When players and owners put pen to paper on the last collective bargaining agreement, the hope seemed to be that a combination of revenue-sharing and a luxury tax would work in concert to allow all organizations to field competitive teams. The players went along with the traditional formula of underpaying minor leaguers, and locking up younger players for pre-arbitration (3 years, or at least 2 years if you were a Super 2 - including a minimum 86 days and being in the top 22% of your same-year peers in service time in the most recent season). That was followed by three more years of arb eligibility.
But after six years, all those players who had not already signed long-term deals would be free agents. They would have reached the open market, competing to divvy up all that shared money, with at least a few teams pushing up to - and past - the luxury tax.
Teams weren't supposed to make deliberate decisions to sacrifice on-field performance in the hope of accumulating cheap young players, rising in the draft (and international bonus pool money), trading away players in their second- or third-year of arbitration for lower-level flyers. The recent success of Kansas City and Houston employing that strategy to draft or trade veterans for high-end controllable talent, then supplementing that core with an expensive free agent or two, and winning a World Series, has not helped matters.
For when a team or two employs that strategy, it gives them an edge in the construction of a future ballclub, at the price of fielding their best possible current team. When over half the league simultaneously employs that strategy, you end up with a lot of very poor baseball - and a lot of veteran players seeking out roles on the few teams remaining who will even consider employing them.
How do we fix this? How do we simultaneously bring in new players, reward veterans, encourage analytics in personnel, and avoid the bust-and-build strategy? There is no one answer, but rather, a combination of factors, that seem necessary.
A spending floor - Every team would have a requirement to spend a percentage of revenues, approaching 50%. This idea would promote the service of free agents to make sure teams spend sufficiently. It would also allow smaller-market teams to creatively invest in arb- and pre-arb extensions to give their teams financial and personnel stability. I can imagine owners neither wish to advertise their revenues or their utilization of those, or have their hands tied in deciding how to construct their teams. How can we be required to spend money on players whose contractual obligations might serve to block a simultaneous core of younger players more in need of big-league development?
Given the disparity in revenue from top to bottom, one could also imagine a scenario where this could lead to unfair monopolization. Are the Dodgers now required to spend twice as much as other teams? Aren't we going to hit a point where the floor for the top teams comes dangerously close to the luxury tax we don't want them to spend beyond? We Twins fans (as most other teams not pushing the luxury envelope) have seen some pretty questionable roster moves made solely based on economics and options remaining , but one can imagine a team having to retain a $12 million albatross rather than promote a rookie in order to stay above sea level.
Draft order and draft compensation for lost free agents - I suggested a lottery system for the first three rounds in an earlier article. I saw another suggestion that the team that came closest to the playoffs would pick first, on down to the worst non-playoff team, and then finally the playoff teams from worst to first. The concern here is that teams could easily be stuck in hellish mediocrity for a long time, unable to select the top draft picks, and unable to elevate their seasons, perhaps because of a single poor long-term signing that weighs down payroll for seasons to come.
I will confess that I like a little competitive imbalance - races in which all drivers have the same exact car are not interesting to me. Even with revenue-sharing, a luxury tax and a spending floor, some teams are going to be more able to sign premium players than others. That is fine with me - it is when this practice is combined with the lack of a spending floor and half the league serving as a development pool for the top 8 teams that it maligns the sport.
Many other ideas have been floated - decrease the amount of time until free agency. Decrease the amount of time until arbitration eligibility. Increase the pay of every level of minor leaguers, and the minimum salary for anyone making a big-league club.
Some ideas promote greater interest in the sport from a less-patient audience (the "bigger pie" theory) - fewer trips to the mound. A pitch clock. A 3-batter minimum for any pitcher. The universal DH combined with a 26-man roster with a 13-pitcher maximum (wait, you just killed the LOOGY but you want to double the number of jobs for the aging slugger?). A much smaller roster expansion in September, so late-season games don't become a substitution-fest. An international draft. Major league free agency taking place all in the week after the Super Bowl. I'm not convinced personally that drastic changes to the sport will do more to bring in new fans than it will to alienate traditional ones, though common-sense pace-of-play tweaks seem justified.
Of all the items out there, to me, the salary floor is the key. Simply by requiring a certain amount be spent by each team allows minor leaguers to survive, young major leaguers to be compensated earlier and more highly, and still retains a share of revenue that every team is going to need to spend on the accumulation of veterans. All the other competitive balance measures fail if not coupled with a requirement, at least, to try.