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Photo by Matthew Grimes Jr./Atlanta Braves/Getty Images
Also, a look at how much budget the Braves may have to spend this offseason. Despite GM Alex Anthopoulos stating that payroll will go up in 2025 and clarifying that the luxury tax will not be a deterrent in their ability to spend, some fans have speculated that the Atlanta Braves might opt to stay under the luxury tax anyways after a slow start to the offseason.
As a reminder, Anthopoulos has said for a few years now that he is given a total budget from ownership that can be spent in the form of player payroll + tax penalty payments. For example, in 2024, the player payroll was ~$232M, and they incurred $14M in luxury tax penalties for having a luxury tax payroll around $276M, just under the threshold for the third tier which started at $277M. So, their “total payroll” spent in 2024 = $232M + $14M, or roughly $246M. A reasonable guess could be that the number from ownership was $250M, but AA steered away from the third tier of the luxury tax since there are draft pick penalties starting at the third tier.
CBT BASICS
We’re about to get deep in the weeds of how luxury tax payrolls and tax penalties are calculated. If you don’t want to read about this, feel free to skip ahead a few paragraphs.
The Competitive Balance Tax payroll (or luxury tax payroll) is a system that was put in place by MLB to try and create more parity. While it is not a salary cap, it does penalize teams who spend at the highest level by taxing the dollars that go beyond a certain threshold.
You may have heard mentions in the past of player payroll and luxury tax payroll. These are two separate numbers that are calculated differently. The player payroll is self-explanatory – it’s the amount of money that the team spends on their players in a given year. There are a couple of key differences in how the luxury tax payroll is calculated:
Instead of using the salary that the players actually earned that year, the luxury tax payroll is calculated using the average annual value of all the contracts on their ledger. For instance, Ronald Acuña Jr. will earn $17M in 2025 (which is what will be reflected on the player payroll), but the AAV of his extension is 8 year, $100M extension is only $12.5M (which is the number that will be counted on the luxury tax payroll).
The luxury tax payroll also includes other organizational costs beyond MLB player salaries, such as the earnings of their minor league players, the cost of player benefits, and payments into the pre-arbitration bonus pool (which is a mechanism for the top young players in the league to earn a bit more than just the league minimum).
Once a team has crossed the luxury tax threshold, they must pay a tax on each dollar spent above that threshold. There are a couple of ways in which the amount taxed per dollar spent over the threshold can increase.
First, the luxury tax tiers. There are four luxury tax thresholds at $20M intervals beyond the initial threshold. At each tier, there is a surcharge on each dollar spent over that tier.
Tier 1 =
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