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 = <$20M over the luxury tax threshold (base tax)
• Tier 2 = $20-40M over the initial threshold (12% surcharge on money spent in this tier)
• Tier 3 = $40-60M over (42.5% surcharge in the first year in this tier, 45% surcharge if the team is in this tier in consecutive seasons. Also, unless a team has a top 6 pick in the draft, their top draft pick will be dropped by 10 spots if they go $60M+ over the luxury tax threshold.)
• Tier 4 = $60-80M over (60% surcharge on money spent in this tier, which is often referred to as the “Cohen tax” since this tier was added in 2022 to specifically discourage Mets owner Steve Cohen from spending infinitely)

Going over the luxury tax threshold for consecutive seasons will also increase the amount taxed on each dollar spent over the threshold. In the first year going over, it’s a 20% base tax in the first tier. If a team goes over the luxury tax threshold for a second consecutive season, that goes up to 30%. If they go over for a third consecutive season, they are then taxed 50% of every dollar spent in the first tier of the luxury tax. (There are no further increases beyond three consecutive years for being a luxury tax team.)

So, just to further illustrate how all of this works, here is the estimated calculation from FanGraphs for the Braves luxury tax payroll in 2024 (the actual luxury tax payroll was reported at $276,144,038, per ESPN):

(If you are on a mobile device, this table is best viewed in landscape mode.)

And here is the calculation for their tax payment of ~$14M (the actual payout number was $14,026,496, per ESPN, so my calculation is slightly off):

(If you are on a mobile device, this table is best viewed in landscape mode.)

WHERE DOES THE 2025 PAYROLL STAND?

There is only one reason why a team that can afford to go over the tax would consider going under instead – to reset the tax so that they can have further financial flexibility in the future. In theory, a team might find themselves in a situation where decreasing the player payroll by $20M for one season in order to reset the tax would allow them to spend $30M more in player payroll the following season (because they could have the same luxury tax payroll that they would have had this year but pay only 20% base tax instead of 50% base tax, which means their luxury tax penalties would be less and they could put more of their total budget into the actual players).

Now, you might argue (correctly, in my opinion) that a team in a championship window like Atlanta should probably focus more on maximizing their chances to win in the year that is directly in front of them rather than hurting their chances this year to slightly improve their chances in the next. But, it’s been a slow offseason in Atlanta, so let’s see if this strategy is even applicable for the Braves.

The Braves exceeded the luxury tax threshold in 2023 and 2024, meaning they will be penalized with a 50% base tax on all dollars spent over the threshold in 2025 (and even more than that on any money spent over the second tier). According to FanGraphs, here is the Braves current payroll situation:

(If you are on a mobile device, this table is best viewed in landscape mode.)

So, if they did want to reset the tax, they’d have $23M to spend. What if they didn’t reset the tax? Well, we’d need to start by taking an educated guess at what AA’s “total budget” might be. Again, his total budget is the player payroll + tax payments.

Anthopoulos has said that payroll will go up in 2025, and if the past few seasons are any indication, you should take him at his word. Take a look at the Braves player payroll and “total payroll” since the first year after the pandemic-shortened season:

(If you are on a mobile device, this table is best viewed in landscape mode.)

So, the lowest increase in total payroll over the past 4 years has been the $20M increase from 2022-2023. Let’s be conservative and guess that AA’s total budget in 2025 will be $260M, just a $14M increase over 2024. If that was the case, they could add $48M in AAV this offseason:

• Add $48M AAV
• Player payroll: $201M → $249M (to keep things simple, we’ll assume the AAV matches the actual 2025 salary)
• Luxury tax payroll: $217M → $265M ($4M into the second tier)
• 3rd time offender so 50% tax on the first $20M over the CBT threshold = $8M penalty
• 62% tax on the $4M in the 2nd tier = $2.5M penalty
• TOTAL payroll: $259.5M

So, if my guess on their $260M total budget is accurate, the Braves would be sacrificing the potential of $25M in additions for 2025 if they decided to reset the tax. Instead of adding $48M in AAV to the roster over the course of this season, they could only add about $23M. Could this be worth it? Could this sacrifice lead to them spending, say, an extra $35-40M in 2026 than what they would be able to spend if they went over the luxury tax threshold again in 2025?

WOULD THE TRADEOFF OF SPENDING LESS THIS YEAR CREATE MORE ROOM TO SPEND IN 2026 AND BEYOND?

The short answer: no. It’s not even close.

To get to the longer answer, we’ll look at two scenarios: how much could they spend in 2026 if they reset the tax vs. how much could they spend if they don’t reset the tax.

First, a quick look at the 2026 luxury tax tiers:

• Tier One: $244M
• Tier Two: $264M
• Tier Three: $284M
• Tier Four: $304M

Now we’ll look at the current state of the 2026 payroll:

(If you are on a mobile device, this table is best viewed in landscape mode.)

A noteworthy distinction between the 2026 player payroll vs 2025 and especially 2024 – because most of the players on extensions will be in the expensive portion of their deals, the luxury tax payroll is much more even with the actual player payroll.

Let’s assume that the Braves again raise the total payroll from $260M in 2025 to $275M in 2026 (again, a bit smaller of a year-to-year increase than we’ve seen in the past several years).

If they do reset the luxury tax in 2025, here’s how they could get to a $275M total payroll in 2026:

• Add $78M in 2026 AAV.
• 2026 player payroll: $191M → $269M
• 2026 luxury tax payroll = $189.5M → $267.5M, $3.5M into the second tier
• 20% penalty on the first $20M over = $4M penalty
• 32% penalty on the $3.5M in the second tier = $1.1M penalty
• TOTAL payroll = $274.1M

And if they do not reset the luxury tax in 2025, here’s how much they could spend in 2026:

• Add $74M in 2026 AAV
• 2026 player ayroll: $191M → $265M
• 2026 luxury tax payroll: $189.5M → $263.5M, $19.5M into the first tier
• 50% penalty on the $19.5M overage = $9.75M penalty
• TOTAL payroll = $274.75M

To summarize: if the Braves reset the tax in 2025 by spending roughly $25M less than they have in their budget, they will gain the flexibility to spend an additional $4M or so in 2026. A complete nonstarter.

We’ll look at one more example, for the sake of argument – the Braves reset the tax this year AND add the $25M that they saved in their 2025 budget to their 2026 budget, giving them a $300M “total” payroll in 2026:

• Add $97M in 2026 AAV
• 2026 player payroll: $191M → $288M
• 2026 luxury tax payroll: $189.5M → $286.5M, $2.5M into the third tier
• 20% penalty on the first $20M = $4M penalty
• 32% penalty on the $20M in the second tier = $6.4M penalty
• 60% penalty on the $2.5M in the third tier = $1.5M penalty
• TOTAL payroll = $299.9M

Even in this instance, they only gain $23M in additional player payroll in 2026 by sacrificing $25M in 2025 ($74M added in the scenario where they don’t reset the tax vs. $97M added in the scenario where they reset the tax and add the unused budget to 2026).

It’s true that these calculations involve a good bit of guesswork about what AA’s “total budget” could be in both 2025 and 2026, but the narrative remains the same if you adjust the assumed budget in either direction. They simply will not gain enough in 2026 to justify spending that much less in 2025.

Rest assured, Braves fans. Alex Anthopoulos may not have found a deal he loves yet, but he has money to spend and no logical incentive to not spend it. Even if the Braves didn’t raise their total payroll a single cent in 2025 (which would buck a three-year trend), AA could add about $30M this winter and still have $5M or so to add at the deadline. If the budget increases from the past three seasons are an indicator, though, it may yet be closer to $50M that the Braves add this offseason.

It’s never fun to watch other teams get better while yours remains stagnant, but remember, it’s futile to judge an offseason before it is over. There are still six weeks before pitchers and catchers report to Spring Training and nearly three months until Opening Day. And for the Braves, it’s a matter of “who” they’ll add before then, not “if.”