So You Think You Know Ball: Explaining the Luxury Tax

With the conclusion of the World Series, the Major League Baseball (MLB) offseason is officially underway. Despite this year’s Fall Classic containing two small-market, low revenue teams, the league and its owners have done a good job banging the drum that, to ensure fairness among every team in the league, a salary cap is necessary. This position is not shared by the Players’ Association, who maintain that a cap will only suppress their members’ earning power. This schism over a salary cap will almost assuredly lead to a work stoppage when MLB’s current labor agreement expires next month. But one thing you will be hearing about this winter is Major League Baseball’s quasi-salary cap already in existence. It’s called the luxury tax and it is relatively unknown, or at least misunderstood, by many baseball fans.

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