Manny Machado made history Tuesday afternoon when news broke he had agreed to terms with the San Diego Padres on a record-breaking contract.
The 26-year-old third baseman and shortstop is set to sign a 10-year, $300 million deal with the club; it is the largest free agent contract in American sports history.
Coming off a 66-win season, the Padres have not had a winning record since 2010 and have not made it to the playoffs since 2006. Signing a young standout like Machado, a four-time All-Star, who hit 37 home runs last season, shows their commitment to improve and perfectly illustrates why professional sports leagues should eliminate their salary caps.
Prior to signing Machado, the Padres already had two large contracts on their payroll: one with first baseman Eric Hosmer, eight years, $144 million, and another with outfielder Wil Myers, six years, $83 million. Combined, these contracts account for more than half a billion dollars in salary commitments. The Padres owners have the money, are willing to spend it and want to win, so why should there be any restrictions on what they can do with it?
Soft salary caps like the ones MLB and the NBA have in place penalize teams with a “luxury tax” if they spend more than a certain amount in hopes of deterring them from doing as much, although rich owners can just pay the fine if they go over the payroll limit. In the NFL and NHL, hard salary caps prevent teams from playing games unless their payroll is below a specific figure, all that means is teams have to be frugal and players end up receiving less money while the owners profit.
While spending might help teams be successful, it does not guarantee it. The Kansas City Royals won the World Series in 2015 despite their $112.9 million payroll ranking 17th largest of 30 MLB teams. Last season, the Oakland Athletics and Tampa Bay Rays, whose payrolls ranked 28th and 30th, went 97-65 and 90-72 respectively. Meanwhile, the San Francisco Giants, who spent over $200 million and had the second-highest payroll, had a losing record of 73-89.
It’s also worth mentioning the NFL’s hard salary cap has not stopped the New England Patriots from winning six Super Bowls since 2002. Even when strictly enforced, the salary cap is no guarantee of competitive balance.
Salary caps hurt teams who want star players. After all, no MLB team since 2003 that has committed 20 percent of its payroll to one particular player has won a World Series, according to FiveThirtyEight. That said, when it is more difficult to put a team around a star, the team is less likely to enjoy overall success.
One issue salary caps often overlook is state income taxes. Teams in states or provinces with high, progressive income taxes on top bracket earners like California, 13.3 percent, or Ontario, 13.16 percent, are at a disadvantage compared to states with low taxes and no state income tax, like Texas and Florida. This is now even more true, thanks to the Tax Cuts and Jobs Act of 2017, which caps deductions of state and local taxes to just $10,000 when filing state or local income tax, as the Associated Press points out.
To put it in perspective, the difference between how much Machado would pay in state income tax on his contract had he signed with a Florida or Texas team is $39.9 million, or nearly $4 million per season. In theory, this means they could offer less money to Machado and he would take home more, thus making it a better contract while having an advantage in terms of staying under the salary cap.
If anything, maybe leagues should start looking at a salary floor, like the NHL has in place, a $58.8 million floor in addition to their $79.5 million cap. Or, perhaps, leagues could let teams operate as they wish, since they are the ones putting up the capital and making the investments.
Tom Joyce (@TomJoyceSports) is a freelance writer who has been published with USA Today, the Boston Globe, Newsday, ESPN, the Detroit Free Press, the Pittsburgh Post-Gazette, The Federalist, and a number of other media outlets.
