By WAYNE REDSHAW
When are the owners of the 30 Major League Baseball teams going to wake up? MLB is the only major professional sports organization in North America that doesn’t have a salary cap like the National Hockey League or the National Football League.
Of course, MLB claims they do. They call it CBT (Competitive Balance Tax) or as it is referred to by many as a luxury tax. The CBT was introduced in 2003.
It is supposed to take the place of a salary cap. The CBT, so they say, regulates the total sum of money a given team can spend on their roster each season. A team is penalized if the combined annual average value of their player contracts exceeds that season’s tax threshold. A club is taxed on each dollar above the limit.
A club over the limit is subject to an increasing tax rate for consecutive years. For the first year, it is 20 percent. Two straight years the rate increases to 30 percent and for three or more consecutive years the penalty is 50 percent. And if a club dips below for a season, the penalty level is reset to 20 percent the next time they exceed the threshold.
There is also a surcharge for clubs that exceed the threshold by $20 million or more. For being over $20 to $39 million the additional surcharge is 12 percent, $40 to $59 million is 42.5 percent and $60 million plus is 60 percent.
Clubs who surpass the season threshold by $40 million or more shall also have their highest draft selection for the coming season moved back 10 spaces unless it falls in the top six. In that case, that club will have its second highest moved back 10 places.
Of course with this CBT there are loopholes and some teams, especially the Big Market Teams are taking advantage of it. This past week was a perfect example when the Los Angeles Dodgers announced the signing of 29-year-old free agent superstar Shohel Ohtani to an astronomical 10-year $700 million contract. And the big joke is the Dodgers are only being assessed $2 million per season for the next 10 years against the threshold instead of $70 million. That will reduce the Dodgers’ CBT payment considerably.
The Dodgers claim it was Ohtani’s idea to defer $680 million until 2034. Then he will receive equal payments of $68 million with no interest per year until 2043.
Whether it was or not, the Dodgers came out on top as it reduces what they will be shelling out for the CBT. With the bargain basement deal, the Dodgers can also build around Ohtani by picking up a few more free agents to stack their roster. They are apparently pursuing prized Japanese pitcher Yoshinobu Yamamoto.
It should be pointed out deferring is nothing new for the Dodgers. When they signed Freddie Freeman to a six- year $162 million deal, $57 million of the contract was deferred with payments starting in 2028 and ending in 2040. And Mookie Betts 12-year $365 million contract includes $115 million deferral from 2033 to 2044.
And the Dodgers aren’t alone. Other big market teams like the New York Yankees, New York Mets and the Philadelphia Phillies to name just a few have played same game. It’s not only a joke it’s a total farce.
It would be nice to have a level playing field for all 30 teams but don’t count on it for the foreseeable future. The millions of dollars they are shelling out is like pocket change to them.
(Wayne Redshaw has covered amateur and professional sports for over 60 years. He can be reached at wredshaw@icloud.com).
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