President Donald Trump makes remarks to the press after signing the $1.5 trillion tax cut bill in the Oval Office

(Photo by Mike Theiler/Sipa USA)

Report: President's New Tax Law Makes Blockbuster MLB Trades 'Harder'

The tax could deter teams from acquiring an impact bat or top-of-the-rotation starter at the trade deadline

March 20, 2018 - 3:10 pm

Imagine how different the 2017 World Series would have gone if Justin Verlander hadn't been traded to the Houston Astros in the final seconds of the 2017 trade deadline. New tax laws signed by President Donald Trump could have MLB teams second-guessing their decision to acquire a Verlander-type player – because they soon may have to pay a tax for doing so. 

A report by the New York Times found that last year's new tax plan signed by Trump changed a small detail that would have imposed a large new tax on the Astros whent they made that trade for Verlander

"The law changed a corner of the tax code that mostly applies to farmers, manufacturers and other businesses that until recently could swap certain assets like trucks and machinery tax-free. But by adding a single word to the newly written tax code — “real” — the law now allows only real estate swaps to qualify for that special treatment."

The law, the Times explains, will bring in more revenue when manufacturers, farmers and other businesses trade assests for something more valuable. Like, when the Astros swapped rising prospects for the Detroit Tigers' elite pitcher. 

It's not just baseball, as blockbuster trades in the NBA are just as common as in baseball. Both leagues are hoping for revisions to be made to the law, the Times reports. 

Theoretically, the tax increase could deter teams from acquiring an impact bat or top-of-the-rotation starter at the trade deadline because of the extra costs. But the problem is that athletes don't have an exact value, such as other goods that are traded and sold throughout the U.S., so it's tougher to set a fair league-wide tax. The Times spoke with chief legal officer of Major League Baseball, Daniel Halem. 

"There is no fair-market value of a baseball player. There isn’t,” said Halem said. "I don’t really know what our clubs are going to do to address the issue. We haven’t fully figured it out yet. This is a change we hope was inadvertent, and we’re going to lobby hard to get it corrected."