The Top Reasons Why MLB Likely Pushes For A Salary Cap

For more than 50 years, owners in Major League Baseball have attempted on several occasions to implement a salary cap. There’s more than one reason for them to want one.

The current labor agreement between the owners and players in Major League Baseball doesn’t expire until December 2026. Still, talk of an owner lockout has already swirled, with a core reason being a push for a salary cap. There have been several attempts by owners to implement one, with the 1994-95 strike, which led to the cancellation of the World Series, being the last. Among the major North American professional sports leagues, MLB is the last to operate under a free market system. The league utilizes a competitive balance tax system, commonly referred to as the Luxury Tax, to penalize clubs that exceed a specific player salary threshold by imposing a tax.

The question is, why are MLB’s owners seeking a cap system? The answers are more than the obvious ones.

Cost Certainty

From an investment in player talent perspective, a cap system narrows the spectrum of total salaries dedicated to the roster. If the cap were tied to league revenues, then owners would have a clearer sense of cost certainty. There are problems with this concept, namely that MLB leans more heavily on local revenues than centralized revenue across all 30 clubs. However, in theory, owners would enjoy being able to calculate budgets more easily. Given that the regional sports network bubble has largely collapsed, knowing approximately what player salary budget is has value for the owners.

Increased Franchise Values

Perhaps the primary reason owners are seeking a salary cap is centered on franchise values. A comparison of sales in similar small markets tells the story:

• Tampa Bay Rays – $1.7 billion
• Portland Trail Blazers – Reportedly $4-$4.5 billion

Recently, the Pohlad family withdrew the sale of the Minnesota Twins from the market, as they didn’t receive the offers they were seeking.

“The perception around baseball is that without a salary cap, its values will lag behind, at least behind the NFL and the NBA, and that’s been the case,” said Steve Greenberg of Allen and Company, who often represents MLB teams in their sale processes. “We’ll see what happens in Rob’s final negotiation.”

Potential Competitive Parity

The owners have touted parity in the standings and playoffs as the primary reason the league would seek a salary cap, and MLB Commissioner Rob Manfred has continued to cite this as part of the reason.

“This is an issue that we need to be vigilant on,” Manfred has said. “We need to pay attention to it and need to determine whether there are things that can be done to allay those kinds of concerns and make sure we have a competitive and healthy game going forward.”

Owners have also publicly expressed interest in seeking a salary cap in the next round of collective bargaining.

“I wish it would be the case that we would have a salary cap in baseball the way other sports do, and maybe eventually we will, but we don’t have that now,” Baltimore Orioles owner David Rubenstein told Yahoo Finance at the World Economic Forum. “I suspect we’ll probably have something closer to what the NFL and the NBA have, but there’s no guarantee of that.”

Manfred has also talked directly to the players about the economics of the game. And while he has been careful not to mention a cap, he has tried to express that if salaries were tied to league revenues, using the past as an example, overall, the players would have made more. The operative word is “overall.” Maybe it should come as no surprise that Bryce Harper got in Manfred’s face when addressing the Phillies over the comments, given that the star players with the highest salaries in an uncapped system would be the ones to get hit the hardest under a salary cap.

As I’ve written previously, there is an illusion that a salary cap in Major League Baseball would create competitive parity from top to bottom. From the players’ perspective, they ask, if the system is so great for the players, why have they been willing to accept labor stoppages as something acceptable?

As much as there has been made about the likes of the Dodgers and Mets at the top of the player salary scale, a salary floor has been seen by many as more problematic. A cap system would force clubs such as the Pirates, Rays, and A’s to spend more, but would likely only do the minimum, just as they are now.

“There are things you can do to incentivize teams to spend,” said Bruce Meyer the MLBPA’s deputy director, on “Foul Territory.” “Last time in bargaining, we proposed numerous changes to the revenue-sharing system. We said, ‘Look, it doesn’t make sense right now. You’re giving all this money to certain teams, and they’re not spending it, and they’re basically putting the money away.’ And what we heard from the league was, ‘We don’t disagree on some of these things, but we can’t change it. We won’t change it.’”

Over the last decade, MLB has had the best championship parity of the major North American sports leagues. Currently, the team with the best record in all of MLB is the Milwaukee Brewers, which, according to Cot’s Contracts, is projected to have a 40-man 2025 player payroll of $114.5 million, ranking them 23rd out of 30. Other divisions see high spenders, but not the highest, leading. In the AL East, the Toronto Blue Jays rank 5th while the 2nd-place Yankees rank 3rd. The #1 ranked Dodgers are seesawing back and forth with the San Diego Padres, who rank 9th. The Tigers have the 16th highest in the league, but based on clubs in the AL Central, rank first in their division. The Astros rank #6 and are currently 3.0 games up on the Mariners in the AL West, who rank 15th.

Spending and spending effectively are key distinctions. As the Brewers are showing, you don’t need to break the bank. Conversely, the Braves (ranked 8 but 18 games out of 1) and Orioles (ranked 17th but last in the AL East) show that spending isn’t always buying wins.

Note, out of these last-place teams, two either are up for sale, or were (the Nationals were, and White Sox are), while the A’s continue to pull together investors to complete the construction of their new ballpark in Las Vegas.

The following is the ranking of all last-place clubs by projected 40-man payroll for the 2025 season, according to Cot’s Contracts.

• Pirates (26) – $85.8 million
• Rockies (21) – $124.5 million
• National (24) – $111.5 million
• Orioles (17) – $160.8 million
• White Sox (28) – $90.8 million
• A’s (29) – $111.6 million