Late Innings

Warning: the following post is political, and is mildly baseball-related. If this does not interest you, I recommend You Porn.

I was about to write about this yesterday, but got too drunk, and this post was getting heavily partisan (Rush Limbaugh would have been proud.) Any ways tonight I’m completely sober, and can coherently express this a little better. Long story short, I voted for John McCain. Honestly I didn’t like either of the two (main) candidates, however I thought my state was much closer than it was, so I made the choice that I did (note that the networks called Pennsylvania for Obama with 1% of the precincts reporting.)

Obama has been in the news heavily of late, and especially in the baseball world as well. Obama is still undecided as to where he’ll throw the MLB first pitch next year, and he’ll probably be doing it in Chicago for the White Sox (Clinton and Bush did it in Camden Yards for so many years…) Obama is also planning on making baseball relevant in the Olympics again, something I like (even if it involves shutting down the season for two weeks.) I like the fact that Obama is a sports fan (and actually wants a College Football Playoff system established.) However the other issues he believes in made me cast against him. The main reason why: taxes.

Joe the Plumber’s new decision involves choosing between Cliff Lee and Aaron Harrang for his fantasy rotation (WP.)

The one story that was on the front pages all across the country was the one of how agents are worried about the new tax hikes that Obama wants to put in place in January. The one area that everyone is speculating is that he’ll raise the top bracket from the 35% (where Bush lowered it) to 39.6% (where it was under Bill Clinton.) Granted this might seem like pocket change to someone like Manny Ramirez, who just received a contract offer with the second-highest average salary ever, however as the article states this tax will impact someone even harder: small businesses. Now what businesses are considered small businesses?

Enter Scott Boras, the most notorious sports agent known to man. He wrote the book on Oliver Perez (literally), and does whatever he can to help his clients receive the best offer both in terms of compensation and playing environment. Boras, a former player, is very wealthy. He also owns a small business, the Scott Boras Corporation, a “small business” which employs roughly around 100 employees of various skills and talents. It’s clear that his “small business” earns more than 250,000 per year. Case in point, he’ll get 10% off Alex Rodriguez’s record 275MM contract alone. While Boras’ employees might be eligible for an Obama “tax cut” (whatever that exactly means), their boss himself will be hit hard.

Granted Mark Teixeira is a free agent, and he could net a contract of around 20MM this year, so the tax hike for him won’t be an issue. However look at the college players available in next year’s Amateur Draft. Most of these kids come from middle class families, however when they receive their 4MM or so first-round pick signing bonus… You get the picture; another area the Obama tax hike will hit.

Peter Schmuck brought up the point about this, and discussed Rafeal Palmeiro, who left the Orioles and signed for the Rangers. The Orioles offered more money, however Texas has lower taxes, and the net effect of moving there would be the same as staying in Baltimore. I’m not saying that players are motivated by money, but taxation does play a role in free agency and where players decide to go. If Teixeira stays and lives in California to continue to play for the Angels, he’ll have a 10% state income tax for starters (and governor Arnold Schwarzenegger is threatening to raise taxes again.) Teixeira might opt to move east (and take a smaller contract) to some place like Baltimore, where the cost of living is much cheaper than on the West Coast.

Any ways, to read the news, I understand that Obama’s taxes won’t affect the players that much (the best quote I saw was “they’ll get by.") However what the news won’t tell is that these taxes will hit two groups: small businesses representing the agents, and the players drafted next June. As to what will happen, we don’t know. However if anything, we can expect total compensation for contracts to rise going forward. Naturally this is the easiest way to offset a tax increase, outside of passing the costs onto the consumer.