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The Players are Leaving over $100 Million on the Table
If they care about parity, competition, money and preventing tanking, implement a floor
Back in late 2021, a report from The Atlantic dropped that said MLB proposed a salary floor coupled with a reduced luxury tax threshold. They wanted a $100m floor and the CBT to be reduced from $210m to $180m.
For those not entirely familiar, baseball doesn’t have a salary cap or a floor like that of other sports. It really only has a luxury tax, known as the competitive balance tax (CBT). This tax sort of acts like a salary cap, but it’s not like the NFL where teams *can’t* exceed it. If teams in MLB exceed the CBT, it simply means that teams would be taxed at a certain rate (20%). That rate, btw, goes up for each consecutive year that is exceeded:
Additionally, there’s a tiering system when it comes to the tax similar to the US tax system (progressive, intervals). More on this later.
In MLB’s proposal, the salary floor, in similar approach as the CBT, doesn’t act like a traditional floor like in the NFL. Teams would be penalized if they didn’t spend at or above the floor, however, this report didn’t have any details about what those penalties might be.
Now, in 2021, the CBT was $210m. There was only one team that exceeded that amount: the Los Angeles Dodgers. And boy howdy, did they exceed it. Payroll came in at a whopping $266m*.
True Blue LA reported that the Dodgers ended up having to spend nearly $37m in penalties due to the massive overspend. That’s essentially Gerrit Cole’s 2021 salary. There is a bit of a discrepancy on True Blue LA’s reporting ($286m) and Sportrac (*where I got the $266m number), but needless to say, the Dodgers blew past the CBT by well over $50m.
With teams being careful not to the exceed the CBT, it does act as a quasi-salary cap. I would imagine that a salary floor would operate similarly, assuming that the penalties are stringent enough. But that does assume that the teams can afford it. More on that research later in this piece.
How Much Are They Leaving on The Table?
I ended up crunching some numbers to determine just how much more money would have been available to MLB players in 2021 if a floor existed. And the results are rather staggering. Based on The Athletic’s report of a $100m salary floor and a $180m salary cap coupled with the numbers that Sportrac provides for the 2021 team payrolls, we get the following results:
7 teams would have exceeded the salary cap by a total of $172m
12 teams would have subceeded the salary floor by a total of $284m. 7 of those teams by less than $20m, 5 by more than $20m. With the worst offender being my beloved Baltimore Orioles.
If we assume that the extra $172m over the cap would have never been spent, but the $284m under the floor would have been spent, there would have been an extra $112m in team payrolls in 2021.
Here’s a screenshot from my Excel doc, but I am happy to share the raw file for those interested:
This would appear, on paper, to be a win/win for nearly everybody involved:
Players would get more money
Fans would get to see a better product from some of the teams that and would be better invested in watching or attending games
More teams would spend more money either on higher ticket FAs or on lower/medium tier players
There’d be more competition across the board - more parity = more competition
Can Teams Afford It?
That said, there is still the burning question of whether teams would spend $100m or not. So, let’s dig into that bit. Of the 12 teams that would have been below the $100m payroll, they are as follows:
Milwaukee Brewers $99,377,415
Texas Rangers $95,788,819
Kansas City Royals $91,595,545
Arizona Diamondbacks $91,232,929
Oakland Athletics $90,900,598
Detroit Tigers $86,348,945
Seattle Mariners $83,837,448
Tampa Bay Rays $70,836,327
Miami Marlins $58,157,900
Pittsburgh Pirates $54,356,609
Cleveland Indians $50,670,534
Baltimore Orioles $42,421,870
The question becomes - when was the last time each of these teams spent $100m (or more) on their team? I had to use a couple of sources: Sportrac and The Baseball Cube, FWIW.
Milwaukee Brewers - $136m in 2019
Texas Rangers - $146m in 2019
Kansas City Royals - $104m in 2019
Arizona Diamondbacks - $119m in 2019
Detroit Tigers - $115m in 2019
Seattle Mariners - $114m in 2019
Cleveland Indians - $108m in 2019
Baltimore Orioles - $150m in 2018
Miami Marlins - $103m in 2018
Pittsburgh Pirates - $99.96m in 2017 (close enough)
That leaves the Rays and the Athletics as the only two teams that haven’t spent $100m on their team. So let’s look at their highest team payrolls over the last 10 years:
Oakland Athletics - $93m in 2019
Tampa Bay Rays - $79m in 2018
So, what does this say to me? Well, clearly *some* teams suffered a financial hit in 2020 and 2021 due to the pandemic. It remains to be seen how much that will continue going forward. If a team is losing, they’ll continue to draw less attendance, less eyes, less merchandise sales, etc. If they start winning? These things will rebound.
To me, teams should be able to spend $100m on a ball club, year in and year out. There’s enough of a revenue sharing model coupled with changes to CBT fees that should allow this gap to close for teams like the Athletics, Rays (and even others).
What’s not to like?
If the players really, truly cared about preventing teams from tanking and better wealth distribution to the low/medium tier players, they should be head over heels happy for a salary floor.
While I’m happy that both MLB and the MLBPA agreed to a new CBA, it’s unfortunate that a salary floor won’t be in discussions again until it comes time for a new CBA. And that’s a shame.
Baseball deserves a salary floor.