Let’s talk about the big issue that MLB owners and players are so far avoiding in this week’s critical labor negotiations.
The Competitive Balance Tax, better known as the luxury tax, is a hot-button topic as the league and players union continue to meet face-to-face every day this week in Jupiter, Fla. The players want significantly higher luxury tax thresholds, while owners want close to the same tax as in previous years, though featuring significantly harsher penalties for exceeding it.
The two sides have yet to broach the CBT topic this week, but the players were unhappy with MLB’s latest luxury tax proposal because they say it would continue to incentivize teams to slash payroll. Under MLB’s latest CBT offer, there would be draft-pick penalties for teams that went over $20 million beyond the threshold. MLB’s CBT thresholds start with $214 million (up from the previous $210 million) in 2022, ending with $222 million by 2026 in the final year of the next CBA deal. Players are deeply underwhelmed by MLB’s incremental increase to the threshold. The union has proposed a luxury tax starting at $245 million in 2022, ending with $273 million in 2026. The union is asking for only financial penalties if teams exceed their proposed CBT threshold — rather than draft-pick penalties.
MLB’s CBT proposal will present harsher penalties for Steve Cohen’s Mets. As it stands, the Mets’ 2022 payroll is around $265 million. It will be the first time since Cohen purchased the Mets that their payroll will exceed the CBT. Under MLB’s current offer, the Mets would be around $51 million over the threshold, and they would lose their 2023 first-round draft pick, further damaging their already-mediocre farm system.
Cohen, being a newly minted owner, is in many ways urged to go with the flow and avoid ruffling 29 other feathers. But under MLB’s CBT proposal, the Mets would lose crucial draft picks that would otherwise help bolster the farm system, an area that Cohen has promised to significantly improve with his ownership regime. Under the union’s CBT proposal, Cohen and the Mets would just lose more money, not more draft picks. For the richest owner in MLB — wealthier than the next three richest MLB owners combined — the proposal he would prefer is a no-brainer. He is likely in the minority among owners who would prefer the union’s proposal.
Until MLB punishes teams for being non-competitive, or putting financial success over on-field success, bad teams will keep getting worse. Four teams lost 100 or more games in 2021, the Pirates, Orioles, Rangers and Diamondbacks. It was only the third time in MLB history that four teams lost 100 or more games in the same season. But the trend is going in the wrong direction. Since 2018, there have been at least three 100-loss teams in the same season (three in 2018, four in 2019, four in 2021). From 2007-2017, there were 11 100-loss teams combined across a decade of play.
Club owners saw that tanking worked for the Astros, a strategy that began over 10 years ago. Houston registered three consecutive 100-loss seasons from 2011-2013, resulting in No. 1 draft picks from 2012-2014. It has led to six playoff appearances in the past seven years, including a 2017 championship. For some teams, picking at the top of the draft is more compelling than trying to win every year — particularly because any fan backlash that may have occurred while their favorite team is tanking (including drops in attendance) largely disappears when that team starts being competitive again. And when teams are in the years-long process of tanking, they can also enjoy smaller payrolls, further repressing player salary.
And that is exactly the strategy that the Players Association would like to change. Teams and owners that are incentivized to tank, whether that’s through larger revenue sharing or other means of income that do not include ticket sales, are priority No. 1 for the players union in the current labor talks. Whether MLB decides to accept that teams being non-competitive has adversely impacted the game is crucial to the season starting on time — or the season starting after the Fourth of July.
