July 5, 2022

Finance & Economy

Let's Talk About Investment

A salary cap should be exactly what the MLBPA wants (just don’t tell the owners)

Table of Contents

It’s more like lukewarm stove league.

It’s more like lukewarm stove league.
Image: AP

The negotiations for a new Major League Baseball collective bargaining agreement promise to be arduous. There are a lot of issues to sort out and a lot of mistrust between the two sides, but on one longstanding bone of contention, there’s a reason for the players to finally give.

It would be poor negotiating strategy for the MLBPA to go to the table and propose it, because agreeing to it would represent a major concession, and accepting it can be used to wrestle better terms out of management in other areas. The time has come for the players to embrace a salary cap.

Owners already have floated the idea of a salary floor, and that’s the key. Their idea, naturally, is to put a salary floor much lower than the NBA and NHL have in relation to their salary caps, while also lowering the luxury tax threshold. They’re also tossing around hard numbers, like a $180 million upper limit before the tax kicks in, and a $100 million floor per team.

In 2021, according to Spotrac figures, there were 12 teams below $100 million in payroll, at a combined $278 million under that proposed floor. There were seven teams above $180 million, totaling $162 million in overages — more than half of that being the Dodgers at $91.2 million over their total payroll of $271,200,832.

Even if it was a hard cap at $180 million, and those seven teams had to get under (and all but the Dodgers act like the current tax threshold of $210 million is a hard cap), the result still would be an extra $116 million that the teams at the bottom would need to spend. Negotiating for a higher floor, higher tax threshold, or both would only mean more money going from owners to players, and that’s the name of the game.

As Deadspin’s Sam Fels noted, a 50-50 split of the $10.37 billion in MLB revenue from 2019, divided among 30 teams, would have meant a $172 million upper limit — a 21 percent cut from what the tax threshold was this year. Only one team in 2020 was above $172 million but below $180 million — the Padres — so even with that, and a hard cap, it’s still a model that would give $108 million more to players than they got this year — and again, that’s before negotiating a better deal as a result of giving in on something that the owners dearly want.

But this isn’t about what the system would do this past year or in any previous year. It’s about the future. In the last CBA, the luxury tax — sorry, competitive balance tax — triggers were set out years in advance. What the players need to go after is what other sports unions have gotten: a locked-in percentage of the league’s sport-related revenues.

Over the course of the last CBA, the luxury tax threshold only went up 7 percent. What do you think the MLBPA could negotiate it to over the next five-year span? How much do you think MLB revenues will rise over the same amount of time?

Local streaming of MLB games is on the horizon. In-stadium gambling is already here, but just getting started. MLB is getting into NFTs, and assuredly will want to cash in on other fads designed to separate idiots from their money. The players might not be able to get a cut of owners’ real estate deals in the areas around stadiums, but they can make sure that they’re in on the revenue streams that are just starting to flow. Accepting predetermined tax thresholds in the next deal would be folly.

We already know that even with the luxury tax threshold going down, instituting a salary floor would mean more money overall for the players. The fact that owners, whether by collusion or individual choices, are not spending past the luxury tax threshold, means that baseball already basically operates with a salary cap. By accepting a cap now, the players can get in on the sport’s burgeoning revenue streams at a locked-in rate. And since it would be a concession in bargaining to grant ownership one of its longest-standing desires, it’s a path for the union to wind up better off in other parts of the eventual deal.