Should the Competitive Balance Tax (CBT) or luxury tax under the Collective Bargaining Agreement (CBA) feature a higher threshold, find out the proposed CBT thresholds from MLB owners and players for 2023
The CBT is currently delaying the MLB and the Players Association in their labor negotiations for a new CBA deal.
Major League Baseball (MLB) 2023 Luxury Tax Threshold And Penalties
MLB CBT threshold offer:
2022: $220M
2023: $220M
2024: $220M
2025: $224M
2026: $230M— Mark Feinsand (@Feinsand) March 1, 2022
As the #Mets, #Phillies, & presumably #Yankees continue to push past the CBT threshold, the conversation shouldn't be about their spending – but about how MLB once again chose to not address teams that continue to refuse to.
Changing the top without adding a floor was senseless.
— Spotrac (@spotrac) December 9, 2022
MLB owners are not in favour of a higher CBT threshold, despite players seeing it as a soft salary cap.
What Is The CBT?
The CBT or Competitive Balance Tax is a measure that limits the spending capacity of MLB clubs. Although originally introduced into the CBA back in 1997, it underwent a three-year hiatus, before coming back in 2003.
The MLB originally introduced the CBT as a way of restraining the spendings of big-market teams and balance out competition in the league. However, as of now, there is no proof of the CBT ever balancing out competition. In fact, instead of playing out its purpose, players see the luxury tax as a soft salary cap.
According to the CBT rules under the CBA, MLB teams face a penalty if the combined annual average values (AAV) of their player contracts go beyond a particular season’s tax threshold.
The league taxes a club above that threshold on each dollar above that limit. Furthermore, if any club goes beyond that threshold consecutively, the taxes and penalties become stricter.
Given below are the now-expired CBA rules:
- First-time offenders will pay a 20% fine on its overage
- Two-time offenders will pay a 30% fine
- Three-time or more offenders will pay a 50% fine
Additional taxes for exceeding the threshold include:
- $20 million (12% surtax)
- $40 million (42.5% surtax)
- Over $40 million, (45% surtax) and their top draft pick moved further down
Once any team goes under the luxury tax threshold even for one season, the penalty level will reset.
How many MLB Team Have Exceeded The CBT Threshold?
Back in 2021, when the now-expired CBA was in use, the CBT threshold was placed at $210 million. Last season, only two teams topped that $210 million threshold the Dodgers ($285.6 million) and the Padres ($216.5 million).
Five other teams finished closely within $4 million of the $210 million threshold, they were:
- The Phillies ($209.4 million)
- Yankees ($208.4 million)
- Mets ($207.7 million)
- Red Sox ($207.6 million)
- Astros ($206.6 million)
The fact that all these five teams managed to stay under the CBT by just a few millions justifies the fact that the luxury tax can act as a salary cap.
Since being originally introduced in 1997, only nine teams have so far ever exceeded the threshold, they are:
- The Yankees
- Red Sox
- Dodgers
- Tigers
- Giants
- Cubs
- Angels
- Nationals
- Padres
Out of the nine teams, only six of them have exceeded the CBT multiple times.
Should The CBT Have Higher Thresholds?
Simply put, MLB Players are demanding a higher CBT threshold, while the owners are not in favour of it. Players have notably pointed out that the CBT growth rate does not match the MLB’s annual revenue.
Higher CBT thresholds would mean more spendings from big-market clubs, while it would mean the opposite for Lower CBT threshold. Moreover, when teams have to intentionally avoid exceeding the CBT threshold, clubs have to repress player salaries.
As such, owners prefer lower CBT thresholds in order maximize profits with decreased team payrolls and slashed player salaries. Moreover, since teams would continue profiting from MLB’s increasing annual revenue the profits further increase.
Latest Proposed CBT Thresholds From Owners And Players
Despite the MLB offering players with a slight increase from the thresholds, four MLB owners voted against it. Moreover, the players had also rejected offer anyway, deeming it as too low.
Given below are the most recent up-to-date proposals from the players and owners:
| Year | Players Proposal | Owners Proposal |
| 2022 | $238 million | $220 million |
| 2023 | $244 million | $220 million |
| 2024 | $250 million | $220 million |
| 2025 | $256 million | $224 million |
| 2026 | $263 million | $230 million |
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