The Competitive Balance Tax (CBT), better known as the luxury tax, is a sticking point in the ongoing labor negotiations between Major League Baseball and the Players Association. The CBT is said to be the major hot-button topic blocking both parties from reaching a deal on a new Collective Bargaining Agreement (CBA), simply because the owners are unwilling to bend for a higher luxury tax threshold. Since this issue can sometimes become complex and confusing, here are some details and concerns surrounding the luxury tax.
What is the CBT?
The CBT is a significant measure that limits MLB clubs from spending. It was originally added to the CBA in 1997, then after a three-year hiatus, it was reintroduced in 2003. Since MLB does not have a hard salary cap like the NBA or NFL, the CBT was initially constructed to restrain runaway spending from big-market teams and, as its name implies, balance competition in the league. But there is no evidence to suggest that the CBT has promoted, or even balanced, competition. Rather, players believe the luxury tax acts as a soft salary cap, and there is evidence to prove it.
