As the current collective bargaining agreement ends this December, MLB have made a proposal for the next salary cap and luxury tax come 2022 and its threshold
Evan Drellich and Ken Rosenthal from The Athletic have reported that Major League Baseball (MLB) has introduced a proposal to decrease the luxury-tax threshold for teams and create a minimum salary across the league. This has come as a result of talks regarding the structure of the next collective bargaining agreement, since the current one expires in December 2021. Read on to know more about the proposed MLB salary cap and luxury tax.
What Is The MLB Proposal Regarding Salary Cap And Luxury Tax For 2022 Explained
While salary cap is the limit set on the amount a team can use to pay off the salaries of its players, a team pays the luxury tax when its aggregate payroll exceeds the predetermined amount set by the league.
That being so, the MLB proposal would force teams to start paying a tax after payroll exceeds $180 million. This amount has been lowered from the current $210 million. Anyone who crosses this line will have to pay at least a 25% tax, which was earlier set at 20%. However, it is also mandatory for the MLB teams to keep their payroll above $100 million.
What Role Does The Luxury Tax Play Here And Its Threshold?
Not only does the MLB now have a salary cap, but also a salary minimum. This would force small-market teams like Cleveland Indians, Pittsburgh Pirates and Miami Marlins to spend more to reach the minimum amount of $100 million and help balance the competition in the league. Currently, there are 12 MLB teams which do not meet this benchmark.
In such a situation, the luxury taxes will help fund the payrolls of these small-market teams. While only Boston Red Sox, Los Angeles Dodgers and New York Yankees exceed the current luxury tax line of $210 million; if this proposal is passed and the line shifted to $180 million, a total of nine teams will have to pay the luxury tax.
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