10 Reasons Why MLB Is Pushing Now For A Salary Cap System

Economic Disparity

While one can debate that the problem in MLB is as much at the bottom of the payroll spectrum as at the top, the reality is that there is a significant gap. For 2025, the Dodgers had a Luxury Tax payroll of $417,341,608 compared to just $86,926,975, a staggering gap of $330,414,633.

Luxury Tax payrolls are critical because it’s the basis (along with amateur signing bonuses), that the league is using to set the proposed hard cap and floor for 2027 (a $245.3 million ceiling and $171.2 million floor). As the MLBPA has noted, using Luxury Tax payrolls doesn’t provide a clear picture of how the cap system would function, given that Luxury Tax penalties from clubs that exceed the thresholds and surcharges funnel back to low-revenue clubs as revenue sharing. Last year, a record $402,637,907 was paid in Luxury Tax penalties.

For 2025, the Luxury Tax payrolls broke down as follows, according to The Associated Press:

Figures are for 40-man rosters and include the average annual values of contracts and $17,209,029 per club for benefits and extended benefits, which include items such as health and pension benefits; club medical costs; insurance; workman’s compensation, payroll, unemployment and Social Security taxes; spring training allowances; meal and tip money; All-Star game expenses; travel and moving expenses; postseason pay; and college scholarships. Also included is $1,666,667 per team for the pre-arbitration bonus pool.

According to FanGraphs, current projections show a projected $407 million Luxury Tax payroll for the Dodgers, down from last year, while the Marlins are projected at $85 million.

So, it’s clear that the gap between the top and the bottom of the economic spectrum is vast. With the Luxury Tax system in place at the top, and no floor, the union for the players frames the situation as clubs pocketing revenue sharing rather than doing their best to compete. Currently, the owners are not entertaining a floor system without a cap.

“The System Isn’t Working”

Recently, Rob Manfred and league executives have focused on the payroll gap over the life of not just the current labor deal, but several rounds of bargaining to declare the Luxury Tax system is broken, regardless of whether Manfred said in 2024 that the system seemed to be working well.

“We have tried mightily over several rounds of bargaining to use a competitive balance tax to address competitive concerns, and sometimes, you got to admit you failed,” Manfred said early in June after the quarterly owners’ meetings.

When the current labor deal was reached, penalties for the top spenders were put in place to try to tamp down runaway spending, a difficult needle to thread, given that the players’ union has looked to avoid dressing up the current system so tightly that it begins to act as a true soft cap.

When examining the table provided above, when not accounting for inflation, the top payroll has increased by 36% from 2022 to the projected 2026, while the bottom has grown by just 30%. Why that is can be in the eye of the beholder. Are clubs at the bottom simply riding along, or are the clubs at the top simply blowing through the Luxury Tax thresholds and surcharges? Even with record Luxury Tax penalties, the Dodgers are the first club in MLB history to exceed $2 billion in sponsorship revenue, largely on the back of superstar Shohei Ohtani.

To add, a loophole has given the Dodgers a $2 billion revenue-sharing shelter, which has amplified calls for a cap system.

Fan Support For Increased Competitive Balance

If the Toronto Blue Jays had won the 2025 World Series (and let’s face it, if not for a trapped ball in Game 6, they might have done so), the chorus by fans around competitive balance may not be so loud. But with the Dodgers winning back-to-back World Series championships, coupled with Kyle Tucker’s mega-contract signing in the offseason, fan sentiment favors a system that increases competitive balance. As a recent The Athletic reader poll shows, how the league addresses it is not necessarily through a hard salary cap system. Still, Commissioner Manfred and league officials have taken this moment in history to say that a hard cap system will solve competitive balance, even though it’s debatable whether that outcome would occur.

Along the way, the league is approaching PR in a way they have never done before. For the first time, when one goes to MLB social media accounts, along with highlights of exciting plays, you’ll see the league making their case for a cap system.

Bruce Meyer, the interim executive director of the MLBPA, has said, “With the All-Star Game approaching, and what should be a celebration of our game, MLB seems to be spending most of its efforts on a political ad-style campaign trying to mislead fans into thinking that the game they love is broken to justify a system that would put more money in the owners’ pockets.”

How The League Is Framing The Cap System In An Attempt To Split The Ranks

By their design, hard cap systems pit classes of players against each other. Any dollar spent on one player is a dollar redistributed from another. The key target would be the “one percenters” of the league, the superstars that garner the mega contracts.

MLB is proposing what would be a record increase in the minimum salary from $780,000 in 2026 to $1 million in 2027 (+28%) for players with at least 2 years of service. Any player with zero or 1+ years of service will receive $1 million if they receive a full year of service ($900,000 minimum salary plus automatic $100,000 service bonus from the Pre-Arbitration Bonus Pool).

Many fans believe that the middle class would see increases, as well, but clubs would still prioritize the best players with the highest salaries. And if history is any indicator, the NBA, as well as the NHL, and the NFL, have seen the middle class pinched as pay gaps have expanded faster than the defined revenues within the cap systems.

The league’s proposals hit the rank-and-file the most, and it’s possible that the owners saw how the MLBPA’s executive committee recommended that the players reject the deal that is currently in place in 2022, only to see the union membership accept it.

Still, news from the NBA that based on the escrow system, something that MLB looks to emulate, each player will have 5.5% of their upcoming payroll dinged. That would be something that straddles all players across the payroll spectrum.

Political Pressure

As it has been well documented, President Trump can insert himself into the business of sports, and MLB’s push for a salary cap is no exception.

“If you don’t have a salary cap, you don’t have a sport, because they can’t help themselves,” Trump told reporters on June 5 aboard Air Force One. “Football has a salary cap. They should have done it a long time ago.

“It’s shocking, frankly, that they didn’t put a cap on many years ago,” added Trump, referring to the 1994-95 strike. “They had a chance to do a cap but they blew it.”

But for all the bluster, Trump has few – if any – levers to pull to make that happen. However, Trump could amplify the battle in the court of public opinion, of which the league currently has an advantage.

But nothing can force the players to accept a bad deal, as they see it. And while the National Labor Relations Board (NLRB) could ultimately become involved if there is a protracted lockout, history has shown that attempting to ram a labor deal on the players might not go as planned. At the end of 1994, the owners attempted to unilaterally implement a cap system by saying they had reached an impasse with the players. The MLBPA filed an unfair labor practice charge alleging bad-faith bargaining. In March of 1995, the NLRB voted 3-2 to seek a court injunction to reinstate the prior labor agreement.

The only political leverage available actually works against the owners.

If Congress got frustrated enough, they could work to pass a bill to remove MLB’s antitrust exemption as a means of forcing the sides to reach a deal.

Franchise Values Increase With A Cap

While the league has touted increased competitive balance with a salary cap system, one aspect of implementing it that would greatly favor the owners is an increase in franchise values. The league has seen franchise values in other leagues, especially the NBA, increase at a faster rate than in MLB. The reason franchise values increase under a cap system is the certainty of player payrolls within the cap.

“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 to the Athletic. “We’ll see what happens in Rob’s final negotiation.”

War Chest Advantage

Since the day the current labor deal was signed, both the league and players have been priming their war chests for the next battle that we’re now in the midst of. The Players’ Association has told the players to save while the union earmarks some funds it collects. According to ESPN, the union accumulated $415 million in U.S. Treasury securities, cash and other investments by the end of 2025, according to its LM-2 filing with the U.S. Department of Labor. Additionally, the players opted to allow the union to withhold group licensing checks since 2024 that could then be distributed to the players in the event of a lockout.

While the increased war chest for the players is substantial compared to what they had amassed for the 2021 lockout, it’s considerably smaller than what the league has in place for the 30 owners, as opposed to the thousands of players the MLBPA has to potentially address.

The league’s war chest is reportedly $2 billion, which could be used to offset loss of game revenues. And while losses of games also affect television and streaming broadcasts, those league partners still pay media rights fees even in the event of a lockout or strike. The league does have to rebate the partners back for the total lost games once the labor battle ends, but provisions are often at no or low interest, which incentivizes the owners to use those media rights on top of the war chest to try and win a battle of attrition with the players.

Leadership Upheaval At The MLBPA

There may be a faction of owners who see upheaval within the MLB Players Association as evidence of a wounded union, making the timing for a cap push more palatable now.

Bruce Meyer was unanimously voted the interim executive director of the MLBPA in February after Tony Clark suddenly resigned amid scandal. Clark and the MLBPA were under investigation by the Eastern District of New York for allegedly misusing licensing funds or equity to enrich themselves. The investigation also involved the NFLPA through their collective OneTeam Partners.

Meyer was the point person for labor negotiations on the current labor deal and is doing so for the upcoming CBA. But Meyer has never led a union before, so the negotiations are a test of whether he sheds the interim tag and retains the job permanently.

The union has repeatedly said that it would be grossly underestimating to view the change in leadership as an indicator of a weakened state. Meyer is known as a fierce negotiator for the players.

Manfred’s Legacy

Rob Manfred is the commissioner of MLB, but also at the behest of the owners. It only takes around eight owners to push for a cap system, and Manfred will be charged with trying to make that happen. But make no mistake, Manfred is in favor of one, and if he were to achieve the lofty task, he would become one of – if not the – most consequential commissioner in league history.

And if he holds to it, this will be Manfred’s last labor deal. He has said he plans to retire in January of 2029.

So, this labor deal could be a crowning part of Manfred’s legacy. He will be remembered for rule changes that have vastly improved the pace of play, as well as for unifying the league’s business arms through what is called One Baseball, but the cap system would be what history remembers most.

Actions Point To Trying To Break The Union

Theoretically, there is still time to reach a new labor deal before the 11:59 PM ET deadline on December 1st, but, even by Manfred’s own admission, lockouts are now the “new normal.”

But if the proposals MLB has sent to the MLBPA are any indication, they are looking to break the union.

Along with the hard cap, they are seeking to set limits on free agent contracts.

According to a recent league proposal, MLB proposed a “Cornerstone Player” advantage for the current team to allow them to offer the largest contract (similar to the NBA’s “Bird Rights”) to retain their superstars.

Teams signing a free agent will be restricted to a contract that covers a maximum of 5 seasons and a maximum first-year salary of 15% of the Cap ($202 million total guarantee for a deal starting in 2027). However, a team re-signing its own player may offer a contract covering up to 6 free agent years with a maximum first-year salary of 16% of the Cap (for a total of $265 million for a deal starting in 2027).

This would be an extraordinary shift on top of the hard cap system. And the league has sought even more.

The league is seeking a complete overhaul of the domestic and international draft systems that would cap signing bonuses at $150 million, remove high school players from eligibility, and establish an international draft, something the league has sought in multiple prior labor deals.

Collectively, what the league is seeking is such a radical departure that one has to assume that they see this moment as a time they could break the union. To do so would assuredly require losing most of – if not all – of the 2027 season.