MLB’s new Collective Bargaining Agreement contains a previously unknown detail that could potentially affect teams that spend heavily, Baseball America’s J.J. Cooper writes. In addition to the luxury tax, the CBA includes two surcharge thresholds that could cost big spenders extra money and that could even lower their top draft picks.
The financial details of the surcharge thresholds were previously known. If a team spends above $217MM in 2018, it will receive an extra 12% tax in addition to the usual 20%, 30% or 50% luxury tax. If a team spends over $237MM, it will receive an extra 42.5% or 45% surcharge tax.
Beginning in 2018, there will be an extra penalty for teams in that second category, Cooper notes. A team that spends above $237MM will also have its top draft pick lowered ten spots, unless that pick is in the top six, in which case the team’s second pick will be lowered ten spots.
As Cooper points out, the new rule could be a significant deterrent to teams hoping to be among baseball’s biggest spenders, since teams are generally quite protective of early-round draft picks. The Dodgers, for example, have had payrolls above $237MM for the past several seasons. Under the new system, they would pay a very significant penalty for spending so heavily. Cooper notes that a $260MM payroll in 2018 would cost the Dodgers over $50MM in luxury tax, plus the lowered draft pick.