The MLB already has a salary cap – it’s called the luxury tax

It’s been another slow offseason for baseball and one that’s gotten more people talking about the free-agency market. The lack of teams that were involved in star players like Manny Machado and continue to be involved in Bryce Harper has raised concerns of team spending and how much a team is willing to spend to win.

Some people have called for a salary cap, such as those in the NHL, NFL and NBA, but the MLB already has one. The luxury tax, also known as the competitive balance tax, has become baseball’s own version of a soft salary cap.

Over the last few seasons, teams such as the Los Angeles Dodgers, Chicago Cubs and New York Yankees have made major efforts to stay under the luxury tax limit. In 2018, only the Boston Red Sox and the Washington Nationals went over the $206 million line, but as this new season comes around, even the Red Sox are trying to shed payroll.

MLB: World Series-Boston Red Sox at Los Angeles Dodgers
GARY A. VASQUEZ / USA TODAY SPORTS / REUTERS

The luxury tax generates money that goes to the commissioner’s office. The first $13 million of tax money is used to fund player benefits, while 50 percent of what is left over is used to fund player Individual Retirement Accounts. The other 50 percent goes to the teams who do not exceed the tax threshold.

The problem is that the luxury tax now leaves over 100 players unsigned, including Harper. The latest labor deal, introduced last year, made exceeding the luxury tax for consecutive seasons have more of an impact on the wallets of top-spending teams. That’s why big spenders like the Yankees and Dodgers decided to hold back and be able to increase their spending in the coming seasons.

With reports of players ready to strike due to tensions with the league, according to Adam Wainwright, it may be the time that players actually ask for one. A capped system that functions similar to those in the NFL and NBA would require a percentage of revenues to be spent on player salaries, which in turn may raise the minimum spending required by each franchise. This would then allow players to receive part of the growing revenue involved in the MLB, which would include sports betting once legalized across the country. However, there’s no guarantee that executives across the league will agree to this. In fact, it’s believed it would be rejected by most.

Payrolls are down by the largest amount since 2004 in 2018. The $4.548 billion spent by the 30 major league teams is a $115 million drop-off from 2017. With free agents still on the market, the amount spent across the league to begin the season has yet to be seen.

If this offseason proves anything, it’s that players are becoming more demanding in their salary requests and even fewer teams are willing to give it to them. If a lockout or strike does happen, it may only be the beginning of the players aiming to turn the labor deal in their favor. Based on statements from players around the league, this season may be the season they start to do so.

 

Featured image: Alex Pavlovic

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