AP: Yankees owe $27.4M in luxury tax for 2016 season

(Presswire)
(Presswire)

According to Ronald Blum, the Yankees owe $27.4M in luxury tax for the 2016 season. That means their payroll for luxury tax purposes was $243.8M this summer. The Yankees are taxed 50% on every dollar over the $189M luxury tax threshold. Their actual payroll based on 2016 player salaries was $224.5M, up ever so slightly from $223.6M last year.

The Yankees have paid the luxury tax every single year since the system was implemented back in 2003. They paid $26M in tax last year and $18.3M in tax in 2014. Their total luxury tax bill over the last 14 seasons is $325M, far and away the most in baseball. The Dodgers, who owe $31.8M this year, are the second highest luxury tax payer since 2003. They’ve paid $113M total.

Hal Steinbrenner has made it no secret he hopes to get under the luxury tax threshold at some point soon. It won’t happen in 2017. It’s much more likely to happen in 2018, when the threshold rises to $197M and the Yankees will be free of several big contracts, most notably Alex Rodriguez‘s and CC Sabathia‘s. Possibly Masahiro Tanaka‘s too, depending on his opt-out.

The new Collective Bargaining Agreement raised the luxury tax threshold and also revised the penalties, adding a special tier for extreme offenders. Teams over the threshold at least three straight years, including $40M+ over the threshold the last two years, are hit with a 95% tax. Goodness. Getting under the threshold would reset New York’s tax rate and save a boatload of cash.

Luxury tax checks are due to the commissioner’s office by Saturday, January 21st. The money goes towards player benefits and MLB’s Industry Growth Fund, and, starting next season, luxury tax money will also be used to fund player retirement accounts. It’ll also be redistributed to teams that did not pay luxury tax. How about that?

A record six teams received luxury tax bills this year. Along with the Yankees and Dodgers, the Red Sox ($4.5M), Tigers ($4M), Giants ($3.4M), and Cubs ($2.96M) also have to pay. Boston and San Francisco are second-time offenders taxed at 30%. The Tigers and Cubs are first-time offenders. They were taxed at 17.5%.

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

(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.

Tuesday Links: Pentland, Sleep, Luxury Tax, Rivera

The Yankees huddled around a small television in their Boston hotel to watch Mayweather vs. Pacquiao. (Photo via @TravelingSec)
The Yankees huddled around a small television in their Boston hotel to watch Mayweather vs. Pacquiao on Saturday. (Photo via @TravelingSec)

The Yankees and Blue Jays continue their three-game series at Rogers Centre later tonight. Until then, here are some miscellaneous links to check out.

Yankees step up after hitting coach’s wife’s health scare

Back in February, new hitting coach Jeff Pentland and his wife Liz received some bad health news, bad enough that Pentland considered resigning one month into his new job. According to George King, Liz Pentland tested positive for a cancer gene and needs to undergo a mastectomy. “She didn’t want me to (resign), but under no circumstances was I going to let her do this by herself,” said Pentland to King.

The Yankees stepped up to help their new hitting coach and his wife, specifically Joe Girardi and head trainer Steve Donahue. They helped arrange visits to the doctor and deal with insurance issues, among other things. Liz will have surgery later this week and Pentland will be away from the team for a few days. Assistant hitting coach Alan Cockrell will fill as hitting coach for the time being.

“Without the New York Yankees, none of this happens. They have been fantastic,” said Pentland. “The doctors are experts in their field, top notch, and we feel very comfortable. We owe a lot to the New York Yankees, Brian Cashman and the whole Steinbrenner family. I guess it was meant to be that I became a Yankee.’’

The Luxury Tax Problem

As you know, the Yankees plan to get under the luxury tax threshold within the next two years. They tried and failed to get under the $189M threshold last year — missing the postseason and losing out on all that extra revenue played a big part in that, no doubt — but appear willing to give it another go in the near future. Like it or not, it’s going to happen.

Nathanial Grow at FanGraphs analyzed the luxury tax and confirmed what has become increasingly obvious with each passing year: the luxury tax threshold is increasing at a much slower rather than league revenues. When it was first implemented in 2003, the luxury tax threshold was set at 90% of the average team’s revenue. MLB and the MLBPA then agreed to switch to a fixed threshold, and now it is only 63% of the average team’s revenue. Here’s Grow’s blurb on the Yankees:

Take the Yankees, for example. From 2000 until 2005, New York’s payroll increased at approximately the same rate as the team’s estimated revenues. As soon as the Yankees faced a 40% penalty as a three-time violator under the new luxury tax framework adopted in 2006, however, the team’s payroll effectively flatlined. This has remained true up to today, even though the Yankees’ estimated annual revenues almost doubled from 2005 to 2014. As a result, today the luxury tax threshold is set at a level approximately less than 40% of New York’s estimated annual revenues.

The current Collective Bargaining Agreement expires at the end of next season and ideally the next CBA would both tie the luxury tax threshold to revenue and reduce penalties, but chances are that won’t happen. The MLBPA already caved and agreed to a fixed threshold and stiff penalties. The best they can probably do now is increase the threshold. It has to be over $200M at this point and should probably be closer to $220M or $230M. The revenue is there to support it.

Yankees consulted with sleep therapists before staying Boston

I thought this was interesting. Following Sunday night’s game against the Red Sox, the Yankees stayed in Boston and flew to Toronto yesterday morning rather than travel right after the game as usual. They needed MLB approval to do that. According to George King, the Yankees consulted sleep therapists before making the decision to stay in Boston another night.

“You stay on a little more normal sleep schedule. You get here at 4 or 4:30 and we encourage guys not to go to bed at that time unless we are traveling. So (Sunday night) you can go to bed at 1:30 or two o’clock and sleep to 10, 10:30,” said Joe Girardi, who called the extra night in Boston an “organizational decision.” Obviously last night’s game didn’t go too well, but that’s not necessarily evidence the plan to travel in the morning was a bad. Sometimes baseball just happens.

I wouldn’t call it a market inefficiency, but teams nowadays are trying to gain a competitive advantage by getting their players more rest. Several clubs have upgraded their planes to improve travel conditions — the Mariners and Athletics were the first teams to do so, which isn’t surprising since they’re on the West Coast and fly so often — and now the Yankees are consulting sleep therapists to determine the best time to travel.

Mariano to receive Ellis Island Medal of Honor

ThisOn Sunday, Mariano Rivera will be one of 90 honorees to receive the Ellis Island Medal of Honor, according to the Associated Press. There’s a ceremony and a gala and all that. The Ellis Island Medal of Honor recognizes those “who have made it their mission to share with those less fortunate their wealth of knowledge, indomitable courage, boundless compassion, unique talents and selfless generosity; all while maintaining the traditions of their ethnic heritage as they uphold the ideals and spirit of America.” Pretty neat. Congrats to Mo.

AP: Yankees hit with $18.3M luxury tax bill for 2014

(AP Photo/Seth Wenig)
(AP Photo/Seth Wenig)

According to the Associated Press, the Yankees owe $18.3M in luxury tax for the 2014 season. The team’s payroll for luxury tax purposes was calculated at $225.6M, though their actual payroll was a bit lower at $218.5M. Luxury tax checks are due to the commissioner’s office by January 21st. The money goes towards player benefits and MLB’s Industry Growth Fund.

The $18.3M luxury tax bill is down from $28.1M last year and $19.3M in 2012. The Yankees paid $13.9M in 2011, $18M in 2010, and $26.9M in 2009. The all-time luxury tax record is their $34.1M bill (!) back in 2005. Since the system was implemented back in 2003, the Yankees had paid more than $271M in luxury tax. That is by-frickin-far the most in baseball.

As you surely remember, the Yankees wanted to get under the $189M luxury tax threshold this past season but abandoned that plan after missing the postseason in 2013. It’s impossible to get under the threshold in 2015 based on their current contract commitments and it’ll be damn near impossible in 2016 as well. The Collective Bargaining Agreement expires after the 2016 season and the threshold will presumably go up then, perhaps over $200M, at which point the Yankees could try to get under again.

The Dodgers set new records for actual club payroll ($257.3M) and luxury tax payroll ($277.7M) this past season. Their luxury tax bill was a little more than $26.6M. Los Angeles was taxed at 30% because they were over the luxury tax threshold for the second straight year. The Yankees are taxed at the maximum 50% because they’ve been over the threshold every year since the system was put in place.

The Dodgers and Yankees ranked 1-2 in payroll and were the only teams to owe luxury tax this year. The Phillies ($183.5M), Tigers ($173.3M), and Red Sox ($168.2M) round out the top five payroll clubs. The Astros ($54.7M) and Marlins ($52.5M) had the two lowest payrolls. No other club was under even $77M. The average player salary jumped 11% to $3.69M in 2014.

Update: Yankees hit with $28.1M luxury tax bill

Dec. 17th: According to Ronald Blum, the Yankees were hit with a $28,113,945 luxury tax bill for the 2013 season. They finished the year with a $237,018,889 payroll, the highest in baseball history. (The Dodgers were only $146,647 behind New York.) Checks are due January 21st. Oh, and by the way, Maury Brown reports MLB’s annual revenues topped $8 billion for the first time in 2013. The game is healthier and teams are wealthier than ever before.

Sept. 11th: Via Bob Nightengale: The Yankees are currently looking at a record $29.1M luxury tax bill after the season. That is based off a $236.2M payroll and is not yet final. The luxury tax is officially calculated after the season and team payroll could still go up or down depending on trades (Brendan Ryan!) and call-ups and whatnot these next two weeks. The Dodgers ($9.9M) are the only other team facing the luxury tax this year.

The Yankees are taxed 50% on every dollar over the $178M threshold, which climbs to $189M next year. As you know, the team is trying like hell to get under that number and save both luxury tax and revenue sharing money down the road. Assuming that $29.1M number doesn’t change much, the Yankees will have paid over $253M in tax since the system was implemented in 2003. The rest of baseball will have paid just $32M or so. The Steinbrenners have shelled out $19.3M, $13.9M, $18M, and $25.7M in luxury tax in the three previous seasons.

Update: The 2012 luxury tax bill: $18.9M $19.3M

Tuesday: According to Chad Jennings, MLB screwed up the luxury tax calculation and sent the Yankees a revised bill today. The bill increased by $393,648, so the Yankees now owe $19,311,642. The team’s end of season payroll was revised up to $223,302,212.

Saturday: Major League Baseball has slapped the Yankees with an $18,917,994 luxury tax bill for the 2012 season according to Maury Brown. They were the lone team to pay the tax this season — the Red Sox fell short of the threshold by less than $50k — and their end-of-season payroll for luxury tax purposes was $222,512,928. Payment is due sometime in January.

The Yankees have paid $13.9M, $18M, and $25.69M in luxury tax in the three previous seasons. Since the tax was implemented in 2003, New York has paid over $224M in penalties compared to $22M for the rest of baseball combined. The Yankees will be taxed 50% for every dollar spent over $178M in 2013, but the threshold jumps to $189M in 2014. As you know, the team is going to great lengths to trim payroll and avoid that penalty, which would also trigger some revenue sharing rebates.

Stark: A-Rod’s homerun milestones do not count toward luxury tax

(J. Meric/Getty Images)

Alex Rodriguez‘s contract is the albatross that keeps on giving, with five years and $114M still to go after this season. To make matters worse, the deal also includes five homerun-based historical bonuses that could begin to rear their ugly heads as soon as this season. With the Yankees looking to tighten up the payroll in the coming years, we’ve been assuming those bonuses would create a headache at some point. That may not be the case, however. Courtesy of Jayson Stark

Officials of both MLB and the union confirmed to Rumblings that baseball has now banned future personal-service deals and all milestone bonuses. Rob Manfred, MLB’s executive vice president for economics and league affairs, said both issues had become a growing concern. So once the offseason signing dust had cleared, owners and players agreed that it was time to step in and spread word that contracts containing those perks would no longer be approved.

So what’s the big deal, you ask? The closer you hone in on this, the more obvious it becomes why these arrangements raised eyebrows.

The “milestones” payouts, for instance, appear to violate baseball’s longtime ban on bonuses for virtually all statistical achievements. A-Rod‘s 2007 contract with the New York Yankees disguised his bonuses as “marketing” money. But “the more they looked at it,” said a source who was briefed on MLB’s thinking, “the more they realized what it was. … He was getting paid to achieve those milestones.”

[snip]

Finally, there’s one objection the commissioner’s office would seem to have to both of those creative wrinkles: Because those payouts are not regarded as guaranteed money, teams potentially could use them to avoid luxury-tax bills. And why do we suspect Bud Selig just totally hates it when that happens?

Unless I’m misinterpreting Stark’s article, A-Rod’s homerun milestone bonuses will not count towards the luxury tax. Signing bonuses, awards bonuses, and playing time bonuses do count towards the tax, but apparently not milestone bonuses. Alex will get $6M each for his 660th, 714th, 755th, 762nd, and 763rd career homers. He’s at 631 career dingers right now.

Obviously, this is pretty significant news as far as the 2014 payroll plan is concerned. The Yankees are aiming to get under the $189M luxury tax threshold that season, and now they don’t have to worry about A-Rod reaching one (or more) of those milestones and eating up payroll space in a given year. That $189M was really $183M or even $177M because they had to leave some payroll space in case Alex earned some of his bonuses, but now it doesn’t matter. Again, it’s pretty significant and good news. Six million bucks may only be ~3% of the payroll, but it sure does buy on a big league roster.