One day after the Major League Baseball Players Association made its opening proposal in the ongoing negotiations for the next collective bargaining agreement (CBA), the league responded. Most notably, clubs and their owners, as widely expected, have proposed a salary cap beginning in 2027.
The league's proposal
Specifically, the league is proposing, via ESPN:
- A salary cap, including benefits expenses, of $245.3 million
- A salary floor, also including benefits expenses, of $171.2 million
- A 50-50 revenue split between clubs and players
- Local revenues would be centralized and also shared equally
Impact on teams
Because of the inclusion of benefit payments — i.e., pension contributions, health insurance, and so forth — determining which teams are presently above the proposed cap line and below the proposed floor isn't a simple matter. The best proxy for such payroll calculations is those used for the competitive balance tax (CBT), or luxury tax.
Those use the average annual value of long-term contracts in their calculations, but they also include the cost of player benefits. According to Cot's Contracts CBT payroll estimates, a total of nine teams would likely be above the proposed cap figure this season.
The Detroit Tigers, with a 2026 CBT payroll of $245.2 million, just barely miss the cap cutoff.
Also per Cot's, 12 teams come in under the proposed payroll floor, again counting benefits payments.
As Craig Goldstein points out, the amount needed to get all these teams below or above the relevant payroll thresholds amounts to an $18.7 million loss in aggregate player salary overall.
Since teams pay roughly $23 million in player benefits each year, you can think of the league's proposed figures as roughly a $222 million cap and $148 million floor on cash payrolls.
Background on salary cap debate
For its part, the MLBPA has been steadfast in its refusal to agree to a salary cap in CBA negotiation after CBA negotiation, spanning decades. There's no reason to expect any kind of different outcome this time.
Among major North American sports leagues, MLB is the only one without a cap on team payrolls. While the league is attempting to cast its calls for a cap as a means to promote competitive balance, the reality is that there's an increasing belief among the ownership class that not having a capped system is hurting franchise valuations.
Still, it's notable that the small-market San Diego Padres recently sold for a record $3.9 billion.
Revenue sharing contentious
Another point of contention is sure to be the calculation of the 50-50 revenue split. No doubt teams will want to carve out, for instance, the various and sundry real estate developments that have cropped up around ballparks.
The union, meanwhile, would surely argue that those developments would not exist without the lure of baseball games and players.
Another notable development is the league's call for centralized local revenues. Commissioner Rob Manfred has been managing tensions between small- and large-market owners over his desire to shift to a more national model of broadcast rights.
Flagship clubs that own their own regional sports networks no doubt needed persuasion to agree to increased sharing of those revenues, and the pursuit of a cap on the highest payrolls is probably essential to their acquiescence.
If that push for a cap fails, you may see renewed resistance from the clubs that carry the league as it applies to a nationalized broadcast model.
As well, any changes to the revenue-sharing system are subject to collective bargaining, meaning the players and their union must agree to them.
MLBPA's counter-proposal
In contrast to MLB's proposals, the union on Thursday proposed the following, in part:
- A "competitive integrity tax" levied against teams that don't spend a minimum amount on player payroll
- An increase of the minimum salary from $780,000 to $1.5 million
- An increase of the bottom competitive balance tax (more commonly known as the luxury tax) threshold