So my beloved LA Dodgers have filed for bankruptcy protection as a result of the perfidious ownership of Frank McCourt, and major league baseball is contemplating the MLB equivalent of an FDIC bank seizure. Major league team owners as a class seem to have a higher proportion of roguish characters among their ranks than exist in the general population distribution, but you really have to go some to become the Angelo Mozzillo of baseball. The Dodgers have always been one of the most stable and profitable franchises in all of sports. It seems doubtful that the Dodgers will be a contender for the pennant for a long time, unless perhaps they move back to Brooklyn. Why not? Washington DC got the Nationals after MLB took over the failing Montreal Expos and decided to move the team south. LA already let its NFL franchise (the Lambs, I mean, the Rams) get away, after having kept the Raiders barely long enough to get new gang jackets ordered up.
Lost in all the news coverage and commentary is a part of the back-story of how the Dodgers came to this low pass. It turns out to be prime example of the destructiveness of the estate tax, a.k.a., the “death tax.”
The unassuming O’Malley family had owned the Dodgers for two generations when, in the late 1990s, Peter O’Malley confronted the unpleasant truth that his heirs would be forced to sell the team on his death because of the onerous death tax. The team was the family’s major asset. To take advantage of the various means by which the estate tax can be minimized, as wealthy people with diversified financial assets are able to do (like the Kennedy family, which has apparently paid less than $200,000 in estate taxes from the death of Joe on), required selling the team. O’Malley had no way of knowing the tax would be phased out for one year last year, which enabled George Steinbrenner’s family to avoid the same fate with the Yankees when Steinbrenner conveniently chose 2010 in which to croak.
The O’Malley’s originally sold the team to Rupert Murdoch, who seemed to want it as another front in his business rivalry with CNN and Atlanta Braves owner Ted Turner, and who can blame him. But once Turner receded from the media scene, Murdoch lost interest and sold the Dodgers to McCourt. (At least that sale worked out better than MySpace, which News Corp gave away this week for $35 million, after having paid $850 million for it a few years ago, making it obvious that MySpace was the social network equivalent of Betamax to Facebook’s VCR.)
In the absence of the estate tax’s distorting effects in financial planning, the O’Malley family would likely still be running the Dodgers in the same manner that had made it one of the classier franchises in all of major league sports. How many more businesses will be dismembered by the estate tax before Washington gets a clue?
P.S. Congratulations to our Minnesota readers. I see the Twins blanked the Dodgers last night 1 – 0.