The actual 2024 payroll is not what is used to calculate the competitive balance tax. It is based on the total of the average annual values (AAV) of the contracts, not how much a player is getting paid on any given year.

Here are examples of players who hit the CBT differently than what they are getting paid in 2024.

Ronald Acuna Jr.: Acuna will earn $17,000,000 in 2024 but the AAV of his contract is $12.5 million per year. So, while the Braves will pay Acuna $17,000,000 next season, he only counts as $12.5 million toward the competitive balance threshold.

Spencer Strider signed an extension last season similar to Acuna’s. His arbitration years were bought out. The Braves signed Strider to a six-year, $75,000,0000 deal, which is worth an average of $12.5 million per year if you just take 75 million divided by six. Strider is only slated to earn $1,000,000 in 2024, yet he will count the same as Acuna’s $12.5 million against the luxury tax cap.

So the CBT threshold is based on the average annual value of the contracts. This is where some of the Braves shrewd arbitration-buying extensions are inflating the impact on the luxury tax payroll. Sean Murphy is set to make $9 million in 2024 with an AAV of $12,166,667. Michael Harris II is due $5,000,000 but will count as $9,000,000 toward the competitive balance tax.

NOTE: When a player is traded, his AAV is recalculated based on the AAV of what remains on their contract, including option buyouts.

These deals will even out as time goes on. Eventually, the deals will be backloaded and the AAV will be well under what the Braves are actually paying the players. In 2027 and 2028, Spencer Strider will earn $22 million a year but will still count as a $12.5 million hit on the CBT payroll.

What is MLB’s competitive balance tax threshold in 2024?

If a team exceeds a total AAV payroll of $237 million in 2024, they will begin to incur penalties or luxury taxes.

The Braves entered the winter meetings around $239 million. After the recent trade with the Mariners, they are clear into luxury tax territory.

Here’s where it gets tricky. If it’s your second-consecutive season breaking the CBT threshold, you get a 30% tax on the overage. If you exceed the threshold for three years or more then you are nailed with a 50% penalty.

Additionally, if you exceed the threshold by the following ranges you will have an additional penalty added to the first penalty.

AAV Payroll is $20 million to $40 million over threshold: +12%
AAV Payroll is $40 million to $60 million over threshold: +42.5% or 45% consecutive-year offenders.
AAV Payroll is $60 million over threshold: 60% surcharge added.

The Braves are currently (as of this writing on 12/09/2023) over the initial threshold and this will be their second-consecutive season doing so. That means their base penalty will be 30%. If they exceed $257 million in AAV payroll (or $20 million over the threshold), they will pay an additional 12% penalty on anything between $20-$40 million over the threshold. That means they will pay a total tax of 42% (30% + 12%) on anything between $257-$277 million. If they go over the third tier ($40-$60 million over), then they pay a total penalty of 75% (30% base + 45%) for each dollar that exceeds the third tier.

It can get confusing, but I am not sure how willing the Braves are to dive into the deep end of the luxury tax pool. Where they stand right now, they don’t have much wiggle room for expensive AAVs unless they are willing to take on the tier-two penalty or trade away some expensive contracts (Ozuna and Iglesias).

What would the luxury tax be if the Braves added $30 million more to the payroll?

Well, they are currently around $250 million. If they added $30 million more they’d be at $280 million.

$280 million – $237 million = $43 million overage

$43 million x 30% tax = $12.9 million base penalty

Tier One ($20-$40 million over): $20 million x 12% = $2.4 million penalty

Tier Two ($40-$60 million over): $3 million x 45% = $1.35 million penalty

Grand Total:……….. $16,650,000 luxury tax

Conclusion

Where they stand now, the Braves are in good shape with the budget if they don’t want to exceed that next tier. If they still hope to add an expensive name or an additional $30 million or so, there is a hefty penalty that will accompany that. This is why I don’t think the Braves are looking to add a big name free agent of any sort.