Author Topic: Competitive Balance Tax  (Read 2428 times)

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Online PowerBoater69

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Re: Competitive Balance Tax
« Reply #50: January 14, 2018, 08:22:29 AM »

In the last round of CBA negotiations the players won on quality of life issues such as extra seats on spring training buses, clubhouse chefs, scheduling and extra days off, but lost on economic issues, such as the Competitive Balance Tax. The CBT, which imposes a “luxury tax” on payrolls that exceed a defined threshold, has become a soft cap that is hardening.

While revenues were skyrocketing, the 2016 CBA barely raised the threshold (this year, for instance, it’s $197 million, or only 4% greater than what it was four years ago) and increased penalties (surtaxes and a draft position penalty for the most extreme offenders).

The CBT alone has kept the Dodgers and Yankees out of major free agent bidding. Agents can’t even use them as leverage. Both teams have a business plan driven by staying under the threshold this year in order to re-set their tax rate in 2019 from 50% of the overage to 20%—a potential annual savings of about $12 million just on a potential Bryce Harper signing.

Over the past decade, the rise in the CBT threshold (32%) has not nearly kept pace with the rises in the average salary (52%) or revenues (67%). “The [cap] effect is real—very real,” said one agent. “It’s something that needs a very hard look next time around.”