Major League Baseball and the Players Association came to an agreement on Thursday for a new Collective Bargaining Agreement.
Part of the new CBA will be a new penalty threshold in the luxury tax, a fourth tier that some are referring to as the “Steve Cohen Tax” meant to deter owners from blatantly outspending the competition.
The threshold for penalties begins at $230 million in 2022 and rises incrementally to $244 million by 2026. The second threshold is $20 million above the first ($250M), the third threshold is $40 million above the first ($270M), and the new fourth threshold is $60 million above the first ($290M).
The penalties from the last CBA remain the same. Teams that exceed the competitive balance tax for the first time will be taxed at 20%. It is a 30% rate for consecutive-year offenses, and 50% for exceeding the tac in three or more consecutive years.
If teams reach the other thresholds the tax amounts grow. At the second threshold, the rates are 32%/42%/62%. At the third threshold, they are 62.5%/75%/95%. And at the new fourth threshold, the rates are 80%/90%/110%.
The amount that is taxed is only the amount above the CBT. For example, if Cohen and the Mets were to have a payroll above $290 million this season he would be taxed 80% of $60 million and pay an additional $48 million.
But does the new fourth tier matter to Cohen? Not really.
Cohen approved the addition if MLB thinks it’s for the greater good, according to Jon Heyman.
Last year when asked about the luxury tax, Cohen responded “we’re not going over for a million, two million bucks. That’s stupid. If you’re going to do it, you’re going to do it.”
The Mets presently have $254 million in active salary already which would put them in the third threshold. If they don’t make any more moves – which is highly unlikely – their estimated payroll and tax bill puts them at $273 million, says Spotrac.com.
Right now only the Mets and Dodgers are expected to break into the fourth luxury tax threshold. Still, the Mets have the advantage of the wealthiest owner in baseball.
New York is reportedly still searching for another bat and a starting pitcher. Only a handful of names are really off the table for the Mets at this point since like Cohen said “if you’re going to do it, you’re going to do it.”
