Why Is There No Salary Cap in Baseball? (Answered!)
The salary cap is the predetermined limit on the amount of money teams can spend on players’ salaries in one year.
Fans of the major sports in the US are very familiar with the term. Almost every major league in the country implements these payroll restrictions.
I say almost because MLB still doesn’t have a salary cap. At least not the hard kind we see in other sports.
The question “why is there no salary cap in baseball” has been a hot topic for years, both among the fans and media pundits.
Some fans believe that introducing a salary cap would bring more parity among the teams and level the MLB playing field.
Others, however, disagree and feel that the league is fine just the way it is. Both sides have some valid arguments which I’ll explore below.
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Why Is There No Salary Cap in Baseball?
Many feel that the lack of a salary cap in baseball creates an unfair advantage for the rich teams.
Indeed, the payrolls of large market teams are often disproportionately large compared to the rest of the league.
We’ve seen the Yankees, Dodgers, or Red Sox pay their stars more than some other teams set aside for almost the whole roster.
This allows big-market teams to bring in superior talent by the sheer power of their bankroll.
Still, introducing a salary cap doesn’t necessarily mean that this will change.
While the NFL has managed to established some level of parity, the NBA which also has a salary cap is ruled by super teams from big markets.
There’s no guarantee that the same won’t happen in the MLB.
Even with a limit on their salaries, the best players may flock to big markets as they provide them more opportunities to earn money off-field.
Players are Firmly Opposed to Salary Cap
There’s one main stumbling block to introducing the limit on players’ salaries, the players themselves.
The salary cap would have to be a part of the Collective Bargaining Agreement and the Players Association (MLBPA) would have to agree on it.
Baseball is known to have the strongest and the most powerful players’ union of all major sports.
Like all unions, MLBPA is most interested in providing the best possible working conditions for its members.
And that includes securing the biggest salary possible.
Capping the amount of money a team can spend would obviously have an effect on how much a player can earn in a year.
Keeping the situation as it is, without a salary cap, allows players to earn ridiculous amounts of money.
Capping the salaries would likely be met with a player’s strike which would cause owners to lose a big chunk of revenue.
Are the MLB Owners In Favor of the Salary Cap?
In general, MLB owners are considered to be strongly in favor of the salary cap.
This would limit the amount they spend on players’ salaries and allow them to keep more cash in their pockets.
They have already tried a couple of times to introduce the salary cap and were met with strong push-back by players.
The most notable attempt was in 1994 when the players went on strike and the World Series were canceled.
However, people often overlook that there are owners who are perfectly happy with the situation as it is.
Implementing a salary cap would likely mean the introduction of the salary floor meaning that the teams can’t spend below the certain minimum.
At the moment, Some teams spend 20-30% of what other teams pay their players and are content with pocketing the gate receipts, TV money, and other revenue.
With salary floor, this strategy would no longer be possible.
What is the Luxury Tax in Baseball?
Although there’s no fixed cap, MLB has another form of control over the salaries.
The luxury tax, or the so-called soft cap, should serve as a ceiling for how much teams can spend for their payroll.
In 2021, the luxury tax threshold has been set at $210mm and it has been increasing in each of the 5 years.
The taxed amount includes the salaries of all 40 players on the full roster. However, it doesn’t include minor league players under contract with the franchise.
Spending above the luxury tax threshold triggers penalties for the franchises.
Teams who go ever the first set $210mm threshold are penalized with a 20% tax on the money spent over the limit.
Breaking the second $230mm threshold will trigger a 32% tax.
Going over the set amount from $250mm for the third threshold will cost teams 62.5% tax of the money spent over the cap.
What is the Minimum Salary for a Major League Baseball Player?
While there is no limit on how much a player can earn, the MLB has set a minimum salary in place to make sure that all players receive fair compensation.
The minimum yearly salary has been slowly, but steadily, rising, over the last 20 years. In the 2021 season, the minimum is $570.500, a $7.000 increase over the last year.
What is the Highest Baseball Salary Ever?
Without a salary cap, baseball players’ salaries often reach absurd amounts and they regularly appear on the lists of highest-paid athletes.
At the moment, 8 players have contracts worth $300 million or more.
Angels’ Mike Trout leads the way with the 12-year extension signed in 2019 worth $430 million.
However, the record yearly salary belongs to Yankees’ Gerrit Cole who signed a $365 million 9-year contract with the team also in 2019.
As you can see, there’s no straightforward answer to why is there no salary cap in baseball.
Just like in every other sport, the salary cap is a hot topic with several interested sides. The league, players, and owners all try to do what’s best for themselves.
With baseball slowly losing popularity battle with other major sports, it’s clear that something needs to be done.
It’s still unclear whether the salary cap is the solution.
The current Collective Bargaining Agreement expires on December 1st and we’ll enter the new seasons with a new CBA.
The MLB has already made its initial proposal to the MLBPA.
It includes a $100 million salary floor and a lowered luxury tax threshold with stricter penalties for the offenders.
So, we likely still won’t see a hard cap, but the league is trying to get close to it as possible.