Minimum wage, new tax structure for the proposed payroll
The current collective agreement between MLB and the Players’ Association expires in December, so the two sides have entered early negotiations on a new deal in hopes of avoiding a lockout next season.
The old collective agreement was reached in November 2016 for the 2017 season and beyond, and there has been no lockout for MLB since 1994-95, when there were four stoppages. of work in season over a period of 22 years.
Commissioner Rob Manfred recently played down the tension that has built up between MLB and MLBPA over the past few years – particularly in 2020 – and believes the two sides have a relatively positive relationship.
Economic issues will be one of the main concerns for both sides for the new CBA, as they always are, and the league has already submitted a proposal that would have a drastic change on the teams’ payroll in the future if it is. approved, by Evan Drellich and Ken Rosenthal of The Athletic:
At a face-to-face collective bargaining meeting in Denver on Monday, Major League Baseball made its first proposal covering fundamental economics to the Players Association. The plan included a new team spending tax, which would both lower the first luxury tax threshold in sports to $ 180 million and charge teams that exceed that first threshold a higher percentage than they did. pay today. A compromise, according to those briefed on the league’s proposal, would be a minimum wage of $ 100 million in the sport.
The idea of a minimum salary is something that has gained momentum in recent years, as currently 12 clubs have a payroll of less than $ 100 million, which is hurting the MLB field product.
The proposed plan would also lower the tax threshold from $ 210 million to $ 180 million, and the tax penalty would increase as well. Currently, seven teams, including the Los Angeles Dodgers, have over $ 180 million in payrolls for the 2021 season.
The idea of lowering the tax cap will likely be rejected by the Players’ Association as it would limit player salaries and give more money to the owners of each team despite a record total turnover in 2019, the final season. full league.
MLB is still the only professional sport without a strict salary cap.
Current MLB Tax System
Under the current system, teams only have to pay a penalty tax when they exceed a payroll of $ 210 million, and that number has increased every year since 2017, when the last collective agreement was reached.
A club that crosses the threshold the first time pays a 20% tax on every dollar over $ 210 million and switches to a 30% tax if terminated for two consecutive seasons.
If they go past three or more seasons, the tax becomes a 50% tax until the club drops below the threshold.
The Dodgers have regularly started paying a luxury tax, but have also been careful to avoid doing so for more than three consecutive seasons.
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