Over the past two offseasons, the Los Angeles Dodgers have committed more than $2 billion in future player salaries, reigniting debate about whether a salary cap would ease the equity woes across the league. After reaching a $700 million deal with star Shohei Ohtani, the Dodgers won their second World Series in four years and are positioned for another deep run following another offseason spending spree.
With frustration growing among fans of smaller market teams, baseball may be headed to a standoff after its Collective Bargaining Agreement (CBA) with the players expires in 2026.
Why aren't there salary caps in baseball?
Baseball is unique among the four major North American sports in that it does not have a salary cap, largely because the last effort by the sport's owners to impose one ended in catastrophe. The 1994 season began without a CBA between the players and the owners, who were unified in their desire for a salary cap. By August, the owners were "still pushing hard for that cap, and no agreement was going to be reached while that remained on the table," said Baseball Prospectus. The players struck, and the rest of the regular season games and the playoffs were canceled. Fans were livid, and the "average attendance dropped from over 31,000 per game to just above 25,000 between 1994 and 1995," said Yahoo Sports.
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Players and owners agreed to a compromise "competitive balance tax" in 1996, which set a soft spending limit. Teams that "carry payrolls above that threshold are taxed on each dollar above the threshold," said Major League Baseball. In 2024, the luxury tax threshold was set at $237 million and nine teams went over it, contributing $311 million in taxes. The Dodgers alone were assessed more than $103 million in taxes, meaning that they "outspent just in luxury tax the entire payrolls of the bottom six teams or 20% of the league," said Baseball Purist.
Are the rules working?
In some ways, baseball's spending rules have led to parity this century. The MLB "hasn't had a repeat champion since 2000," said CBS Sports, meaning that no team has won back-to-back World Series championships since the Yankees in 1999-2000. There have been 16 different champions in that time, including small-market teams like the Miami Marlins, Kansas City Royals and Washington Nationals. But the Dodgers have been quietly building an empire for more than a decade, reeling off "14 consecutive winning seasons and 12 consecutive playoff appearances," said The Ringer.
Recently, the biggest spenders have "not shown much concern about the impact of their activities on smaller-market clubs," said Front Office Sports. The Dodgers' spending will "only accelerate renewed talk of a cap," said The Athletic. And it's not just the Dodgers: outfielder Juan Soto signed a $765 million contract with the New York Mets this offseason that put him out of reach for almost every team. That reality means it is "possible that some baseball owners may realize they simply aren't wealthy enough to compete against their so-called peers without a cap," said Puck.
Not everyone is convinced that a salary cap is the answer to the sport's inequalities. "It's a cyclical thing, and the cycle has come back around to a tired narrative," said Bill Shaikin at the Los Angeles Times. More teams could easily afford to spend like the Dodgers and the Mets, but "half the league spends less than half of their revenue on the team itself," said Marc Normandin on his baseball analysis site. The issue isn't the Dodgers or the Mets, it is the "lower payroll teams not doing more to field a competitive group," as they pocket revenue sharing while consistently putting up terrible results, said Rowan Kavner at Fox Sports.
All of this is leading to speculation about a work stoppage after the CBA expires. "At this point, I would be surprised if there wasn't a lockout," said Deesha Thosar at Fox Sports. "If owners decide to push aggressively for a cap, history says the fallout will be ugly," said The Athletic.
