Report: Luxury tax threshold will remain unchanged for two years


Via Joel Sherman, the luxury tax threshold will remain at $178M for the next two seasons under the Collective Bargaining Agreement. Teams will be taxed 40% on every dollar they spend over that amount. The threshold and tax will be raised to $189M and 50% in 2014, respectively.

The Yankees are the only team in baseball to consistently pay the luxury tax, but other clubs have had to pay on occasion. The Red Sox and Phillies will be awfully close to that threshold next year as well. The Yankees owed $18M last season and $25.7M the year before, bringing their total luxury tax payout to $192.2M since it was instituted in 2003. One of these days they’ll just rename this thing the Yankee Tax and be done with it.

Categories : Asides
  • Plank

    I’m curious to see if there are substantial changes to the revenue sharing system. That’s the biggest impediment to the Yankees spending more, and the luxury tax is the second biggest.

    The luxury tax gets worse for the Yankees with this CBA. Hopefully the revenue sharing becomes more fair.

  • UYF1950

    I guess if the Yankees are really trying to stay within their theoretical budget of about $210M +/- there really isn’t that much of a difference for the Yankees between a 40% in excess of $178MM = $12.8MM or a 50% tax in excess of $189MM = $10.5MM on a $210MM payroll. In fact by raising the minimum to $189MM the Yankees actually save a couple of bucks. Probably enough to throw their office year end party.
    Just a little bit of holiday humor there at the end.

  • UYF1950

    Mike, correct me if I’m wrong but I believe the Red Sox exceed the luxury tax threshold on at least 2 or 3 previous occasions. So going forward they are subject to the highest rate I believe. Although it remains to be scene once the threshold jumps to $189MM if the Sox will exceed it. Probably not. But I do believe when the final figures are released for this past season they will be over the limit as I believe they will be come the 2012 season.

    • Plank

      They were slightly in 2010. The 2011 numbers haven’t come out yet.

      The tax rate increases up to 40%. The first and second consecutive years are lower.

      • UYF1950

        In searching the internet it appears the Red Sox have exceeded the threshold for the luxury tax in: 2004 thru 2007 then again in 2010. So it appears the Red Sox are at the maximum rate of 40% through 2013 and then should they exceed the threshold starting in 2014 they will be taxed at the 50% rate.

  • YankeesJunkie

    Is it just me or did players do a shit job in negotiating the contract. While there is still no salary cap they still get paid crap for about the first 5-10 years of their pro career depending on their situation. Then MLB decides that it will be a good idea to cap international and draft spending so that the best players can go to other sports. It is just irritating.

    • Plank

      And the soft cap is getting harder and harder.

      • YankeesJunkie

        True, but the cap is a “Yankee Tax”

    • Gonzo

      Players get 5-7 more players eligible for super-2 each year. They got rid of type A tags for a lot of players.

      They raised the luxury tax threshold too. Why do you think they did a horseshit job?

      • RetroRob

        I would put the luxury tax threshold as a win for the owners. The threshold was increasing at $8 million every season until this new CBA, where it’s now frozen for two more years, and then the penalty increased to up to 50% Both of those will put a drag on the growth in players’ salaries. The Yankees under Hal have been trying to reduce the amount they pay, so that’s not a win for the players.

    • Brett

      They also increased the minimum wage.

    • Rainbow Connection

      Yeah, it’s sad. Poor guys. If they don’t like it, they could always go WORK for a living.

      • A-Rod’s Wingman

        I guess we can add Employer/Employee relations to the list of things you don’t understand.

    • A-Rod’s Wingman

      Nothing solid on capping draft or IFA spending.

  • Rich in NJ

    The continuance of the 40%50% tax rate probably ensures that the budget will remain at or near $200m, making it all the more important for them to grow their own.

    • RetroRob

      The Yankees might have had a shot at falling below the tax if not for the A-Rod contract. Yet its Steinbrenner money and it was Hank Steinbrenner who agreed to the contract, so I guess they can’t complain.

    • viridiana

      This new deal — with all its punitive provisions directed at the Yankees (and perhaps a couple of others) — makes it only that much more important to develop and hold on to homegrown talent. Yanks have window based on current healthy farm. Hopefully, they can fill 6-10 roster spots a year with young (first four years) talent over the next six or eight years. If they can’t do that, i do believe they are doomed to decline as there are only so many $20 mill/yr contracts they can afford. If anyone has ideas on how they can continue to find and develop young talent under these onerous new rules would love to hear. But Selig — who I personally know to be obsessed with thwarting the Yankees — has really done it this time. I only hope I’m wrong.

  • RetroRob

    I was wondering how MLB planned to ensure that they keep collecting the Yankee Tax, as the threshold was creeping closer and closer to the Yankees payroll. They came up with the answer: Don’t increase it for three years, and then ramp the highest penalty up to 50%.

  • Jose M. Vazquez..

    Please help me understand why some billionaires have to hand money over to other billionaires who can do what they wish with said money. I mean these people are businesspersons and if they are in a business that is losing money they immediately sell out. But wait. These owners don’t want to sell. Why not? There are people lining up to buy. I don’t believe that any of them lose money as they say.