Sources: MLB proposes salary minimum funded by new tax on teams spending $180 million

Sources: MLB proposes salary minimum funded by new tax on teams spending $180 million

In a face-to-face collective bargaining meeting in Denver on Monday, Major League Baseball made its first proposal covering core economics to the Players Association. The plan included a new tax on team spending, one that would both effectively lower the first luxury-tax threshold in the sport to $180 million, and charge teams who exceed that first mark a higher percentage than they pay today. One trade-off, people briefed on the league’s proposal said, would be a salary minimum of $100 million in the sport.

Money collected from teams paying tax would fund certain club payrolls to the minimum, but details about the mechanism are unclear, including what penalties teams might incur if they do not reach $100 million, or what year the minimum would take effect.

The current tax system includes three spending tiers, the first of which is $210 million. Today, a team that goes over that amount pays a tax of at least 20 percent. In the new system proposed by MLB, the three tiers would still exist, and the new tax would be introduced below them — making for what would function as a four-tier system. Taxation would begin at 25 percent for the teams above $180 million, and the rates would climb from there.

MLB and the MLBPA declined comment. Per Cot’s Contracts, seven teams began 2021 with payrolls projected to be under $100 million, as calculated for luxury tax purposes.

The proposal included many other components which are are not currently known, leaving an incomplete picture. But player reaction to the luxury-tax element was not expected to be positive. Even in the absence of additional details of the proposal, the luxury tax is no small matter, and the Players Association almost certainly wants to see luxury-tax thresholds raised, not lowered, to incentivize spending.

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