If the Tuesday night deadline is not reached, MLB has warned that the season will not be a full 162 game schedule.
The drawn-out stalemate between MLB and its 30 ownership groups and the MLBPA continues to threaten the 2022 season. According to reports, the key sticking point between the two sides is the competitive-balance tax threshold (CBT).
Why Does the Competitive-Balance Tax Matter?
The CBT is a mechanism that was introduced in 1997 by MLB to purportedly decrease the on-field discrepancy between the wealthiest and poorest teams. For each dollar a team’s payroll exceeds the CBT threshold, they are taxed a percentage of the figure. A portion of the tax is then redistributed to the teams that did not exceed the CBT.
MLB, unlike all other major professional sports leagues in the United States, does not have a salary cap.
The current structure was implemented in the 2002 CBA where each consecutive season above the threshold leads to an increased tax rate that is capped at 50% after four seasons. 50% of the tax is then redistributed to teams that did not exceed the CBT.
The question remains if the CBT has had its purported effect and if it was necessary in the first place. Spending and winning have never had a strong correlation in the MLB, unlike in major European football. In fact, the standard deviation in team winning percentage between teams has grown since the current CBT structure was implemented in 2002 compared to the previous 15 seasons (1987-2001).
The CBT has become the most contentious part of negotiations due to the economic impacts it has had on players and, by extension, the owners. While MLB teams are not prevented from exceeding the CBT, almost every organization uses it as a de-facto salary cap and few have exceeded it significantly over the past two decades.
In practice, the lower the CBT threshold, the less money players make, and the more money the owners make.
The seasonal thresholds for the CBT are not tied to revenue but negotiated by the MLB and MLBPA leaving the two sides tens of millions of dollars apart.
The MLPA proposed a $238 million threshold for 2022 that would reach $263 million in 2026. The owners bumped their initial offer of $220 million to $228 million for 2022 but proposed a $238 million threshold for the 2026 season.
To exert leverage over the MLBPA, MLB has repeatedly used arbitrary dates to start removing games from the schedule if an agreement has not been reached. The loss of games will affect player salaries and service time and could create another hotly contested topic for negotiators.
The owners locked out the players on December 2, 2021, and waited until February to begin negotiations.
23 of 30 teams need to agree to a proposal, as well as the MLBPA, for a new CBA to be ratified.