Nightengale: Yankees hit with $26M luxury tax bill for ’15

Revisiting the 2005-2006 Offseason (Part II)
Thursday Night Open Thread
(Presswire)
(Presswire)

According to Bob Nightengale, the Yankees have been hit with a $26M luxury tax bill for the 2015 season. That’s based on an end-of-season payroll of $241.15M. The luxury tax threshold is $189M and the Yankees have to pay a 50% tax on every dollar over the threshold as a repeat offender.

The Dodgers owe a record $43.7M in luxury tax based on their $298.3M end-of-season payroll. They’re only taxed at 40% because they haven’t been over the threshold as many consecutive years as New York. The previous luxury tax record was $34.1M by the 2005 Yankees. New York paid $18.3M in tax last year, $13.9M in 2011, $18M in 2010, and $26.9M in 2009. They’ve paid every year since the luxury tax was implemented in 2003.

Hal Steinbrenner has been pretty vocal about wanting to get under the luxury tax threshold — getting under the threshold means resetting the tax rate and also entitles the team to some revenue sharing rebates — in recent years, but that won’t happen next year. The threshold is $189M again and the Yankees already have $183M in salary commitments, before signing their arbitration-eligible players.

The current Collective Bargaining Agreement expires next offseason, and surely the luxury tax threshold will be raised in the next CBA. It has to be. MLB revenues are sky high and more teams are approaching the threshold. A $200M threshold for 2017 seems like the bare minimum. $210M might be more appropriate these days. That’s probably what the MLBPA should be pushing for, anyway.

Once the new CBA takes effect and some of the large contracts start coming off the books next year, the Yankees will be in much better position to get under the luxury tax threshold. Whether they intend to stay under the threshold long-term — luxury tax is money for nothing, after all — or simply get under one year to reset their tax rate remains to be seen.

The Red Sox ($1.87M) and Giants ($1.33M) also owe luxury tax money this year. Checks are due to commissioner’s office by January 21st. The money goes into MLB’s Central Fund.

Revisiting the 2005-2006 Offseason (Part II)
Thursday Night Open Thread