Major League Baseball is an outlier in the American sporting landscape in that teams do not operate under a salary cap. There is no limit to the amount of money organizations can spend in pursuit of the World Series. On the other side of the coin there is no salary floor, which creates widespread disparity across the 30 teams.
Clubs that exceed a predetermined payroll threshold must pay the Competitive Balance Tax, known more commonly a the luxury tax. This is an escalating figure that went up to $244 million for the 2026 season. A team's Competitive Balance Tax figure is calculated using the average annual value of each player's contract on the 40-man roster, plus any additional player benefit.
