Baseball Balks at Salary Cap

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We may not get a baseball season this year if union standoffs continue. The issue is salary caps and it is a bit confusing so let’s try to work it out together.

Every professional American sport has salary caps except Major League Baseball. Players’ unions have made sure of this by striking in 1994. Now, instead of salary caps, the teams have what is called a competitive balance tax (CBT), which taxes the teams who go over a certain payroll threshold up to 95%. Initially some teams just paid it but 95%!? No one is that crazy.

The players say that this tax acts as a salary cap and that seems to be true. The MLB wants to keep it and even increase tax rates and players are not going for it. This is the major holdout. If the CBT goes away, the rest of the negotiations seem negotiable.

A discussion about free-market economics is merited here, as well as a discussion about player parity. Let’s leave that for another day because I have another question: Why does the MLB get to set its own tax rates? Tax rates are usually set by Congress for normal humans. But if you’re a big moneymaker like American baseball you make your own rules? What am I missing here?

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