Since its inception in 1876, Major League Baseball has never taken on the concept of a salary cap. For the first time in MLB history, this might be about to change, as MLB Commissioner Rob Manfred told reporters he has considered implementing a salary cap.
MLB’s collective bargaining agreement (CBA) expires in December of 2026. The CBA is an agreement that all MLB players sign onto when entering the league. It sets the standard for how teams pay players for participation in team activities. The players won’t play ball until a new CBA is negotiated. That new set of negotiations can bring about significant changes to the game of baseball in the modern day.
A major topic in this year’s CBA could be the implementation of a salary cap into baseball, something that nearly every other sports league in the United States has. If everyone else has one, what would it look like for the MLB?
What is a Salary Cap?
A salary cap is a prescribed amount of money set by the sports league that a team can spend in total on players. The National Football League’s salary cap sat at $255.4 million for the league’s 2024 season. It is used to field a team of 53 players for games during the season.
The National Basketball Association has a soft salary cap, and teams that exceed it are subject to a luxury tax. A luxury tax is extra money that must come out of the team’s revenue for exceeding the cap. It is a mechanism to help with competitive balance. The NBA also has a salary cap floor, a set amount of money that a team has to spend to stay on the court every season. That salary cap floor sits at 90% of the league’s salary cap. This means that they have to spend most of their allotted money from the league, or face repercussions.
The Current State of Salary Restrictions in the MLB
The MLB adopted a growing luxury tax in its 2022-26 CBA, setting the maximum amount of money to be spent at $241 million for the 2025 season. Its overage taxes equate to 20% for the first year over, 30% for the second year, and 50% for every year spent over that threshold thereafter. The MLB has no a salary floor, leading to multiple teams spending far under the soft cap of $241 million. Team owners often hold onto the extra cash to spend elsewhere, whether it be team ventures or otherwise.
This practice of spending far under the luxury tax threshold has left fans of the teams who don’t frustrated. The Pittsburgh Pirates, for example, rank among the MLB’s most profitable teams but have held a bottom-10 payroll for each of the last 10 seasons. Fans have constantly showered Pirates owner Bob Nutting with pleas to either spend more money to field a competitive team, or sell the team to an owner who will. Nutting has walked headstrong through the ridicule and continues to profit from his ownership of the Pirates.
Many pundits use the Pirates’ situation as one of the main arguments for implementing a salary cap. Young star pitcher Paul Skenes doesn’t have a team around them that is built to help them win. In Skenes’s young career, the Pirates have lost six times when he has allowed one run or fewer, out of just under 40 starts.
On the opposite end, big market teams that can afford to pay large luxury taxes dominate baseball. The Los Angeles Dodgers have signed nearly every big-name free agent, including pitcher Shohei Ohtani to a massive contract recently. From these two signings, they won the World Series in 2024, and look to be a contender for it again.
The Yankees’ signing of pitcher Gerrit Cole away from the Astros after they won a World Series is another recent example. The Yankees also made a deep run in 2024, taking the AL playoffs by storm before losing to the Dodgers in the World Series.
What might a salary cap look like for the MLB?
The ideal MLB salary cap would likely adopt some of the best features from the NFL and NBA’s salary restrictions. The NFL’s hard ceiling is likely the way to go, as it spreads talent around the league as opposed to hoarded between a few elite teams. A hard salary cap means all of these players can’t get paid by the same teams. Talent trickles down to the pseudo-contenders and less talented teams in the league.
The NBA’s salary floor concept is fruitful for consideration as well. It forces owners like Bob Nutting to spend 90 percent of their allotted cap money to field a competitive team, as opposed to spending a minimal amount and fielding a non-competitive one.
So, what would the exact numbers look like for the MLB?
That $241 million luxury tax threshold is a good working number for a theoretical salary cap, a salary floor sitting at 90 percent of that. This money would be spent on not just the MLB main team, but also through the team’s farm system. The new system proposed here requires 90% of that cap space to be spent, or at least 20% of the cap space to be spent in the team’s farm system, their minor leagues.
This should be a hard salary cap, unlike the NBA’s, or the MLB’s current restrictions. That way, talent spreads around the league more, as previously mentioned. The salary floor provides competitive benefits for teams spending up to their salary floor, making baseball more competitive all around, and enforcement of it is necessary.
What would change in a salary-capped MLB?
The effects of a salary cap in the MLB are hard to predict. It remains unclear if something like this would work, and what repercussions it would have. It would likely raise a team’s medium roster strength, pulling perennial underachievers and elite teams in the league closer together.
A salary cap gives a lot of agency to players. Instead of basing decisions on the amount of money a team offers them in free agency, different factors come into play as players decide where to sign. Location, roster makeup, and how much cap space the team would have to build around this free agent. In a team sport like baseball, one star is not enough to carry the team. The ability to strategize a signing around that cap space allows players to have more agency in where they sign.
At the end of it all, that’s a major part of negotiating a CBA, what the players’ rights are, and the freedoms they have through their careers in the league. A salary cap gives them freedom to go wherever, not just to the highest bidder.
