Baseball Luxury Tax
10-06-2014 / By:
"Competitive Balance Tax"
Monies collected under the MLB luxury tax are apportioned as follows: The first is held in reserve, to pay for possible luxury tax refunds. This isn't comparable to a tax return you might expect if you decided to donate car or truck parts this year, the sums of money involved in the luxury tax refund are much greater. Once it is clear that there are no refunds to be issued, this money is then earmarked for the Industry Growth Fund (IGF). 50% of the remaining money is used to fund player benefits, 25% is used to fund baseball programs in developing countries with no high-school baseball, and 25% is put into the Industry Growth Fund. The cap on spending before the luxury tax (officially called the Competitive Balance Tax) kicks in changes during each season of the current collective bargaining agreement. According to the agreement, affected teams must send a check to the commissioner's office by Jan. 31. These are a lot of checks to be writing and they're not cheap checks either. The amountsfor recent and future seasons (as defined by the new MLB labor agreement through 2016) are:
2007: , 2008: , 2009: , 2010: , 2011: , 2012: , 2013: , 2014: , 2015: , 2016:
Top Five projected MLB Opening Day Payrolls for 2014
2) Yankees $197,500,000
3) Phillies $175,500,000
4) Tigers $161,000,000
5) Red Sox $155,000,000
2013 Luxury Tax
Los Angeles Dodgers: $11,415,959
The NY Yankees were hit with a $28 million luxury tax bill, pushing their total past the $250 million mark since the penalty began in 2003. The Yankees had the highest payroll in baseball for 2013, but it didn't translate to postseason success and it cost them $28.1 million in luxury tax fines. According to MLB calculations sent to teams, the LA Dodgers were the only other team that exceeded the tax threshold this year and must pay $11.4 million. Boston finished just under for the second straight year, coming in $225,666 shy of the $178 million mark. Figures include average annual values of contracts for players on 40-man rosters, earned bonuses and escalators, adjustments for cash in trades and $10.8 million per team in benefits.
Because the Yankees have been over the tax threshold at least four consecutive times, they pay at a 50 percent rate on the overage, and their $28,113,945 bill was second only to their $34.1 million payment following the 2005 season. The Yankees are responsible for $252.7 million of the $285.1 million in tax paid by all clubs over the past 11 years.
Top Five MLB Opening Day Payrolls for 2013
York Yankees $228,995,945
2) Los Angeles Dodgers $216,302,909
3) Philadelphia $159,578,214
4) Boston $158,967,286
5) Detroit $149,046,844
2012 Luxury Tax
New York Yankees: $18,900,000
Top five final 2012 Luxury Tax payroll figures. The luxury tax is assessed on the amount above $178 million. As a team that paid at a 40 percent rate on the amount over the threshold in 2011, the Yankees pay at a 42.5 percent rate on the amount over the threshold in 2012.
Los Angeles Angels 176,652,838
San Francisco 160,399,128
Top Five MLB Opening Day Payrolls for 2012
York Yankees: $197,962,289
2) Philadelphia Phillies: $174,538,938
3) Boston Red Sox: $173.186,617
4) Los Angeles Angels: $154,485,166
5) Detroit Tigers: $132,300,000
breakdown of what teams have paid since 1997 (as of May, 2011) and the
percentage of the total amount of the tax ever levied:
Source: Biz of Baseball
Red Sox: $17,531,662 (7.21)
Orioles: $11,238,849 (4.62)
Dodgers: $5,199,593 (2.14)
Braves: $2,567,582 (1.06)
Indians: $2,065,496 (0.85)
Tigers: $1,305,220 (0.54)
Angels: $927,057 (0.38)
Mets: $525,000 (0.22)
Marlins: $139,607 (0.06)
2011 Luxury Tax
New York Yankees: $13,900,000
Boston Red Sox: $3,400,000
Yankees pay at a 40% rate on the amount of their payroll over $178 million, a
figure that includes the average annual values of contracts plus benefits.
Boston, which exceeded the threshold for the second straight year, pays at a
30% rate. For purposes of the tax, New York's final payroll was $212.7 million
and Boston's was $189.4 million.
Payroll figures are for 40-man rosters and include salaries and prorated shares of signing bonuses, earned incentive bonuses, non-cash compensation, buyouts of unexercised options and cash transactions, such as money included in trades. In some cases, parts of salaries that are deferred are discounted to reflect present-day values.
Top Five MLB Opening Day Payrolls for 2011
York Yankees: $201,689,030
2) Philadelphia Phillies: $172,976,381
3) Boston Red Sox: $161,407,476
4) Los Angeles Angels: $138,998,524
5) Chicago White Sox: $129,285,539
2010 Luxury Tax
New York Yankees:
Boston Red Sox: $1,490,000
MLB bases the luxury tax on the annual average value of contracts for players on the 40-man roster and adds benefits. The Yankees' payroll was $215.1 million, down from $226.2 million, while the threshold rose from $162 million to $170 million. The Red Sox were the only other team to receive a luxury-tax bill, as Boston will pay out $1.49 million, the first time since 2007 that the Sox have exceeded the payroll threshold.
Top Five MLB Opening Day Payrolls for 2010
York Yankees: $206,333,389
2) Boston Red Sox: $162,747,333
3) Chicago Cubs: $146,859,000
4) Philadelphia Phillies: $141,927,381
5) New York Mets: $132,701,445
2009 Luxury Tax
New York is the only team to pay a tax for the 2009 season and has crossed the threshold in all seven years since the tax started.
New York Yankees: $25,700,000
Top Five MLB Opening Day Payrolls for 2009
York Yankees: $201,449,289
2) New York Mets: $135,773,988
3) Chicago Cubs: $135,050,000
4) Boston Red Sox: $122,696,000
5) Detroit Tigers: $115,085,145
2008 Luxury Tax
The Yankees were assessed a $26.9 million tax by the commissioner’s office on Monday, 12/22/08, up from $23.9 million last year and their biggest bill since paying nearly $34 million for 2005. The Detroit Tigers, who also failed to qualify for the postseason, are the only other team that must pay tax and owe $1.3 million to the commissioner’s office. While the Yankees pay at a 40 percent rate for the amount over $155 million, the Tigers pay at a 22.5 percent rate because they exceeded the specified threshold for the first time.
New York’s final payroll was $222.2 million and Detroit was second at $160.8 million for the purpose of the luxury tax. The threshold rose from $148 million last year to $155 million this season. It goes up to $162 million next year and rises by $8 million in each of the following two seasons.
NY Yankees: $26.9 million
Detroit Tigers: $1.3 million
Top Five MLB Opening Day Payrolls for 2008
York Yankees: $209,081,577
2) New York Mets: $137,793,376
3) Detroit Tigers: $137,685,196
4) Boston Red Sox: $133,390,035
5) Chicago White Sox: $121,189,332
2007 Luxury Tax
NY's payroll was $207.7 mil. and Boston was second at $163.1 mil. for luxury tax purposes. Both teams pay at a 40 % rate for the amount over the tax threshold, which rises from $148 mil. this year to $155 mil. next season.
NY Yankees: $23.88 million
Boston Red Sox: $6.06 million
2006 Luxury Tax
The agreement started with the 2002 season and ran through Dec. 19, 2006.
NY Yankees: $26,000,000
Boston Red Sox: $497,549
2005 Luxury Tax
NY Yankees: $34,053,787
Boston Red Sox: $4,156,476
Because they exceeded the payroll threshold for the third time under the labor contract that began after the 2002 season, the Yankees were taxed at a 40 percent rate on the amount above $128 million. Boston, which topped the threshold for the second time, was taxed at a 30 percent rate.
2004 Luxury Tax
NY Yankees: $25,026,352 -
revised to $30,637,531 (4/05)
Boston Red Sox: $3,155,234
LA Angles of Anaheim: $927,059
In 2003, the first year of the luxury tax, the Yankees were the only team to pay. Because they exceeded the threshold a second time, the Yankees were taxed at a rate of 30 percent for the amount they were over. Boston and Anaheim were taxed at a 22.5 percent rate. If the Yankees go over the 2005 threshold of $128 million they would be taxed at a 40 percent rate.
2003 Luxury Tax
NY Yankees: $11,798,357.
Luxury Tax Provisions 2003 - 2006
The luxury tax provisions agreed to in 2002 by baseball owners and players. The tax will be levied on the portion of a team's payroll above a threshold, and the tax rate for a team would vary depending on the number of times it exceeded the threshold. Figures for thresholds are in millions of dollars. Figures for rates are in percent.
Threshold (millions of dollars)
2003 - 117.0
2004 - 120.5
2005 - 128.0
2006 - 136.5
|Tax Rate (%)|
Note: Payrolls calculated using average annual values of contracts of players on 40-man rosters, earned bonuses and $9 million per team for benefits.
Original Luxury Tax
Money paid by teams under baseball's original luxury tax, which began for the 1997 season and ended with the 1999 season.