MLB has a competitive balance problem.
The Dodgers spent over $1 billion in free agency this past winter. This spending is unconscionable to most franchises. However, because of league leading attendance and a secure broadcasting deal, the Dodgers can flex their muscles every offseason to bring in the best players. They can also afford to defer compensation for their players, most notably Shohei Ohtani, who is deferring $680 million of the $700 million total contract beyond 2034.
While teams like the Mets, Dodgers, and Yankees routinely vie for the highest payroll, clubs like the Athletics, Rays, and Marlins battle to spend as little money as possible.
Kudos to the Rays – they are the only team who have made the playoffs the last five seasons with a payroll under $100 million in each season.
MLB has a “Competitive Balance Tax” – commonly referred to as the “luxury tax.” It’s not a hard salary cap. Teams can freely spend beyond the predetermined payroll threshold (for 2024, it is $237 million); at the end of the season, a luxury tax value is calculated and paid into the revenue sharing pool for the next season.
For comparison, the NFL and the NHL each have a hard salary cap. The NBA has a soft salary cap, with salary exceptions that allow teams to exceed the cap, and a luxury tax.
It’s time that MLB stops the freewheeling spending and agrees to a hard salary cap.
Tony Clark, the head of the MLBPA, has said many times that the players will never agree to a hard cap. However, he is doing his players who don’t play for the Dodgers, Mets, Yankees, Cubs, and Braves a disservice.
A hard cap will generate true parity among the teams. A hard floor will force teams to spend money and field competitive teams. Right now, there is no device in place to do this. If a team wanted to coast off of its revenue-sharing payment and broadcasting deal, it could do that.
There is nothing worse than being a fan of a team that does not have the revenue streams in place to contend. These teams have bad broadcasting deals, low attendance, and may need new stadiums (read: “more luxury seating options”).
These teams become farm teams for the marquee franchises of the league. Let’s look at the Rays. They traded Tyler Glasnow last summer to the Dodgers for prospects because the Rays could not afford to pay the market rate for the player when his contract expired. They continued their fire sale at the trade deadline, unloading Randy Arozarena, Aaron Civale, Isaac Paredes, and Jason Adam, among others. How devastating if you’re a Rays fan, or even if you are in the organization, to see top talent shipped off because of economics.
The Marlins are in even worse shape. After the eight deadline moves including sending Jazz Chisholm to New York, Miami has just over $15 million committed to active players! This is a major league team? 106 players in MLB have a contract with an AAV of at least $15 million.
This is downright embarrassing for MLB. You’ve probably seen “Moneyball” – the story of the early 2000s Oakland Athletics. We see this situation in real time with many teams. The rich get richer and go to the playoffs while the poor get poorer. It’s unfair to the players, it’s shameful to do to fans, and it’s a black eye for the league. It needs to change with the next CBA negotiations.
