March 4: Angels owner Arte Moreno, D-backs owner Ken Kendrick, Reds owner Bob Castellini and Tigers owner Chris Ilitch were all opposed to proposing a $220MM CBT threshold, per Evan Drellich and Ken Rosenthal of The Athletic. Drellich and Rosenthal add that some concerned owners have pointed to the spending of the Dodgers and the Mets as reasons for trepidation with pushing the luxury tax threshold further north. Martino tweets, rather unsurprisingly, that the Mets and the Yankees are among the teams open to a “less punitive” CBT setup.
The Athletic report also indicates that the players were particularly irritated when MLB proposed counting the cost of player meals against the luxury tax. Whether that’s among the issues recently raised by Blue Jays righty Ross Stripling isn’t clear, but Stripling contended that the league “tried to sneak some shit past us” in the proposal’s “fine print” during the wee hours of Monday night/Tuesday morning negotiations. Health insurance and other player benefits already count toward the luxury tax under the terms of the prior CBA.
March 3: Major League Baseball’s most recent offer in collective bargaining proved unpalatable to the Players Association, which rejected it despite knowing the league was likely to follow by canceling some regular season games. Various members of union leadership described that as an easy decision, with the MLBPA particularly dissatisfied with the league’s proposals on the competitive balance tax thresholds and the amount of money that would be allotted for the pre-arbitration bonus pool.
While the union found the offer too slanted in favor of the league, some on the MLB side apparently viewed the proposal as going too far towards the players’ asks. Andy Martino of SNY reports that during a video call between all 30 ownership groups and MLB leadership, four owners voted against the terms of the league’s final offer to the union on Tuesday. MLB needs approval from 23 of the 30 ownership groups to agree to their end of a new CBA, so the league was able to proceed with its offer with the assent of the other 26 owners.
Obviously, the terms of that deal weren’t sufficient to get the union’s approval. Yet some of the owners who were on-board with the league’s proposal Tuesday are evidently hesitant to move any further in the players’ direction. Martino writes that the call “made it clear” that more owners would oppose any offer that pushes the base CBT threshold above the $220MM mark the league put forth. The MLBPA, meanwhile, proposed a $238MM base tax marker in 2022. Martino writes that the union refuses to entertain any offer with a 2022 tax threshold lower than $230MM.
There’s currently an $18MM gap on the luxury tax for 2022, and the parties are even more divided on the marker’s long-term future. The MLBPA has sought more rapid escalation of the threshold over the term of a potential CBA than the league has offered. Under the parties’ latest terms, the $18MM gap would rise to a $33MM divide by 2026 — the players were looking to set that year’s figure at $263MM, while MLB proposed $230MM for that season.
Martino’s report sheds some light on the challenges that remain for finding a mutually agreeable settlement on the CBT, which has proven perhaps the biggest sticking point in negotiations. The union has pursued a rapid expansion of the threshold, pointing to team spending habits suggesting the CBT has served as a de facto salary cap for clubs. Last season, five teams finished with CBT payrolls within $5MM of the $210MM base threshold. Two clubs, the Dodgers and Padres, pushed their CBT number above $210MM. Given the union’s longstanding opposition to any form of salary cap, it’s little surprise they’ve sought to dramatically increase the numbers this time around.
The league, meanwhile, has pursued the opposite initiative. MLB’s early CBA proposals included harsher penalties for tax payors, provisions that would’ve presumably made clubs even more reluctant to do so. It dropped the push for tougher penalties this week, but it hasn’t shown the appetite for the kind of higher thresholds the union seeks.
As MLBTR’s Tim Dierkes explored in December, the past two collective bargaining agreements have seen limited growth in the CBT thresholds. From the time of the tax’s introduction in 1997 through 2011, it wasn’t uncommon to see the CBT jump by more than 4% year over year. Since 2012, however, that growth has slowed considerably. The base CBT marker has moved from $178MM that year to $210MM last season, an average hike of less than 2% per year.
The league’s offer to move from $210MM to $220MM would represent a 4.8% year-over-year jump. MLB would presumably posit that’s a meaningful enough increase to be favorable to the players. However, it was followed by no movement on the tax in each of the following two years and minor increases in each of the two seasons thereafter. The union, meanwhile, seems intent on pulling in a more dramatic spike in the tax threshold to somewhat compensate for its slowed progression between 2012-21.
It’s not clear how many owners are inherently opposed to pushing that number beyond $220MM. Martino’s report hints at the conflicted interests that can arise among the ownership groups themselves. Presumably, some large-market clubs that are planning to exceed the CBT anyhow would be on-board with the union’s efforts to encourage penalty-free spending. Others could be anxious to draw a harder line, particularly with the league reportedly content to miss a month’s worth of regular season games in order to pressure the union to move in their direction.
If more than three of the owners who voted yes on MLB’s latest proposal are stringently opposed to going further, the league may be hard-pressed to find the votes to go past $220MM this year. That’d seemingly be unacceptable to the union. If there’s that kind of fundamental disagreement on the luxury tax, it’ll be essentially impossible for the sides to put a new CBA in place.