"The Los Angeles Dodgers are on track to pay at least 160 million dollars of MLB competitive balance tax in 2026. In all, ten teams will be charged close to 500 million dollars in 2026. And it's only January 31st. There are some big free agents still available. We've been over the salary cap and floor and overspending and the poor teams at the bottom. But we haven't discussed one aspect, however. Where does all that money go?"
"Three and a half million dollars go to player benefits. After that, half of that money goes into baseball players IRAs. The other half goes to teams that didn't violate the tax threshold. But where does that money go, exactly? It is placed into a non-public discretionary fund. It's a slush fund for lousy teams. Reportedly, some of last year's tax went to reimburse teams that were affected by the RSN bankruptcy and non-payment of television rights fees."
Major-market franchises like the Dodgers face massive competitive balance tax bills, with the Dodgers projected to pay at least $160 million in 2026 and ten teams collectively nearing $500 million. A small portion—about $3.5 million—goes to player benefits, then split between player IRAs and payments to teams under the tax threshold. The remainder is funneled into a non-public discretionary fund used to reimburse certain franchises, including those harmed by RSN bankruptcies and unpaid TV fees, and otherwise distributed opaquely to lower-spending clubs. The practice effectively subsidizes teams with low payrolls and raises questions about incentives and alternative public-benefit uses.
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