With Major League Baseball's owner-imposed lockout now imperiling the start of the regular season, the league and the MLB Players Association are expected to meet more frequently this week with the hope of reaching a new Collective Bargaining Agreement before Opening Day must be postponed. (The unofficial deadline to avoid that fate is believed to be Feb. 28.) One of the biggest sticking points in the negotiations thus far has been the owners' unwillingness to budge on the parameters of the Competitive Balance Tax (hereafter referred to as the CBT).
For those unhip to baseball's finer workings, the CBT is a mechanism that was first introduced as a luxury tax. In recent years, the owners have fashioned the CBT into the league's unofficial salary cap. You can read more about that transformation by clicking here, but the gist is that teams are penalized if the combined average annual value of their player contracts exceed the tax line. The further over the threshold a team is, the steeper the fine. Under the old CBA, teams that went more than $40 million beyond the tax line would even have their top draft pick moved further down.
Although those penalties are trifling for the franchises, they've served as an effective deterrent. Only six franchises have ever exceeded the CBT multiple times during its history, and just three of those teams have done it more than twice. The most common violaters have even made a habit out of ducking under the line every few years, so as to reset their penalties and avoid the additional multipliers tacked on for repeat offenders. Teams going over the tax line isn't a true problem, and yet the owners have prioritized adding teeth to the CBT in a way that overstates the threat.
The league's most recent proposal would increase the lowest threshold overage tax rate from 20 percent to 50 percent for first-time violators; the second tier would increase from 32 percent to 75 percent; and the final tier would increase from 62.5 percent to 100 percent. There would be no additional tax for subsequent offenders (as there was under the old CBA); there would, however, be new draft-pick-related penalties for crossing any of the three thresholds.