Salary cap

In sports, a salary cap is a limit on the amount of money a team can spend on player salaries, either as a per-player limit or a total limit for the team's roster (or both). Several sports leagues have made salary caps mandatory, both as a method of keeping overall costs down, and in order to balance the league so a wealthy team cannot become dominant simply by buying all the top players. Salary caps are often the major issue in negotiations between management and players' unions.

Luxury Tax in Major League Baseball

Major League Baseball has instead implemented the so-called luxury tax, an arrangement by which teams whose aggregate payroll exceeds a certain figure (annually revised) must pay into a pool designed to help the less affluent teams pay higher salaries. However, critics point out that the luxury tax has had little effect on maintaining competitive balance and on overspending by affluent teams. For the 2004 season, only the New York Yankees, Boston Red Sox and Anaheim Angels paid any luxury tax; such teams often had superstar players, each of whose yearly salary was often more than the entire payroll of the weaker clubs. Due to opposition of a powerful MLB union and because the Yankees and Red Sox refused to side with the majority of MLB owners, the implementation of a salary cap is unlikely at the moment, although some saw the 2004-05 NHL lockout as an opportunity for MLB to reform its collective bargaining agreement.

Related Topics:
Major League Baseball - Luxury tax - New York Yankees - Boston Red Sox - Anaheim Angels - MLB union - 2004-05 NHL lockout

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