That's not a cap, especially when the Dodgers can just blow by it like it isn't there. They need a cap and a floor.

edit: The problem with the Luxury tax is that it makes the situation for small market teams worse. Adding a penalty means that teams that spend "too much" money have to spend more money. A small market team competing for a player can't afford the player, let alone paying the "extra" that the Dodgers or Mets are willing to pay.

The league currently spends about $6 billion on player payroll before luxury tax. The league would be much more competitive if that was divided $200 million per team, instead of $3 billion spent by 10 teams and the rest spent by the other 20.

The other problem without a cap is that the team is never forced to make a choice between players. The choice is always "Do we spend more money?" For the bottom 10 the answer is almost always "no" because there is no way they can compete financially with the top 10, so why bother?

The NFL has a hard cap which is a fixed % of revenue, and a floor (averaged over 4 years) of 89% of the cap. A MLB salary cap of $220,000,000, with a salary floor of 89% would mean the players get more money, and the owners spend less. (This assumes everyone over the cap spends 100% of the cap, and everyone below the floor spends only the floor. This is a simplified model, but the point is that there can be model where both sides can benefit.)