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In defense of the salary cap

Owners are already treating the luxury tax as a soft cap, so why not move to a model the other major sports leagues have proven works?

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World Series - Atlanta Braves v Houston Astros - Game One Photo by Bob Levey/Getty Images

I’m beginning to warm to the idea of a salary cap.

Now before you run and grab your torches and pitchforks ... hear me out. MLB is the only one of the four major sports leagues without a de jure salary cap. The problem is, that hasn’t stopped the majority of owners from treating the Competitive Balance Tax (CBT) system as a de facto salary cap. So if they are going to continue regarding the luxury tax as a soft cap, why not go the full nine yards and institute a hard cap?

Of course, a hard cap cannot exist without a salary floor, and that is at the heart of the proposal I’d like to discuss today. More and more, owners are prioritizing profits above all else, usually achieved by cutting costs. Therefore, agreeing to a hard cap is among the most valuable bargaining chips the union can offer in exchange for gains in other areas of the CBA. A gain, for example, such as a mandatory spending minimum that prevents teams like the Pirates and Guardians from running out payrolls barely surpassing the $60 million mark.

One of the core dilemmas facing MLB in recent years has been competitive balance, or rather, lack thereof. Because there has never been a salary floor, teams are free to depress payrolls as low as they see fit. In fact, they are incentivized to do so. Fielding a non-competitive team not only keeps costs low, but lands teams high draft picks that enable further reliance on cost-controlled players. Thus we have the preferred method of roster construction for too many teams around the league: tanking.

In nearly all the dialogue between owners and union, we’ve heard the issue of competitive balance thrown around. MLB rejected the union’s proposal to scale back revenue sharing because the owners worried doing so would harm competitive balance (miles may vary on this claim). Likewise, MLB shot down the union’s attempt to reduce the service time required to reach free agency because, they claim, players would be more likely to jump ship to bigger market clubs, again jeopardizing competitive balance. Both sides have proposed a draft lottery system to improve competitive balance by removing some of the advantage gained by tanking.

There are few more effective methods to increase competitive balance than forcing owners to spend on their teams. Of course they would never agree to a floor without a cap, but I would argue that a salary floor would do more good for increasing overall player compensation than a salary cap would do to harm it.

You see, the problem with competitive balance isn’t that the big market teams are spending willy-nilly above the luxury tax. Only the Dodgers and Padres exceeded the CBT threshold. The Yankees traded away practically half the farm to avoid paying the luxury tax. Five teams finished with a CBT payroll between $206.5 million and $209.5 million — like I said, a $210 million soft cap.

The problem is that too many teams aren’t even trying. They’re trading away their best players for the right not to pay them. 10 teams ended 2021 with a CBT payroll more than $100 million below the first threshold. A hard cap probably doesn’t change the behavior of the top-spending teams, but a floor sure as heck remedies the parsimony of the penny-pinchers.

What might this cap/floor system look like? The first bargaining session between MLB and MLBPA provides the framework, and believe it or not, it comes from the owners. That August, they proposed a $180 million cap and $100 million floor, with the tax collected from the teams that exceed the tax used in part to help the lowest-spending teams reach the $100 million.

Well, there’s a lot wrong with that plan, and it’s no surprise the players rejected it. First, $180 million is an unreasonably low cap, representing a 14.3 percent decrease from 2021 after the CBT threshold had risen every year since 2016. Second, and perhaps even more importantly, this system of funding the small market teams with the tax collected from the cap-exceeders incentivizes the low-payroll teams to spend even less. The union countered with a $245 million threshold and no floor à la the CBT system of the previous CBA.

I’d like to offer a revised system that I think addresses both sides’ concerns. The owners have also offered a redux of the previous system with modest CBT threshold increases — $214 million in the first year rising to $220 million across the life of the CBA. So, we have a glimpse of the spending bounds the owners are comfortable with, let’s put them to use.

How about a $100 million floor and $214 million cap rising to $220 million? Teams that exceed the cap or do not spend up to the floor are taxed at the same rate as well as subjected to whatever further punishment, be that surrendering draft picks, getting docked international bonus pool money, etc. Equal penalties for offenders on either side of economic transgression — teams are punished for not spending enough (win for the players) or spending too much (win for the owners).

Tanking has become such a pervasive, almost universally decried tactic that both MLB and MLBPA are seeking to improve competitive balance in the new CBA. At the same time, owners are worried that without proper safeguards in place, big market teams can far outspend the field, putting competitive balance equally at risk. Meanwhile, the union wants to secure maximum compensation for their constituents from owners who are finding new ways to avoid doing so. With a salary cap tied to a salary floor, both sides might just be able to have their cake and eat it too.