Getting in on the Action?

Fay Vincent in his pomp.

Former commissioner Fay Vincent has an op-ed in the Wall Street Journal suggesting that baseball players negotiate for ownership shares in their teams as part of their compensation. (The piece is behind the pay wall, but if you have a login it’s worth a look.)

Why would players prefer stock to cold, hard cash? As Mr. Vincent notes, it’s all about taxes. Capital gains — the kind of income realized when you sell shares that have appreciated in value — are typically taxed at a much lower rate than regular salary income. Since professional athletes earn major dollars and often have their entire lifetimes’ earnings collapsed into relatively short careers, optimal tax planning is extremely important.

Indeed, tax issues have received some attention in the sports media recently. When LeBron James chose to sign the Miami Heat this summer, the media was quick to note that Florida has no personal income tax. More recently, articles about the race for Cliff Lee’s services have recognized the fact that Texas is another state without a personal income tax. New York on the other hand does have an income tax (although it also has the Yankees).

For my part, I’m not sure most baseball players are suited to being significant corporate shareholders. People who own large amounts of shares in individual companies should be very knowledgeable about the businesses in which they are invested. Your typical player might have a good understanding of the on-field team, but I doubt he knows (or wants to know) everything about his team as a business. Also, the player would only get the lower tax rate on any gain in share value, as the initial payment of shares would be taxed at ordinary rates.

Still, for those players with an interest in the business of baseball, it could certainly make sense. It’s somewhat surprising that agents and teams haven’t gotten creative and tried this more than they have.

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5 years 6 months ago

Didn’t read the WSJ article because I don’t want to pay for it, so maybe some of this is discussed already… I’m 99.9% sure that MLB has a rule specifically prohibiting active players from buying or being given ownership shares in MLB teams, even their own.
It also raises a host of prickly issues: revenue sharing, trading a player mid-contract, whether a player with an ownership stake has any say over what his teammates get paid, etc.
The last thing we need is another way for millionaires to pay lower taxes. I’m OK with the idea of profit-sharing for players, but that’s more or less what the playoff bonuses are. One thing that might be cool is if a group of active players bought a franchise and ran it as a co-op, a la the old Players’ League, but the other owners would never allow it, and players have enough to worry about just playing the games without running a business as well.
I always thought baseball would have been better off if Fay Vincent stayed on as commissioner, now I’m not so sure.