How The MLB Luxury Tax Thresholds Have Changed By Year
There was a time when the MLB players’ union felt that a luxury tax is just a salary cap in another form, with is why they rejected such proposals back in 1994. Nonetheless, in the first post-strike collective bargaining agreement, executive director Don Fehr “finally said yes to the luxury tax – the first time the union agreed to any form of payroll restraint since free agency changed everything in 1976,” to quote Jon Pessah’s book The Game.
Though Pessah called that CBA a “huge victory for Fehr and the union” for other reasons, the owners did get their foot in the door on the matter of a luxury tax. The luxury tax wound up snowballing into a major problem for the players in recent years.
In that CBA, the tax thresholds were set like this:
- 1996: no luxury tax
- 1997: $51MM
- 1998: $55MM, a 7.8% increase
- 1999: $58.9MM, a 7.1% increase
- 2000: no luxury tax
- 2001: if MLBPA exercises its option for ’01, no luxury tax
Mechanisms were also put in place that could allow the 1997-99 thresholds to be higher, depending on where the fifth and sixth-highest payrolls in the game landed. Tax rates were set at 35% on the overage for ’97-98 and 34% for ’99.
While that CBA technically ended with two years sans luxury tax, it became part of all future agreements. The agreement that began in 2003 saw the luxury tax rebranded as the “competitive balance tax.” The MLBPA was able to achieve an initial major increase in the thresholds from where they left off in ’99:
- 2003: $117MM, a 98.6% increase from ’99
- 2004: $120.5MM, a 3% increase
- 2005: $128MM, a 6.2% increase
- 2006: $136.5MM, a 6.6% increase
For this CBA, a concept was introduced to penalize second, third, or fourth-time offenders with a higher tax rate. The first-time offender rates were set at 17.5% in ’03 and 22.5% in 2004-05, yet was removed entirely for ’06. 30-40% tax rates were set for teams that exceeded the threshold multiple times during that CBA.
For the CBA beginning in 2007, the tax thresholds were set as follows:
- 2007: $148MM, an 8.4% increase
- 2008: $155MM, a 4.7% increase
- 2009: $162MM, a 4.5% increase
- 2010: $170MM, a 4.9% increase
- 2011: $178MM, a 4.7% increase
Here after an initial “new CBA” leap, we start to see the tax thresholds moving up more slowly. The tax rates were set at 22.5%, 30%, and 40% and began penalizing teams for exceeding the thresholds in consecutive years, introducing the concept of teams “resetting” its rate by getting under the threshold for one season.
For the CBA beginning in 2012, these were the tax thresholds:
- 2012: $178MM, no increase
- 2013: $178MM, no increase
- 2014: $189MM, a 6.2% increase
- 2015: $189MM, no increase
- 2016: $189MM, no increase
Here, the players’ union made large concessions that had a compounding effect they’re still feeling today. If the MLBPA had achieved simply a repeat of the increases from the previous CBA, the 2016 tax threshold would have sat at about $232MM.
The next agreement introduced the concept of luxury tax tiers, adding first and second surcharge thresholds after the base tax one. For example, 2021 included thresholds at $210MM, $230MM, and $250MM. This CBA also introduced penalties involving the draft.
- 2017: $195MM base tax threshold, a 3.2% increase
- 2018: $197MM, a 1.0% increase
- 2019: $206MM, a 4.6% increase
- 2020: $208MM, a 1.0% increase
- 2021: $210MM, a 1.0% increase
While better than the previous CBA, the MLBPA again agreed to tiny increases in the base tax threshold. A simple 5% increase per year beginning in 2012 would have put the 2021 base tax threshold around $290MM, yet it sat only at $210MM. Not coincidentally, only the Dodgers and Padres exceeded a $210MM payroll this year. You can see the restraint this put on a club like the Yankees, which had a lower 2019 Opening Day payroll than it had in 2005.
In the current negotiations, MLB made an initial proposal that included lowering the base tax threshold to $180MM. According to Gabe Lacques and Bob Nightengale of USA Today, “In final proposals exchanged Wednesday, players requested a $245 million luxury tax threshold, with no progressive penalties for offenders; owners are offering a $214 million threshold, rising to $220 million in the final year of a five-year agreement.”
With a request to jump to $245MM, the MLBPA is proposing a 16.7% jump over the ’21 threshold, which would only begin to make up the ground they lost due to the non-existent or miniscule increases from 2012 onward. MLB, meanwhile, would like to increase the base tax threshold by 1.9% for 2022 and is proposing average annual increases of less than 1%.
How The MLB Minimum Salary Has Changed With Each New CBA
collectAs we enter Day 1 of the MLB lockout, one key issue in the current labor negotiations is where the players’ minimum salary will land. Given the union’s stated goal to get players paid more when they’re younger and more productive, it stands to reason that they’re seeking a more significant increase than usual. The minimum salary was set at $570,500 in 2021. It’s not known how much MLB proposed raising it in their most recent offer. Here’s a look at how the minimum salary has changed with each new CBA.
- 1968: Minimum salary went from $6K to $10K, a 66.7% increase
- 1970: $10K to $12K, a 20% increase
- 1973: $13.5K to $15K, an 11.1% increase
- 1976: $16K to $19K, an 18.8% increase
- 1980: $21K to $30K, a 42.9% increase
- 1985: $40K to $60K, a 50% increase
- 1990: $68K to $100K, a 47.1% increase
- 1997: $109K to $150K, a 37.6% increase
- 2003: $200K to $300K, a 50% increase
- 2007: $327K to $380K, a 16.2% increase
- 2012: $414K to $480K, a 15.9% increase
- 2017: $507.5K to $535K, a 5.4% increase
In the free agency era, the minimum salary had always increased by at least 15.9% until the just-expired CBA. There is historical precedent for a leap as high as 50%, which would mean $855,750 for 2022. An increase of 16% would be more in line with the ’07 and ’12 CBAs, which would set the minimum at $661,780. It should also be noted that the minimum salary typically increases each year within a CBA, with the ’20 and ’21 rates involving cost of living adjustments.
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Free Agent Prediction Contest Leaderboard Update
Our free agent prediction contest closed for entries on November 15th. To date, 17 of our top 50 free agents have signed. Of the 6,233 people who entered our contest, only three people have as many as eight predictions correct so far.
To follow along with the contest results, check out the leaderboard here. You can also check out how 11 participating MLBTR staff members are doing here. You can search for your own name in the contest results, and you can also click on anyone’s name to see their individual picks.
Enter The MLBTR Free Agent Prediction Contest
UPDATE: The contest is now closed. More than 6,200 people entered! The leaderboard will be available soon.
It’s time for the MLB Trade Rumors Free Agent Prediction Contest! Click here to enter your picks for the destinations for our top 50 free agents. The deadline for entry is TONIGHT at 11pm central time! You can edit your picks until then. Further contest info:
- After the window to make picks has closed, we’ll post a public leaderboard page so you can see who’s winning the contest as players sign with teams. We’re going to use entrants’ full names on it. So, if that concerns you, please do not enter the contest. Entries with inappropriate names will be deleted.
- We are also collecting email addresses, which I will use to notify winners.
- If a player signs between now and the close of the contest, that’s a freebie, but you still need to go in and make the correct pick.
- After you submit your picks, you’ll receive an email from Google Forms. In that email, you’ll see a button that allows you to edit your picks.
- We will announce the winners on MLBTR once all 50 free agents have signed. We will award $500 to first place, $300 to second place, and $100 to third place. We will also be giving one-year memberships to Trade Rumors Front Office for everyone who finishes in the top 15. Winners must respond to an email within one week.
- MLB owners are expected to lock out the players this winter, putting a freeze on transactions. The winners of this contest will be declared on May 1st, 2022, and any unsigned players will be excluded from the competition. If fewer than 30 players are signed at that point, the contest will be canceled.
- Ties in the correct number of picks will be broken by summing up the rankings of the free agents of the correct picks and taking the lower total. For example: Tim and Steve each get two picks correct. Tim gets Carlos Correa (#1 ranking) and Anthony Rizzo (#21 ranking) for a total of 22 points. Steve gets Marcus Semien (#6) and Eduardo Rodriguez (#14) for a total of 20 points. Steve’s total is lower and he’s ahead of Tim for tiebreaker purposes.
- I mistakenly forgot to change the Indians to the Guardians in the contest form. I’m going to leave that mistake to make sure I don’t break anything by trying to change it. Sorry about that.
If you have any further questions, ask us in the comment section of this post! Otherwise, make your picks now!
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Cardinals Execs On Pitching Needs, Shortstop Situation
At the GM Meetings in Carlsbad, California, Katie Woo of The Athletic spoke to Cardinals President of Baseball Operations John Mozeliak, as well as Vice President and GM Mike Girsch. The executives offered insight into the Cardinals’ offseason priorities.
Both execs cited pitching as the team’s primary need. Mozeliak spoke of the success of midseason pickups Wade LeBlanc, T.J. McFarland, Luis Garcia, J.A. Happ, and Jon Lester, and the need to replicate that depth addition. And Girsch noted the many 2021 Cardinal pitchers who are currently free agents, a list that includes LeBlanc, Garcia, Happ, Lester, Kwang Hyun Kim, Andrew Miller, and Carlos Martinez. The Cardinals currently have Adam Wainwright, Jack Flaherty, Miles Mikolas, and Dakota Hudson as rotation locks for 2022.
According to Derrick Goold of the St. Louis Post-Dispatch, “The Cardinals are looking for pitchers who they think can thrive with a superior defense behind them — which is most pitchers, but specifically sinkerballers.” Goold mentions Marcus Stroman as a potential target on the higher end, and Nick Martinez on the lower end. Martinez, a member of the Rangers’ rotation from 2014-17, pitched his fourth season in Japan this year and posted a 1.62 ERA in 149 2/3 innings. Other groundballers on the free agent market include Alex Wood, Clayton Kershaw, Jon Gray, and Yusei Kikuchi. The trade market could include Luis Castillo, Dallas Keuchel, and Sonny Gray.
Otherwise, Cardinals fans dreaming of a Trevor Story–Nolan Arenado reunion may want to temper expectations. According to Goold, Mozeliak said the shortstop market has “not been a focus for us” to this point. Both Mozeliak and Girsch made a point to defend Paul DeJong after a rough season, and to praise Edmundo Sosa‘s work. The execs made it clear they’re comfortable with internal options, especially with second/third baseman Nolan Gorman on the way.
Yankees’ Cashman On Carlos Correa, Anthony Rizzo
The GM Meetings are taking place in Carlsbad, California, and Yankees GM Brian Cashman spoke to reporters yesterday. Cashman said he has “some latitude” on the team’s budget, after talking to owner Hal Steinbrenner. The club was able to stay below the base luxury tax threshold of $210MM this year, effectively resetting as a first-time payor for future penalties – if something resembling the current system remains in place in the next collective bargaining agreement.
Cashman acknowledged to reporters that he’s already had talks with the agents for two free agent shortstops. Those players are Carlos Correa and Corey Seager, according to The Athletic’s Jim Bowden. ESPN’s Buster Olney is hearing that the Yankees’ pursuit of a shortstop will remain focused on elite players of this nature. Chandler Rome from the Houston Chronicle has more from Cashman on the Yankees’ interest in Correa. Cashman explained, “(Correa) is just a very talented player, obviously. Puts up numbers with the best of them. He’s obviously had an incredible career thus far. Certainly not afraid. He’s pushed forward, regardless of the circumstances. He’s clearly not afraid because (the sign-stealing fallout) has not affected his play.”
There’s been a sentiment that perhaps Yankees fans would not tolerate or accept Correa. That doesn’t seem to be Cashman’s primary concern, as the fans’ reaction “is not going to enter my calculus right now.”
Correa, who seems unlikely to sign before a potential December lockout, is reported to have received a five-year, $160MM offer from the Astros that seems more for show than anything. As the top player on the free agent market, Correa is in line for $300MM or more.
Cashman has also spoken to the agent for first baseman Anthony Rizzo, who appeared in 50 games for the Yankees after a July trade. The GM noted, “He obviously was really good for us, we feel, both on the offensive side and on the defensive side and on the leadership side, so he brings a lot of good things to the table. I know he liked it here, I know we liked having him, but nothing has gone past that.” Rizzo, 32, put up a 113 wRC+ for the Yankees. In projecting a three-year, $45MM contract, MLBTR took into account intangibles like Rizzo’s reputation around the game.
The Yankees still have an incumbent first baseman in Luke Voit, who was limited to 68 games on the season due to injuries. MLBTR projects Voit to earn $5.4MM next year, and it’s possible the Yankees move on from him. Voit’s troublesome left knee is “resolved,” according to Cashman.
Perhaps the most intriguing possibility for the Yankees at first base is a trade for Matt Olson of the Athletics. Olson, 28 in March, posted a 146 wRC+ with 39 home runs this year and is projected to earn $12MM through arbitration. According to Brendan Kuty of NJ.com, the Yankees have internally discussed trading for Olson.
The Yankees would also like to add some help in center field, tweets Jon Heyman of MLB Network. Aaron Hicks, who played in only 32 games this year, is still owed $41MM through 2025. Hicks, whose season ended in May due to wrist surgery, hopes to play winter ball, noted Lindsey Adler of The Athletic back in October. The Yankees filled the void this year with 38-year-old Brett Gardner, who recently declined his $2.3MM player option in favor of a $1.15MM buyout. The free agent market for center fielders also includes Starling Marte, Juan Lagares, Chris Taylor, Kevin Pillar, and eventually Odubel Herrera. The trade market could include Kevin Kiermaier, Ketel Marte, and Byron Buxton.
Offseason Outlook: Chicago Cubs
The Cubs traded away their core rather than extend them, and now the club is light on financial commitments as well as good MLB players. Is this winter the time to strike?
Guaranteed Contracts
- Jason Heyward, RF: $44MM through 2023
- Kyle Hendricks, SP: $29.5MM through 2023. Includes $16MM club option for 2024
- Wade Miley, SP: $10MM through 2022
- David Bote, 2B/3B: $13MM through 2024. Includes $7MM club option for 2025 and $7.6MM club option for ’26
Arbitration-Eligible Players (projections from MLBTR contributor Matt Swartz)
- Willson Contreras, C: $8.7MM
- Ian Happ, LF/CF: $6.5MM
Option Decisions
- Wade Miley, SP: exercised $10MM club option after claiming off waivers from Reds
Free Agents
When the dust had settled after the July deadline, the Cubs had completed eight trades. Of the nine players sent packing, seven are currently free agents, Trevor Williams might be non-tendered by the Mets, and the White Sox picked up Craig Kimbrel‘s option. Seeing Anthony Rizzo, Kris Bryant, and Javier Baez in different uniforms marked the end of an era, and now the Cubs have a bunch of extra prospects and a clean financial slate. They’ve also got a new second-in command in the front office behind Jed Hoyer in Carter Hawkins, hired from Cleveland. The Cubs went on to hire Ehsan Bokhari from the Astros as assistant GM and Greg Brown from the Rays as the new hitting coach. Furthermore, longtime executive Jason McLeod is leaving, and Randy Bush is moving into an advisory role.
Hoyer said in late September, “We plan to be really active in free agency.” Trying to decode GM-speak is always difficult, but Hoyer elaborated a few weeks later, saying, “We have money to spend this winter. But it’s really important that we do that in an intelligent way.” Furthermore, “We need to be active in a way that we feel like we’re getting the right value for the dollars we’re spending, and we’re also making sure that we’re not hindering ourselves going forward with expenditures for right now.” Hoyer went on to caution against “winning the offseason.”
MLBTR projected its top 12 free agents to each receive contracts of at least five years, with the exception of record-setting three-year deal for Max Scherzer. When I try to translate spending money “intelligently” and “not hindering ourselves going forward,” I take it to mean that the Cubs won’t sign any of those top dozen or so free agents. Hoyer has stated that the Cubs “have a lot of holes to fill on this roster,” which is a euphemism for a lack of present MLB talent. The Cubs will shop at the top end of the free agent market again, but I don’t think it will be this winter.
So what will the Cubs do? Hoyer made it clear that adding pitchers, particularly those with strikeout ability, is the team’s top priority. So why, then, did the club commit $10MM to 35-year-old lefty Wade Miley, who the payroll-cutting Reds cast off after a fine season? Miley possesses a 90 mile per hour fastball and the sixth-worst strikeout rate in baseball this year among those with at least 160 innings. The answer is that Miley is still a solid pitcher, the only cost was his salary, and it’s a one-year commitment. For a team with no rotation locks beyond fellow soft-tosser Kyle Hendricks, the Cubs took the opportunity that fell into their lap. Miley’s best attribute is his ability to generate weak contact, as he ranked fourth in baseball in average exit velocity.
The Cubs may yet add two or three starting pitchers to the rotation. As far as potential free agent targets, let’s cross off those seeking five-plus years or an immediate shot at a championship. We’re left with Carlos Rodon, Eduardo Rodriguez, Alex Wood, Yusei Kikuchi, and Jon Gray atop the strikeout leaderboard. We believe Rodriguez may require a four-year deal, plus Boston’s qualifying offer means the Cubs would sacrifice their second-round draft pick. Noah Syndergaard comes with that same draft pick problem, if he even reaches the open market. Rolling the dice on Rodon makes some level of sense, in that the Cubs wouldn’t be hampered by a deal anywhere from one to three years, and he offers possible ace-like pitching without a $100MM commitment if the club rolls the dice on his health. Rodon is the moon shot option, while Wood, Kikuchi, Gray, and James Paxton are safer choices. Free agency also offers pitchers with decent velocity if not the strikeout rate, like Steven Matz, Garrett Richards, and Anthony DeSclafani.
The trade market is also an option for the Cubs, who could offer one year of Willson Contreras, deal away some of their prospect capital, or just take on an unwanted contract. Strikeout pitchers who could be available in trade include Blake Snell, Yu Darvish, Tyler Mahle, Pablo Lopez, Sonny Gray, Frankie Montas, Zac Gallen, Sean Manaea, Chris Paddack, Chris Bassitt, Caleb Smith, and Luis Castillo. The Rays’ Tyler Glasnow makes sense for the Cubs, even though he won’t be recovered from Tommy John surgery until the 2023 season. Indeed, such a trade was considered back in July. The Tigers’ Matthew Boyd, who underwent flexor tendon surgery in September, may be non-tendered by the Tigers and also makes sense for the Cubs. Back when the Cubs had some money to burn, they signed Drew Smyly to a two-year, $10MM deal off Tommy John surgery with an eye entirely on the second season.
Three of the best trade targets are on the Reds, who may be reluctant to trade a starter to the division-rival Cubs in addition to Miley. The idea of the Cubs reacquiring Darvish one year after his trade somewhat kicked off their rebuild is too amusing not to mention. After the Cubs shipped Darvish and backup catcher Victor Caratini to San Diego for four low-minors prospects and Zach Davies, Darvish went on to post a 2.44 ERA through the season’s first half. He got blasted (mostly by home runs) in the second half to the tune of a 6.65 ERA. Darvish is owed $37MM over the next two years, and the Cubs suddenly have the payroll flexibility the Padres desire. Just saying, it’d be fun to see.
The bullpen is another clear need for the Cubs, who are left with guys like Codi Heuer and Rowan Wick atop their depth chart. A few cheap free agent investments make sense here.
The Cubs’ infield is mostly set, with Willson Contreras at catcher, Frank Schwindel at first, Nick Madrigal at second, Nico Hoerner at short, and Patrick Wisdom at third. While Schwindel (age 30) and Wisdom (29) aren’t likely long-term solutions, they’ve at least earned at-bats in 2022. The Cubs also have to see if a Madrigal-Hoerner double-play combination has staying power.
With one year of control remaining on Contreras, the Cubs enter into the familiar “extend or trade” territory that led to their July sell-off. The free agent market is weak at the position, and teams like the Yankees, Guardians, Rangers, Marlins, and Giants might be seeking catching help.
Ian Happ avoided a possible non-tender by posting a 147 wRC+ over the season’s final two months. He figures to hold down left field, while Rafael Ortega can keep center field warm until the Cubs deem top prospect Brennen Davis ready. In right, there’s Jason Heyward and the $44MM owed to him over the next two years. After a brutal 68 wRC+ in 2021, the Cubs probably can’t justify a roster spot for Heyward through all of ’22 unless he manages at least league average hitting. While the Cubs could explore a potential bad contract swap, they’re in more of a position to take on dead money as a means of accumulating yet more prospects.
One outfield addition that could make sense for the Cubs is right fielder Seiya Suzuki. It’s nearly impossible to project what level of contract Suzuki will require if he’s posted by the Hiroshima Carp, but he’s only 27 years old and is one of the best players in Japan. Signing him would be akin to the club’s $30MM deal for Jorge Soler, which occurred about eight months into Jed Hoyer’s tenure with the team.
We’re about to embark on a free agency experience unlike anything we’ve seen in recent years, with a probable lockout followed by a compressed signing period. If some players fall through the cracks in that scenario, the Cubs are well-positioned to make opportunistic strikes with one-year offers. With Heyward, Hendricks, Miley, David Bote, Contreras, and Happ, the Cubs have an estimated $63.7MM committed for six players. As a team capable of sustaining a payroll in excess of $200MM, the Cubs are a sleeping giant right now. In reference to the Giants, Hoyer said, “They certainly didn’t win the offseason last year. They won the season.” While I can say with certainty the Cubs won’t win 107 games in 2022, it’s clear that the team would prefer to avoid the top end of free agency this winter, become a surprise contender, and then look to flex its financial muscle.