994, two novel "luxury tax" plans. Those plans, however, were tied to the central concept of a 50% total-revenue limit on salaries, and essentially worked as salary caps, since both contained escalators that would have raised the tax rates without limit until the players' share of revenue declined from 58% to 50%. The MLBPA had rejected both of those plans offhand as forms of a salary cap, and had refused to treat them any differently than a salary-cap proposal.

On Feb 1, 1995, as talks resumed, the owners' Executive Council proposed to the union, and publicly announced, that the owners had effectively abandoned their salary-cap proposal for a re-configured luxury tax. Red Sox CEO John Harrington, the owners' new lead negotiator, stated -- "By removing the cost-certainty requirement, we have removed the chief objection expressed by players. ... Our proposal tracks much of the framework first offered by the union."

Union head Donald Fehr at first said publicly only that the MLBPA needed time to analyze it. As had become routine by that time, 2 union officials, requesting anonymity, stated that the new luxury tax plan was unacceptable, and players actively involved in the negotiation process denounced it vehemently to the press as nothing new. Other baseball "management officials" interviewed anonymously indicated that the numbers in the new luxury tax offer were less important than the framework. Even if the union countered with extremely low numbers, it was hoped that it could lead to productive negotiations that would end the work stoppage.

The structure of the plan was quite different from that of the current CBT. The plan proposed taxing the 5 clubs with the highest payrolls, based on the average of total salary between the 5th and 6th highest salaried clubs. This part of the structure structure would be the basis for the initial form of the luxury tax as eventually adopted in the 1997 CBA.

The plan initially proposed on Feb 1, 1995, was 2-tiered, with a 75% and 100% tax, and was also based in part on certain absolute levels of payroll. Through later negotiations, the percentage was changed, and the tiers and secondary amounts were eliminated. In its form in the 1996 CBA, the luxury tax would impose a 34% fine on each dollar a team spent on salaries over the midpoint of the fifth and sixth highest team payrolls. The 1996 CBA, however, only applied the luxury tax to the 1997-99 seasons, so no luxury tax was imposed in 2000-01. The initial form of the luxury tax was not particularly effective, since it failed to give owners a precisely defined threshold by which to avoid taxation. The present threshold-tiered version of the CBT luxury tax was bargained for, and first appeared, in the 2002 CBA, and with modifications, in each subsequent CBA.

Nathaniel Grow, MLB’s Evolving Luxury Tax (Fangraphs 2015)
Owners Abandon Salary Cap: Luxury Tax Proposed (LA Times AP 1995) (paywall)
CBA History
(Cot's)


February 1, 1947
The MLB Announces the Baseball Players Pension Plan


On Feb 1, 1947, Commissioner Happy Chandler announced the creation of a pension plan for ML players. Players who had accumulated or will accumulate 5 seasons in the major leagues will receive $50 a month starting at the age of 50. For each year of additional service, a player will receive an extra $10 per month, up to a maximum of $100. The plan would also extend to coaches and trainers active on opening day. It was announced that the plan was to be funded by $650,000‚ with the 16 teams providing 80% and the players the remaining 20% through salary deductions.

The post-WWII period from the late 1940's - 1960's was a wholly different economic climate from today's. WWII left the US in a uniquely prosperous economic situation in the world, and routine salaries provided many employees with the ability to have the assets necessary for a successful middle-class life. At the same time, American unions had made significant advances into workplaces during WWII and would do so again during the Korean War.

The owners wanted to avoid player union organization, and the main concern of the bulk of the players at the time seems not to have been the reserve clause (on which a great deal of history is focused) or even other miserly owner matters such as pitiful reimbursement of expenses, but on a pension plan, which was the initial hallmark benefit of unionization. Baseball had been notorious for often leaving even it's star players and their families destitute, once their playing careers were over.

The owners' plan to introduce a pension was intended to thwart unionization by giving the players just enough to lose interest in unionization, and it was effective in that regard for 25 or so years.

The Baseball Players' Pension Plan was unique in a positive sense at the time, in being based solely on years of ML playing time and not on salary at retirement or termination. The Plan retains this beneficial aspect today. Not so positive, was the fact that the initial Plan never had a separate fund or account, as such, and all its unallocated funds, including player contributions, were held as part of the Commissioner's operating funds. In its early form, the Plan was also unique among American corporate pensions plans in the sense that the owners never made a contribution to the Plan. The Plan was "funded" exclusively off percentages of event and media income. These 2 issues forced Chandler to make an emergency sale of media rights in 1950 in order to fund the first payments under the Plan. While some progress was made in improving aspects of the Plan in its first 25 years, the owners and Commissioner refused even to reveal the financial status of the Plan or the specific interest of any particular player-participant in the Plan, until after the formation of the MLBPA.

This is just an introductory overview -- specifics on the formation of the MLBPA, particular aspects of CBA negotiations or specific work stoppages may be covered on other days. But the Plan was the primary initial focus of most players in the creation of the MLBPA. In addition to other areas of benefit to the players, the MLBPA would develop the Plan into the best retirement plan in professional sports, and a plan better than most private business and governmental plans, including many different benefits such as lifetime medical coverage. But the MLBPA has steadfastly and specifically refused to bargain for players who retired prior to the formation and certain negotiations of the MLBPA ("those players didn't pay union dues or engage in work stoppages"), and so earlier players never retroactively received any increased pay or benefits, and receive only the relatively small payments specified under the early period of the Plan, while facing the economic pressures and hardships of inflation and medical costs. Lawsuits against the owners to increase past benefits failed, as did lawsuits against the MLBPA to force it to negotiate on behalf of former players. Players still playing in 1972, and all players thereafter, have received the increasing pension pay and benefits of a truly great Baseball Players' Pension Plan.

Charles Bevis, A Home Run: The Baseball Players' Pension Plan (SABR 1992)
1947 in baseball (Wikipedia)
CBA History (Cot's)