Even With Holdouts, Path to New CBA Runs Through Competitive Balance Tax

The Competitive Balance Tax threshold has been central to the contentious collective bargaining agreement negotiations and the ending of the owners’ self-imposed lockout. The league and the players union have been further apart on that issue than on any of the other major ones, which helps to explain why last week’s optimism regarding a last-minute deal proved to be unfounded. Even with the owners’ offers to raise the minimum salary and improve the lot of pre-arbitration players — albeit not to the levels that the union was seeking — the minimal growth of the CBT threshold meant the owners’ final pre-deadline proposal was dead on arrival. Yet according to The Athletic’s Evan Drellich, four of the 30 team owners objected even to those threshold levels.

As noted several times in my coverage of the negotiations, the CBT threshold has not kept pace with revenues over the past decade and has increasingly been treated as a salary cap by owners. Recall this oft-circulated graph from The Athletic”

During the just-expired CBA, the threshold grew from $195 million in 2017 to $210 million in ’21, a gain of 7.7%. In the owners’ final proposal before commissioner Rob Manfred’s artificial deadline to preserve Opening Day, the threshold started at $220 million for 2022 and grew to $230 million for ’26, a gain of just 4.5%. It may make more sense to compare the five-year increments starting from the endpoints of the previous CBA; by those measures, the gain was 11.1% from 2016 ($189 million, where it had been stuck for the previous two years) to ’21, and as proposed would be just 9.5% from ’21 to ’26.

That kind of “growth” was never going to secure a deal with the players, and yet for four of the 30 owners, namely the Reds’ Bob Castellini, the Tigers’ Chris Ilitch, the Diamondbacks’ Ken Kendrick, and the Angels’ Arte Moreno, even that was a bridge too far. Note that this wasn’t simply a group of small-market owners or low-spending teams banding together. As Drellich reported, “[A]t least some of the four owners took stances based on their personal feelings toward costs and baseball’s economic system, sources said.”

If the four teams have anything in common, it’s a lack of success during the last CBA. Over the course of the past five seasons, the Diamondbacks posted a .476 winning percentage, the majors’ 12th-worst, while the Angels (.473) were the 10th-worst, the Reds (.458) the eighth-worst, and the Tigers (.390) the second-worst. This quartet’s 20 team-seasons produced just two playoff teams, the 2017 Diamondbacks and the ’20 Reds; they combined for just one playoff win, Arizona’s Wild Card victory over the Rockies.

But while we can lump those four teams together in their sub-.500 miseries, the stories with regards to their payrolls — their final payrolls for luxury tax purposes, not Opening Day payrolls, with all figures throughout this piece via Cot’s Contracts — differ:

The Angels ranked among the game’s top spenders, though they haven’t paid the CBT since 2004. The other three teams are clustered in the lower half in terms of total payrolls over the past five seasons, though their arcs to those rankings are quite different. It’s worth reviewing the specific situations of each team for a bit more perspective.

Angels

Despite their big spending since Moreno took over in 2003, the Angels haven’t ranked among the top five in total payroll since ’13, and haven’t been higher than eighth since ’18. Their win-now approach has generally been underfunded, with a payroll concentrated on pricey position players at the expense of pitching, and questionable choices even when they do sign free agents hurlers (Matt Harvey, Julio Teheran, José Quintana). They’ve played in just one postseason series since Mike Trout debuted in 2011: the 2014 Division Series, where the Angels were swept by the Royals. The team has finished above .500 only two other times during his tenure (2012 and ’15). It’s felt as though Moreno’s intent is to squander the prime of this generation’s best player, and perhaps that of Shohei Ohtani, too.

The Angels play in the majors’ second-biggest market; via the expired CBA, they had a Revenue Sharing Market Score of 175 based on population, income and cable households, meaning their market was 75% bigger than the average one; the two New York teams had the highest scores at 235, while the Dodgers were also at 175. While they’ve been positioned to outspend most of their competition in the AL West, aside from Trout, Ohtani, and a few other instances, they haven’t spent their money well; in fact, the $2.79 million dollars per win that they paid over the past five seasons ranks as the majors’ highest. Spending less, or forcing their competition to, won’t overcome that kind of ineptitude. Compare their spending to the Astros, who have a Revenue Sharing Market score of 93, and who spent slightly more over the past five years ($962.6 million, sixth in the majors) but paid just $2.21 million per win (17th).

Diamondbacks

As Kendrick, the desert Steinbrenner wannabe, has occasionally accompanied his bluster with bouts of spending money, the Diamondbacks have gone through a couple of boom and bust cycles in recent years. In 2014, they ranked 14th in payroll ($124.5 million) but after hiring Tony La Russa to be Chief Baseball Officer, cut payroll in midseason by trading Martín Prado, Brandon McCarthy, and Gerardo Parra, and crashed to 98 losses. After hiring Dave Stewart to be general manager that fall, they dropped to 27th in payroll and then 23rd — then shocked the industry by signing Zack Greinke to a record-setting $206.5 million deal in December 2015. It didn’t help immediately, as they dropped back to 93 losses and changed GMs again (to Mike Hazen), but in 2017 they returned to the playoffs for the first time in six years. Since then, they’ve receded in terms of both spending and competitiveness, trading Greinke to the Astros on July 31, 2019, and bottoming out with 110 losses last year.

Kendrick has been vocal about wanting a salary cap that’s tied to overall revenues in the fashion of other leagues. It’s not hard to see why he would want to tamp down spending and keep the threshold low given his competition. The Diamondbacks play in a division that features the game’s top-spending team, the Dodgers ($1.1 billion over five years, with CBT paid in 2017 and ’21), as well as the Giants (ninth over that span at $914.9 million, and twice in the top four, with taxes paid in 2017) and Padres (16th overall at $758.2 million, but with taxes paid for the first time in 2021).

Reds

After four straight seasons of finishing last in the NL Central with 94 losses or more, the Reds appeared to be headed in the right direction, with a strong rotation supplemented by the addition of free agents Nick Castellanos and Mike Moustakas in early 2020. The team even broke through during the pandemic-shortened season, setting a franchise record for payroll (before proration), finishing above .500 and making the postseason for the first time in seven years. But as quickly as things seemed to come together, they were taken apart, with the free agent departure of Trevor Bauer, the non-tendering of Archie Bradley, the salary-dump trade of Raisel Iglesias, and the lack of a plan at shortstop helping to cut costs but leaving the 83-win team just outside the playoff picture in 2021. Had they spent just a bit more aggressively, they might have returned to the postseason.

The Reds play in one of the majors’ smallest markets; in fact, in the last CBA, they had the lowest Revenue Sharing Market Score of any team (51). Their motive for keeping payrolls suppressed might be the clearest of the teams here, even in a division where the one potential heavyweight, the Cubs, has thrust itself into a rebuilding plan.

Tigers

The Tigers have done the biggest about-face from among this group. After paying the CBT in 2016 and ’17, they tore up their roster in the midst of the latter season, trading J.D. Martinez, Justin Upton, Justin Verlander and even Justin Wilson as they sank from 86-win contenders to 98-loss basement-dwellers. They’ve been dreadful ever since while cutting payroll around the bad contracts of Miguel Cabrera (who’s signed through 2023) and Jordan Zimmermann (now gone).

The change in direction owes plenty to the transfer of ownership from Mike Ilich to his son, Chris. The elder Ilich paid big money to keep Cabrera and Verlander surrounded by a well-stocked roster in pursuit of a championship that alas never materialized, while the younger one has overseen a rebuilding process that has yet to come to fruition. The signings of Javier Báez (six years, $140 million) and Eduardo Rodriguez (five years, $77 million) signal that the Tigers are ready to spend again, but even in a division where none of their rivals are much of a threat to cross the threshold, their reservations about doing so stand out.

If there’s a single factor that unites these four teams, it’s not particularly apparent, and perhaps it’s a mistake to search for patterns when it’s merely ownership’s fits of pique that unite them. It’s worth noting that despite these owners’ intransigence towards raising the tax threshold, unanimity isn’t required to strike a deal; it merely takes three-quarters of the owners (23 out of 30) to ratify a new CBA. Doing so will take a tax threshold higher than $220 million to $230 million, that much is certain.

On that note, on Sunday the Major League Baseball Players Association presented its latest proposal in writing to the owners, its first since the deadline to preserve the March 31 Opening Day passed. Via Drellich, notably they did not move on their CBT thresholds, which in their March 1 proposal began at $238 million for 2022 and rose to $263 million in ’26, an increase of 25.2% over the life of the CBA. Nor did they move on their minimum salary proposal (growing from $725,000 in 2022 to $805,000 in ’26).

In their proposal, the players did lower their ask on the pre-arbitration bonus pool from $85 million to $80 million, and indicated a willingness to incorporate non-monetary penalties into the CBT (such as the loss of a draft pick for a repeater) if the qualifying offer system is scrapped. They also agreed to grant MLB the ability to implement three specific rule changes with 45 days of notice, starting with the 2023 season: the implementation of a pitch clock, larger bases, and restrictions on infield shifts.

Apparently disappointed that the players still aren’t caving to their every demand, the league’s response was predictably cranky, with MLB spokesman Glen Caplin voicing their frustration:

“We were hoping to see some movement in our direction to give us additional flexibility and get a deal done quickly. The Players Association chose to come back to us with a proposal that was worse than Monday night and was not designed to move the process forward. On some issues, they even went backwards. Simply put, we are deadlocked. We will try to figure out how to respond, but nothing in this proposal makes it easy.”

The league claimed that the size of the union’s bonus pool offer during verbal negotiations last week had been smaller, hence “backwards”; the union strongly denied their assertion. This is the second time in a week that the league has used the word “deadlock” to describe negotiations, which makes it feel as though they’re flooding the zone with that term in order to lay the groundwork for an eventual declaration of an impasse. Doing so would likely mean an attempt to unilaterally impose their terms, which in turn could lead the union to file an Unfair Labor Practices charge with the National Labor Relations Board over the league’s failure to bargain in good faith. Suffice it to say that scenario would make for a real mess.

The path to an agreement still appears to run through a threshold that both sides can live with. The Athletic’s Ken Rosenthal reported that the league “is willing to increase the first competitive-balance tax threshold from $220 million if the Players Association makes moves in other areas.” The union thought it had done that with Sunday’s proposal. Lather, rinse, cancel some baseball games, and repeat.