The Luxury Tax outlined in the 2003 CBA became known as the Competitive Balance Tax in this CBA. The 1994-1995 Major League strike resulted in significant tensions between players and owners going into this CBA negotiation. The competitive imbalance resulting from the lack of salary spending restrictions within Major League Baseball led to the institution of a Luxury Tax, which penalized clubs for spending over a specified salary cap.
While advantageous in terms of ensuring Major League competitive balance, the Luxury Tax also set the precedent for the slotted signing bonus system which would have significant impact on minor league labor conditions and compensation.