NEW YORK — The luxury tax, or Major League Baseball’s well-disguised salary cap, is being designed by owners to punish Steve Cohen and the Mets.
The Mets are central to the current labor negotiations because Cohen, the richest owner in MLB, just blew past the previous luxury tax threshold in the expired CBA. For the first time since purchasing the Mets in 2020, Cohen this winter finally did what he always said he would be open to doing. He outbid other clubs to land three-time Cy Young winner Max Scherzer and spent over $250 million in commitments so that the Mets carried the highest payroll in MLB heading into the lockout. And they’re still not done. It’s possible the Mets blow past a $300 million payroll by the time the 2022 season begins (if it ever does).
“I am not going to go over [the luxury tax] for a million or two million,” Cohen told reporters in June 2021. “That’s stupid. So if you are going to do it, you are going to do it, so we’ll see what’s available.”
Owners feared this response to the luxury tax from Cohen well before he was approved as the majority owner of the Mets. It is part of the reason four owners voted no to Cohen’s purchase of the Mets. Commissioner Rob Manfred and MLB have maintained since the inception of the luxury tax, which was added back into the CBA in 2003 under the title Competitive Balance Tax, that it allows the entire league to be competitive. Without the luxury tax, MLB claims, small-market teams would be at a disadvantage.
It is difficult to fact-check or analyze MLB’s claim without teams making their finances open to the public. But we know, as a fact, that revenue has risen for MLB as a league, as has inflation, while the luxury tax has remained stagnant. The players are asking for the luxury tax to grow alongside MLB’s growth in revenue, while small- and big-market teams have a difference of opinion on that matter.
Throughout these labor talks, MLB has proposed harsher penalties for teams that go over the luxury tax, including higher overages and draft-pick penalties. On Tuesday, the league did not move from its latest offer of a $220 million luxury tax threshold in 2022, 2023 and 2024, followed by a $224 million threshold in 2025 and a $230 million threshold in 2026, the final year of the next CBA. The players union asked for a $238 million luxury tax threshold in 2022, followed by $244 million in 2023, $250 million in 2024, $256 million in 2025 and $263 million in 2026.
As it stands, the Mets have a 2022 payroll of around $265 million. The Mets — specifically — will be over the owners’ proposed 2022 luxury tax threshold by at least $45 million. The Mets — specifically — will not be able to come under the luxury tax threshold until at least 2024 or 2025. Notice how the league’s proposed luxury tax threshold remains stagnant at $220 million until 2025, after which it will just slightly increase to $224 million?
Now, in years past, the Mets would not be the only team impacted by the 2022 luxury tax threshold. The clubs with the highest payrolls in the sport — the Yankees, Dodgers, Red Sox and others — would also be prevented from spending due to the luxury tax thresholds and the taxes that accompany them.
But leading up to these CBA negotiations, Yankees owner Hal Steinbrenner said he wouldn’t mind a significantly lowered luxury tax threshold. Steinbrenner, and the Red Sox’ John Henry, are two of seven owners in Manfred’s labor policy counsel, and though that group includes both small- and mid-market team owners, Steinbrenner holds influence due to the Yankees’ powerful financial might in the industry.
Manfred on Tuesday said the luxury tax is “the only mechanism that protects some semblance of a level playing field among our clubs.” As discussed previously, that is just another way of saying the luxury tax is a way to restrain big-market teams from runaway spending. This is because small market team owners claim they are unable, or unwilling, to meet the playing field that owners like Cohen and others are. This issue could be further resolved if owners and teams made their finances public, just as player salaries are public.
But, for now, while owners try to peddle a $220 million luxury tax threshold with harsher penalties than the previous CBT, their proposal may as well be named the Cohen Tax.
