Major League Baseball is the only one of the four major North American professional sports without a salary cap for team payrolls.
Over the last couple of seasons in particular, many teams have begun to use the luxury-tax levels negotiated in the most recent collective-bargaining agreement as a sort of soft salary cap. Only two teams (the Red Sox and Nationals) went over the luxury tax in 2018, and several others, including the Cubs, made major efforts to stay under that limit. Here’s where the luxury tax goes, in case you are wondering:
Checks for the competitive balance tax, as it is normally known, go to the commissioner’s office and are due by Jan. 21. The first $13 million of tax money is used to fund player benefits and 50% of the remainder will be used to fund player Individual Retirement Accounts. The other 50% of the remainder will be given to teams not over the tax threshold.
$14,337,188 was paid in luxury tax in 2018, so the amount of money given to teams not over the threshold is $668,594, not much more than one pre-arb player gets paid in the current market. And $13 million funding player benefits, spread over 30 teams, is only $433,333 per team.
It was presumed at the time that the teams staying under the luxury tax, which included the Yankees, Dodgers and Giants, among others, wanted to stay under the 2018 limit so they could break the bank for the 2018 free-agent class that included Bryce Harper and Manny Machado, young talents who would presumably be worth big-money contracts.
Here we are two weeks before spring training, and not only are those big names still unsigned, but so are more than 100 other players.
One feature of the salary caps in the other professional sports leagues is also a salary floor. Teams must spend more than a minimum amount of money. If we had such a feature in MLB, some of those 100 players likely would have jobs right now. In 2018, per Spotrac, MLB payrolls ranged from $227 million (Red Sox) to $68 million (Rays). That means the lowest payroll was just 30 percent of the highest. (You might find other team payroll figures for 2018 elsewhere, but in general that lowest-to-highest percentage won’t change much.)
Here is where those figures stand in the salary-cap leagues. All of the links below are from the official league sites.
The NHL salary cap for the 2018-19 season will be $79.5 million, the League and the NHL Players’ Association said Thursday.
The salary cap for the 2017-18 season was $75 million, up from $73 million in 2016-17.
The lower limit for next season is $58.8 million and the adjusted midpoint is $69.15 million.
The NHL’s salary floor is 74 percent of the cap. The NHL has a hard cap, which, as you likely know, has resulted in the Blackhawks (among other teams) having to trade good players to fit under the cap.
The National Basketball Association today announced that the Salary Cap has been set at $101.869 million for the 2018-19 season. The tax level for the 2018-19 season is $123.733 million.
The Salary Cap and tax level go into effect at 12:01 a.m. ET on Sunday, July 1, when the league’s “moratorium period” starts and teams can begin negotiating with free agents. The moratorium period ends at 12:01 p.m. ET on Friday, July 6.
The minimum team salary, which is set at 90% of the Salary Cap, is $91.682 million for the 2018-19 season.
As you can see above, the NBA’s floor is 90 percent of the cap. The NBA has various “exceptions” which allow teams to go over the cap, and for now, I’m going to ignore that for purposes of this discussion.
The league will increase the cap’s total from $167 million to $177.2 million for the 2018 season, NFL Network’s Mike Garafolo reported, according to two team executives who were informed.
The NFL has a floor which is known as the 89 percent rule, but that doesn’t mean teams have to spend up to 89 percent of the cap every year. From that Cincy Jungle link:
This requirement must be the average amount spent over the four year spending period. The current spending period started in 2017 and will continue through 2020.
In other words, the Bengals could have to spend 88 percent of their cap last year and this year, but would have to spend at least 90 percent over the next two years.
The second requirement is that the league as a whole must spend 95 percent of its total cap space. So the average percent of cap spending must come out to 95 percent every year, or the remaining money will be given to the players. This rule also applies over the course of the spending period.
In other words, for the NFL, “it’s complicated,” but in general, teams are going to have to spend somewhere around 89 percent of the cap.
74 percent. 89 percent. 90 percent. You can see that the MLB’s smallest payrolls don’t come anywhere close to that. If we used the Red Sox’ $227 million figure as the “cap” for 2018, since it was the highest payroll, and 74 percent (the lowest of the other three leagues) as the “floor,” MLB’s payroll floor for 2018 would have been $168 million. Again per Spotrac, only eight teams (Red Sox, Giants, Dodgers, Cubs, Nationals, Yankees, Angels) spent that much in 2018. Or, let’s say we use the $197 first luxury-tax level for 2018 as the “cap.” 74 percent of that is $145.8 million. You can add five more teams that spent at least that much in 2018: Cardinals, Astros, Mariners, Blue Jays, Mets.
But that still leaves 18 teams that didn’t spend that much money in 2018. The way things are going, there might be even more teams than that who won’t spend 74 percent of the first luxury-tax level for 2019, which is $206 million. That would be a “floor” of $152.4 million.
Seriously, I’d think the players would be all over this, presuming the “cap” was set high enough. Requiring all teams to spend at least $152 million this year would probably get at least half the current free agents jobs.
What form a cap should take would, of course, be up to MLB and MLBPA negotiators. Maybe they’d have a hard cap like the NHL, which would appeal to owners wanting cost certainty. In that case I think players would want a floor higher than 74 percent of the cap. If the cap were more of a “soft” cap like the NBA’s, where teams could go higher with “exceptions,” maybe the floor could be somewhat lower.
MLB teams are awash in money shared via MLB’s huge new TV contracts that will bring more than $5 billion to the game and from MLB’s sale of BAMtech last year that brought $50 million to each team. Every one of the 30 teams could afford a salary floor that would bring the minimum team payroll up to around $150-$160 million. Right now the luxury-tax system is artificially depressing salaries — salaries went down last year for the first time in seven seasons.
I believe baseball needs a salary cap with a salary floor to bring it into line with the other major sports, and to force teams refusing to spend to do so. The exact form it takes, as noted, will have to be negotiated and perhaps it would be a cap with “exceptions” like the NBA’s.
And if MLB doesn’t explore doing this in the next round of labor negotiations, we could be in for a long, long year without baseball in 2022.