Major League Baseball team payroll disparity continues to worsen

Major League Baseball is the only major American or Canadian professional sport that does not have a salary cap.

There are debatable arguments on both sides on the salary cap issue.

The Major League Baseball Players Association has consistently rejected the notion of a salary cap or salary floor.

Baseball players feel more comfortable letting market trends and player performance dictate salary structure.

What happens when a star player like Cleveland’s Josh Naylor reaches free agent status? Will the Guardians extend his contract? He is an example of a growing number of young players who will eventually earn a huge salary.

Some teams choose to trade players as they enter the final year before being eligible for free agency.

MLB owners are free to create a salary structure for their club that fits their personal comfort level and their own willingness to pay.

Some owners and ownership groups have demonstrated a salary frugality that is very frustrating for fans.

Conversely, some owners and ownership groups have demonstrated roster construction that pays little or no attention to player payroll.

Given the lack of a salary cap, MLB and the Players Association agreed to a tax system designed to impose a penalty on clubs with excessive payroll.

MLB Competitive Balance Tax:

Clubs that exceed predetermined payroll thresholds are subject to tax.

The competitive balance tax, often called the luxury tax, is imposed on every dollar spent above the threshold.

The base threshold for 2023 was $233 million.

Six 2023 MLB teams have had to pay luxury tax penalties. They were:

Mets – $100.8 million

Padres – $39.7 million

Yankees – $32.4 million

Dodgers – $19.4 million

Phillies – $7 million

Blue Jays – $5.5 million

Braves – $3.2 million

The base threshold for 2024 will be $237 million.

Huge pay disparity:

At this point in the offseason, the disparity in MLB payroll must be problematic for commissioner Rob Manfred.

Just look at Fangraph’s projected estimates for 2024 MLB team salaries to realize that the differences on the economic terrain are as wide and deep as the Grand Canyon.

Here’s a sample of MLB teams’ estimated payroll for 2024, as reported by Fangraphs:

New York Mets – $315 million

Los Angeles Dodgers – $302 million

New York Yankees – $296 million

Philadelphia Phillies – $239 million

Compare these payrolls with these four MLB teams:

Oakland Athletics – $59 million

Pittsburgh Pirates – $81 million

Cleveland Goalies – $96 million

Tampa Bay Rays – $99 million

Different circumstances:

Teams with low payroll have given various reasons to explain their payroll levels.

1-Conflicts and lawsuits between MLB clubs and regional sports networks have left several teams uncertain about potential television revenue for the upcoming season. Some issues are resolved, but many teams have reduced their rights fees for 2024.

Teams had to wait until their legal battles with their regional networks concluded to get a clearer idea of ​​2024 TV revenues. Now, most have a clearer picture, allowing them to plan accordingly.

But months of uncertainty led to very conservative spending on free agents and player acquisitions.

When these same teams were realizing the full value of their television contracts, many ownership groups were still small and frugal in their salary budgets.

Teams like Cincinnati, Pittsburgh, Cleveland, Tampa Bay, Oakland and Baltimore are among the clubs with low payroll.

These teams aren’t swimming in deep free agent waters. They don’t bid for high-priced free agents like Shohei Ohtani or Yoshinobu Yamamoto.

Clubs with minimal payroll have been very careful to monitor spending on each player in their organization. Misjudging a player’s value can have far-reaching financial consequences.

For example, in 2016, the Baltimore Orioles gave first baseman Chris Davis a seven-year, $161 million contract. At the time, it was a huge financial commitment.

Davis didn’t come close to earning contract value.

The Orioles haven’t made such a massive financial commitment to a free agent since Davis.

On December 15, 2022, the Cleveland Guardians signed wide receiver Mike Zunino to a one-year contract worth $6 million. Zunino was released on June 21, 2023.

Also in 2022, the Guardians signed first baseman/designated hitter Josh Bell to a $33 million contract. When he failed to hit well, the team traded Bell to the Miami Marlins on August 1, 2023.

Deals like those for Davis, Zunino and Bell have a huge impact on clubs like Baltimore and Cleveland. Their team’s payroll philosophy leaves no room for missteps.

The Guardians were able to extend star Jose Ramirez to a team-friendly contract because he wanted to stay with Cleveland. His case was not the norm.

More than just hiccups in their payroll structure, when a team like the Guardians misses a free agent calculation, it casts a huge shadow over their appetite to re-enter the free agent market.

2- Many teams have relied on young, cheap players, still under team control, to build their rosters in the major leagues.

Younger players result in lower payroll.

Once again, teams like Baltimore and Cleveland have players sitting years away from free agency. Team control allows the club to maintain a payroll that meets the comfort level of ownership.

However, the arbitration years preceding free agency are costly,

Some teams, including the Tampa Bay Rays, have traded players before they became too expensive for the owner’s comfort level.

The Rays have frequently targeted players from opposing teams to trade for their own players who are inching closer and closer to free agency. The strategy worked for them.

Conclusions:

The disparity between and among MLB clubs continues to be a problem.

However, spending money on payroll does not guarantee success.

The Mets, Padres and Yankees all paid the luxury tax bills. None made the playoffs.

To their credit, some teams with a history of conservative salary spending have stepped up to sign quality young players to long-term contracts.

Under general manager John Hart a few years ago, the Cleveland Indians bought out the arbitration years of young players with nice bloated contracts. But this trend has stopped.

Now, teams like the Royals (Bobby Witt Jr.) and Brewers (Jackson Chourio) are just two recent examples. Will this type of business calculation continue?

The big stars seem to be heading to the clubs with the highest salaries. It is a problem.

Is it good for MLB to see free agents Shohei Ohtani, Yoshinobu Yamamoto and Teoscar Hernandez sign with the Dodgers this winter?

It remains in the eye of the beholder.

Dodgers fans love it.

Sooner or later, for this old scout, Major League Baseball will have to face the great disparity in team payrolls.

How they accomplish this is a story for another day.