The 2025 competitive balance tax figures are out, and Major League Baseball’s financial divides look sharper than ever. Nine teams have blown past the $241 million threshold for a second year in a row, and five clubs landed in the harshest penalty tier.
This luxury system is shaking up everything—draft position, free-agent plans, you name it.
Understanding MLB’s 2025 Competitive Balance Tax Landscape
The competitive balance tax (CBT) was supposed to curb runaway spending and even the playing field. In 2025, though, it’s really just spotlighting how far apart the sport’s richest and everyone else have drifted.
Some teams basically treat the penalties as a cost of doing business. Others are tiptoeing under the line to dodge bigger hits down the road.
Right at the center: the Los Angeles Dodgers. Their spending spree has thrown out the old payroll playbook and given “all in” a whole new meaning.
Dodgers Headline a Group of Nine Tax-Paying Teams
Nine clubs crossed the $241 million CBT threshold in 2025, matching last year’s number. It’s a pretty clear sign of how top-heavy MLB spending has become.
The tax bills say plenty about who’s willing to pay for a shot at October:
The Dodgers, Mets, Yankees, Phillies, and Rangers have settled in as long-term big spenders, each paying the tax for at least three straight seasons. The Astros are back for a second year, while the Blue Jays, Padres, and Red Sox jumped over the line again after ducking under in 2024.
Resetters: Braves, Giants and Cubs Step Out of the Luxury Spotlight
Meanwhile, a few clubs chose short-term restraint for long-term flexibility. The Braves, Giants and Cubs all stayed under the CBT threshold in 2025, successfully resetting their tax status and dodging repeat-offender penalties.
Atlanta’s reset might not last long, though. With the CBT threshold bumping up to $244 million in 2026, the Braves—already one of the most efficient rosters—could easily leap back over if they want to add premium talent.
Third-Tier Offenders Pay the Price in the MLB Draft
The CBT system hits the hardest at the very top. Crossing the third tier—$281 million in 2025—comes with a nasty competitive cost: draft punishment.
For five teams, that line became a real obstacle. They’re not just writing big checks; they’re giving up prime amateur talent to keep their win-now windows open.
Five Teams Suffer 10-Spot Draft Drops
The Dodgers, Mets, Yankees, Phillies and Blue Jays all barreled through the $281 million tier, triggering a 10-pick drop for their top 2025 MLB Draft selection.
For organizations already spending big at the major league level, the draft downgrade makes it even harder to restock the pipeline.
Free Agency, Compensation Picks and the CBT Squeeze
The CBT doesn’t just tax payroll; it warps the free-agent market and compensation system too. Teams over the threshold get hit with the harshest penalties for both signing and losing qualified free agents.
For repeat payors, adding another high-end free agent isn’t just about dollars—it’s a direct hit to the future with lost picks and bonus pool money.
Steep Penalties for Signing and Losing Qualified Free Agents
Tax-paying clubs run into the toughest rules when dealing with qualified free agents:
This setup looms over several big names who could hit the market, along with the compensatory picks attached: Dylan Cease (Padres), Edwin Díaz (Mets), Bo Bichette (Blue Jays), Framber Valdez (Astros), and Ranger Suárez (Phillies). For high-payroll clubs already in the tax, every move on those players comes with layers of consequences.
The Dodgers’ Record Bill and MLB’s Growing Financial Gap
No team shows off the current financial reality quite like the Dodgers. Their 2025 spending is historic, even for a big-market club, and it really highlights the growing gap between the sport’s top and bottom payrolls.
Honestly, Los Angeles is playing in a different league when it comes to dollars and cents.
Dodgers’ Payroll Dwarfs the Bottom Third of MLB
The Dodgers rolled out a staggering $417 million payroll. That created a combined payroll-and-tax bill of more than $586 million.
Their tax alone—$169.4 million—actually tops the entire payrolls of the league’s bottom 12 teams. It’s wild to see that kind of gap.
League-wide, MLB will collect just under $403 million in CBT payments, due by January 21. Those funds go toward player benefits, retirement accounts and revenue sharing.
Honestly, the CBT numbers kind of act as a scoreboard for competitive spending. In 2025, team payrolls ranged from $87 million (Marlins) all the way up to the Dodgers’ $417 million.
That’s a spread that really shows how uneven the economic playing field has gotten.
Here is the source article for this story: Nine Teams Exceeded Luxury Tax Threshold In 2025
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