Author: Tim Dierkes

Kyle Tucker reached an agreement with the Dodgers last Thursday, and thoughts have been swirling around my brain ever since.  Sometimes I have trouble sleeping because I keep writing this post in my head.  I’m fortunate enough to have this website as my outlet, so here goes.

It feels almost quaint that a year ago, the Dodgers signing Tanner Scott seemed to be the straw that broke the camel’s back.  I ran a poll around that time, asking, “Do you want a salary cap in the next MLB CBA?”  36,589 people responded, and two-thirds said yes.  It was later pointed out to me that I should have made clear that a cap comes with a floor.

If I had phrased it as “a salary cap and floor,” the number may have been even higher than 67.2%.  I also think that if I run the poll again in the coming weeks, an even higher percentage will vote for a cap, since the last year has seen the Dodgers win a second consecutive World Series and then add Edwin Diaz and Tucker.

The poll had a second question: “Are you willing to lose the entire 2027 MLB season for a salary cap?”  27,629 people responded to the second question, implying about a quarter of those who answered the first question either didn’t see the second just below it or didn’t care to grapple with the consequences of a salary cap.

For those who did respond, the second question was more evenly split: 50.18% said yes, they would lose the entire 2027 season for a salary cap.  That was stunning to me, because I view a lost season as a disastrous outcome that must be avoided.

Evan Drellich of The Athletic spoke to a source who made it clear ownership will push for a salary cap during upcoming CBA negotiations.  But according to Drellich’s colleague Ken Rosenthal, a salary cap is “considered highly unlikely by many in the sport” and “many player agents and club executives are skeptical games will be lost” in 2027.

Even if this round of negotiations doesn’t result in a cap, I think it’ll happen in my lifetime.  If necessary, MLBTR can adapt to that new world and hopefully become experts in explaining salary cap nuances.

The purported goal of ownership is not to get a salary cap, though.  It’s said to be parity, or competitive balance.  That doesn’t mean every team has an equal chance to win each year or dynasties are impossible.  It does mean that all 30 teams have roughly the same ability to sign top free agents and retain their own stars.  I think fans want a small market team like the Pirates to have about the same chance as the Dodgers to sign Kyle Tucker, or to be able to keep Paul Skenes.  Perhaps they want a world where teams can differentiate from each other based on drafting ability, player development, shrewd trades, and the intelligence of their allotted free agent signings, but not so much on payroll.

At the risk of stating the obvious, I do not think the Pirates can run a $400MM payroll and remain profitable.  The Dodgers reportedly reached a billion dollars in revenue in 2024.  Many teams, the Pirates included, generated roughly one-third of that.  This does not feel fair or good for baseball.

The Dodgers are so profitable that the “dollars per WAR” they’re willing to pay seems to be on another planet.  Tucker projects for 4.5 WAR in 2026, and the Dodgers seem to be valuing that at $120MM including taxes.  Even if they think he’s a 5 WAR player, they’re paying $24MM per WAR on him in 2026.  With the possible exception of the Mets, who are reportedly not profitable, I don’t think any other teams are willing to pay more than $12MM per WAR.

Which brings us to the desire by many for a salary cap.  A cynic might say that while owners and fans are aligned on the need for competitive balance, owners also love the salary cap idea because it will depress player salaries long-term, saving them money and increasing franchise valuations.

I consider a true “salary cap no matter what” stance from ownership to be the nuclear option.  If the true goal here is parity or competitive balance, then a cap is just a means to an end, and not the only option or factor.  That leads me to a series of questions.

Who should bear the financial burden of restoring competitive balance?

There is often an assumption that this whole problem should just be solved by the players making less money.  I certainly understand the logic that Tucker would be just fine making $20-30MM a year instead of $60MM.

But the truth is, the average MLB player does not accumulate the six years required to reach free agency (though he may get there with less service time if he’s released).  This is admittedly 18 years old, but this New York Times article points to a study suggesting the average MLB career length is 5.6 years.

Though I haven’t run my own study on the average length of ownership, I’ll venture to say it easily exceeds 5.6 years.  A case can be made that if one of these parties must be stewards of the game, making financial sacrifices for the greater good of competitive balance, it should be ownership.

I think MLB would argue that they can devise a salary cap/floor system in which players will actually earn more money in total.  Drellich reported last summer that commissioner Rob Manfred has suggested just that to players.  There’s a trust issue here.  Players may not believe Manfred is being forthright on that point or that they have a full picture of team revenue.  Furthermore, they may be wary that if they allow for a cap system that grants them a percentage of revenue that is advantageous for them now, owners will eventually chip away at that percentage.  Once a cap is in place, it will never be removed.

I believe common sense dictates that a model where players compete for a finite and defined pool of money means they will earn less as a group, though it may be distributed more evenly.  If players eventually earn less as a group, then they will be bearing the cost of competitive balance while owners pocket the difference.  I think we should at least entertain the opposite: big market teams redistribute more of their profits to smaller markets in the name of competitive balance.  More on that at the end of this post.

Why is a cap the default solution for so many people?

Having read the autobiography of MLBPA forefather Marvin Miller, I don’t think there was ever a time that MLB players were winning the PR war over teams.  I don’t think Miller cared.  Players’ salaries are well-known and huge compared to normal people, and they’ll probably always have an uphill battle getting widespread fan support to protect that.

These days, I doubt Tony Clark has a narrative he can sell to win over a majority of baseball fans.  He might say MLB actually does have competitive balance, or talk about attendance records, and World Series ratings, or suggest that some teams don’t try hard enough to win.  But Manfred will win the PR battle because he is acknowledging real widespread fan sentiment that the current system is unfair and broken.

I think it’s easiest to default to “baseball needs a salary cap” because the NFL, NBA, and NHL have one.  But why do those sports have a cap?  Is it because they tried many different approaches toward competitive balance and arrived at a cap?  I am admittedly not a labor historian of those sports, but I think it’s mostly that those sports’ players didn’t accidentally fall backwards into a Marvin Miller, and thus their unions caved to ownership demand for a cap.

I won’t speak to the competitive balance of other sports because it’s not my area.  But when people ask me whether I think an MLB salary cap would have the desired effect of competitive balance, my answer is yes.  If MLB could somehow get players to agree to a cap/floor system with a tight salary range (say, $20MM), I do think the financial advantages of certain teams would be snuffed out and the smartest teams would be in the playoffs every year regardless of market size.  I’d be interested to see what the payroll range would be and how small market teams would react to the floor, but the appeal is obvious.

Why does the current system have significant penalties for exceeding various payroll thresholds, but no apparent penalty for running excessively low payrolls?

There are people out there who say the “real problem” is certain MLB owners who won’t spend.  I don’t think forcing the Marlins to spend another $25MM on players this winter would solve the inherent unfairness of a competitor having triple their revenue.

Still, in each CBA, MLB has succeeded in increasing the penalties for going over competitive balance tax thresholds – thresholds that sometimes don’t increase even at the rate of inflation.  The initial highest tax rate was 35% on the overage; now it’s 110%.  I assume that if owners abandon their pursuit of a cap at some point, they’ll at least add a new “Dodgers tier” beyond the current 110% “Cohen tax.”

But in the name of fairness and competitive balance, why is it that no real penalties exist for running extremely low payrolls?

As Rosenthal and Drellich noted in November, “If a team’s final luxury-tax payroll is not one and a half times the amount it receives in a given season from local revenue sharing, it will likely stand a better chance of losing a grievance for not properly using its revenue-sharing money to improve on-field performance, which the CBA requires.”  They go on to add that “the Marlins were expected to be among the highest revenue-sharing recipients at roughly $70 million if not more,” which would necessitate a $105MM CBT payroll.

The CBA specifically says, “each Club shall use its revenue sharing receipts (including any distributions from the Commissioner’s Discretionary Fund) in an effort to improve its performance on the field.”  If a team falls short of the 1.5x threshold and the MLBPA files a grievance, it’s on the team to demonstrate that it did use its revenue sharing funds to improve on-field performance.

The Marlins ran the game’s lowest CBT payroll in 2025 at about $87MM.  Their 2026 CBT payroll is around $80MM right now.  The MLBPA’s grievances on this seem to go nowhere, lingering for years and getting settled in CBA negotiations.  I’ve seen no evidence a team has been penalized in any way for failing to meet the 1.5x floor called for in the CBA.  One can imagine that if low-spender penalties had been added in 1997 when the luxury tax came into being, certain ownership groups would not have purchased teams and other, better ones might have come in.

It’s often said that it’s much easier to tweak something that’s already in the previous CBA than add something entirely new.  Players have been agreeable to ever-increasing tax penalties, rather than a sea change to a cap/floor system.

And the game does already have a soft cap, ineffective as it may be against certain clubs.  But I’d argue that language is also already in place for a soft floor, at least for revenue sharing recipients (the Diamondbacks, Rockies, Reds, Brewers, Pirates, Marlins, Athletics, Mariners, Tigers, Royals, Twins, Guardians, Orioles, and Rays).  The MLBPA should fight for codified penalties for failing to meet the 1.5x floor, such as simply losing a portion of revenue sharing proceeds depending on how far below the team is.

A better-enforced 1.5x floor would not be a panacea.  That floor led to the A’s signing Luis Severino, but certainly didn’t keep Blake Snell away from the Dodgers.  But I do think that if revenue sharing money is spent well, it is a step in the direction of competitive balance.

Why do we know everything about player contracts, but very little about team revenue, team profitability, the distribution of luxury tax proceeds to teams, and especially revenue sharing?

We spend so much time on MLBTR talking about player contracts and the resulting team payrolls.  This information is readily available for just about every signing; some teams put contract terms right into their announcements.

Everyone knows how much players are making, and it often works against them in terms of public perception.  Conversely, we have to rely on an annual report from Forbes (or similar outlets) that provides valuations and estimates of operating income for MLB teams.

Forbes explains that the information used in their valuations “primarily came from team and league executives, sports bankers, media consultants and public documents, such as stadium lease agreements and filings related to public bonds.”  The valuations, and I assume operating income/loss numbers, exclude things such as “equity stakes in other sports-related assets and mixed-use real estate projects.”

For me, it’s pretty hard to know how profitable each team is.  This information is kept under lock and key by MLB.  The Braves are an exception because they’re owned by a publicly traded company, and sometimes their financials are used to form guesses about other teams.  Still, fans and journalists are left with inadequate information to determine what a team’s player payroll could or should be.

We also don’t know how much revenue sharing payors are paying out each year, or how much recipients receive.  Bits and pieces trickle out on rare occasion.  I mentioned the reported $70MM-ish received by the Marlins that Rosenthal uncovered.  And Sportico suggested that in 2024, the Dodgers paid “roughly $150 million into baseball’s revenue-sharing system.”

How much money in total is paid into revenue sharing each year?  We don’t know.  How much of that do recipients spend on player payroll?  We don’t know that either.  How about these huge tax bills teams like the Dodgers, Mets, Yankees, and Phillies have incurred – where does that money go?  The luxury tax brought in a record $402.6MM in 2025.  Drellich reported in 2024, “MLB and the players have always essentially split luxury-tax proceeds, with half of the money going to clubs in some form, the other half to player retirement funds.”  So perhaps $200MM of luxury tax money went to teams – how was that distributed specifically, and are there any rules about how it’s spent?

If you’d like to understand a bit more about how revenue sharing works, start on page 145 of the CBA.  The CBA says, “The intent of the Revenue Sharing Plan is to transfer among the Clubs in each Revenue Sharing Year the amount of revenue that would have been transferred in that Year by a 48% straight pool plan, plus such transfers as may result from distributions of the Commissioner’s Discretionary Fund.”  We get payors (like the Dodgers) and payees (like the Marlins) because “the Blended Net Local Revenue Pool shall be divided equally among the Clubs, with the difference between each Club’s payment into the Blended Net Local Revenue Pool and its receipt therefrom producing the Club’s net payment or net receipt.”

Does the Shohei Ohtani unicorn theory have any validity?

Let’s talk deferrals for a minute.  Many fans think this is a huge part of the problem with the Dodgers.

The Dodgers may be the villains of MLB right now, but agent Scott Boras is right there with them for many fans.  Between the contracts, press conferences, puns, and dad jokes, Boras does occasionally speak truth.  Boras made a statement to Drellich yesterday suggesting Shohei Ohtani is a unicorn in terms of ability and revenue generation:

“The Dodgers are not a system issue. They are the benefactors of acquiring Shohei Ohtani, MLB’s astatine. Short-lived and rare. No other player offers such past or present. Ohtani is the genius of elite performance and additional revenue streams of near $250 million annually for a short window of history. The process of acquiring Ohtani was one of fairness and equal opportunity throughout the league. A rare, short-lived element is not a reason to alter the required anchored chemistry of MLB. The mandate of stability to gain media rights optimums is the true solution to league success.”

Well, yes.  Peak Ohtani is perhaps the best and most unique player the game has ever seen, and he’s from a foreign country.  As such, he generates a huge amount of money for the Dodgers, which we likely won’t see again in our lifetimes.

Boras didn’t directly mention the other extremely rare factor with Ohtani: he wanted to defer 97.1% of his contract.  As I wrote a year ago, “money is worth more now than it is in the future, so players have not exactly been clamoring to wait until retirement age to receive 97.1% of their contract.”

But Ohtani is unique, and it made sense for him partially because of his endorsement money.  His decision did have a negative effect on competitive balance.  If deferred money had been outlawed, the Dodgers would have had to pay Ohtani a straight $46MM or so per year.  That they’re instead paying him $2MM per year right now means they have $44MM extra to spend because of Ohtani’s choice.  That is exactly why Ohtani proposed this structure to multiple teams: he wanted to free up money so his team would use it on other players and have a better chance of winning.

(EDIT: Reading the comments on this post, I realized I didn’t explain this well, because it’s true that the Dodgers have to set Ohtani’s deferred $68MM aside.  But my understanding is that they are able to invest that money, and I think having a much lower cash player payroll grants them a good amount of extra flexibility.)

Using Kyle Tucker’s $57.1MM AAV as an example, you could say Ohtani’s extreme deferral choice bought the Dodgers 77% of Tucker, probably good for 3+ wins by itself this year (unless you count Tucker’s tax penalty, in which case it’s more like 37%).

If I was the MLBPA, I’d probably just cave on this issue for the PR benefit.  Players like the flexibility of deferred money, but limitations could be added that would only affect the next Ohtani-type player who attempts to defer 97.1% of his contract, which is unlikely to ever exist.

In theory, could the competitive balance issue be solved entirely by ownership?

I have plenty of friends who love baseball and feel that MLB needs a salary cap.  Most of them don’t seem excited about canceling a season, though, so I’ve floated the question of whether there might be other ways to get competitive balance.

Revenue sharing is a longstanding effort to level the playing field.  As the CBA explains, “The Clubs and the Association recognize that the participation of two Clubs is necessary for the production of the on-field competition that the Clubs sell to the public. The net payments and net receipts required by this Article XXIV reflect a continuation of the amounts paid directly to the visiting Clubs and are in recognition of the principle that visiting Clubs should share, and in fact traditionally have shared, in the economic benefits jointly generated by the Game at another Club’s home field.”

Much like the players and the salary cap, in the last CBA negotiations in 2021-22, when it came to topics such as “getting to free agency and arbitration earlier, in revenue sharing and in service time,” MLB took “hardline stances,” according to Drellich.  In February 2022, MLB.com’s Mark Feinsand wrote, “MLB has maintained from the start that reducing revenue sharing and expanding Super 2 eligibility are non-starters for the league.”

It would seem, then, that both sides have at least one “non-starter.”  For the players, it’s a salary cap.  And for MLB, one of their various non-starters is revenue sharing.  Perhaps the players don’t have a seat at the table on how much money is paid into revenue sharing, how much each team receives, and how that money is spent.

We know that 14 teams are receiving revenue sharing, apparently topping out around the Marlins’ $70MM in recent years (that does not include luxury tax distributions).  We also know that the Dodgers have a level of revenue and profit that many feel are breaking the game.  Fans are very concerned about competitive balance, and the commissioner says he wants to address their concerns.

A salary cap is the widely-discussed solution, but one that could cause the loss of a season.  It’s worth noting, too, that regular season games and the World Series could get cancelled and owners still might fail in installing a salary cap, as happened in 1994-95.  In that scenario, we get all of the destruction of the game and none of the desired competitive balance.

Another solution, then, is for MLB’s 30 owners to solve competitive balance themselves.  On a rudimentary level, this would involve a team like the Dodgers contributing even more money into revenue sharing, and recipients being required to spend most of it on player payroll.

This is all theoretical, but there is an amount of money that Marlins could receive from revenue sharing that would enable them to sign Kyle Tucker for $60MM a year and still be a profitable team (whether that’s a good use of $60MM is a whole other story).  The competitive balance goal is for small market teams to be able to compete for top free agents and retain their own stars, I think.

Similarly, there likely is a level of taxation, draft pick loss, and revenue sharing (all basically penalties that form a soft cap) that would make the Dodgers choose not to pay $120MM for one year of Tucker.  In the present system, we have clearly not reached that level for the Dodgers, but that’s not to say it doesn’t exist.  Perhaps if the Dodgers end up moving from “wildly profitable” to just “profitable,” Guggenheim would decide to sell the team to an outfit that is comfortable with that.

You can guess why we’re not actually going down this path of MLB owners solving competitive balance themselves: they’d never agree to it.  Approval would be needed from 23 of the 30 ownership groups.  To me, this idea is just the flip side of a salary cap, to which the players have said they will never agree.  I believe both approaches to be equally viable toward improving competitive balance, except that neither side wants to be the one paying for it.

For those who read this entire post, thank you.  I’ll be interested to read your takes in the comments, and I encourage everyone to be respectful.  For Trade Rumors Front Office members, my mailbag will return next week.