Is MLB a fair playing field for all 30 teams without a Salary Cap? The 2014 Los Angeles Dodgers and New York Yankees have enormous team payrolls while teams like the Rays and Astros this year are nearly $200M lower.
4 of the top 10 Major Baseball Player salaries today are paid by the Yankees. Not many teams generate revenues to fathom the possibility of affording that. Would a Salary Cap save the day for teams that will never be able to generate the massive income of the big market teams? Tune in, I suspect most everyone will be surprised by the answer to this controversial question!
Does MLB Need a Salary Cap?
Salary Caps have been implemented, both as a method of keeping overall costs down, and to ensure parity between teams so wealthy teams cannot routinely dominate by signing many more of the best players than their competition.
Star pitcher Clayton Kershaw recently inked a 7 year, $215 deal with the Los Angeles Dodgers. This year alone, the Dodgers have committed over $269M in player salaries. Last year it was worse. They paid over $279M in player salaries and some of those players weren’t even on the Dodgers roster or in Major League Baseball for that matter. Yikes!
To put it in perspective, the Tampa Rays total team revenue is $175M. Their team payroll is just over $77M and they don’t even have the lowest payroll in baseball.
This is only one of several eye-popping examples like this that can be cited.
Salary Cap and Luxury Tax
The large market New York and Los Angeles teams are dominating in the revenue department along with several other big market teams. A Salary Cap would surely prevent them from spending to buy the number of epic player salaries they dish out. The NFL, NBA, and NHL all went the Salary Cap route. Yet Major League Baseball chose to implement a Luxury Tax instead.
A salary cap is used by the NFL, NBA, and NHL an agreement or rule that places a limit on the amount of money that a team can spend on player salaries.
Luxury Tax is an arrangement in which teams whose total payroll exceeds a certain figure annually are taxed on the excess amount in order to discourage large market teams from having a substantially higher payroll than the rest of the league. The tax is paid to the league, which then puts the money into its industry-growth fund.
In 2014 it is set at $189M and will remain so through 2016.
Any MLB team that goes over the luxury tax cap for the first time in a five-year period pays a penalty of 22.5% of the amount they were over the cap, second-time violators pay a 30%, and teams that exceed the limit three or more times pay a 50% penalty from 2013 moving forward.
The cap limit for 2011-2013 is $178 million, and for 2014-2016 $189 million. No surprise, since 2003, the Yankees have paid 88.66% of all MLB Luxury Taxes, that comes to over $254M.
Case for a Salary Cap in MLB
A Salary Cap in the National Past Time would surely protect teams from spending past a ceiling that could be afforded by all. Every roster would then have an opportunity to be on equal footing. Smaller market cities would finally have a fair shot. After all, since big market teams can afford to pay a “luxury tax”, is it really much of a deterrent? Looking at the whopping size of the Dodgers and Yankees Luxury Tax buster payouts coming, it doesn’t seem to be at all. It’s not like they can’t afford it with their giant-sized revenue streams coming in.
Reality of Luxury Taxes in MLB
19 out of the past 30 World Series teams have won. During that same span, that is a greater number of teams than the NFL, NBA, or NHL. It’s no wonder the MLB Players Association is against them, let alone the New York Yankees investors who threatened a lawsuit should MLB switch to a Salary Cap. A Luxury Tax may deter some, but it’s clearly not deterring the large market teams or other good size markets with wealthy owners from driving up player salaries when it comes to Free Agency.
Should a Salary Cap Replace Luxury Tax in MLB?
Tune in to the podcast to hear the answer to this question and a solution I propose for an equitable way all MLB teams and players can protect themselves moving forward. Meanwhile let me know if you think Major League Baseball needs a Salary Cap or is doing better using the Luxury Tax? Looking forward to your comments or questions on this controversial topic covered on the Baseball Classics Podcast!
Baseball Classics Resources Used For This Podcast
Baseball Reference – www.baseball-reference.com
Major League Baseball Franchise Valuations – Bloomberg Dynamic Infographic
2014 Payrolls And Salaries For Every MLB Team – Article
2013 List of Highest Paid Major League Baseball Players – Wikipedia
Clayton Kershaw Contract Breakdown – Article
Dodgers Payroll – Article
Luxury Tax – Wikipedia
MLB Team Payrolls – Reference Data