MLB Luxury Tax

The New York Yankees own the luxury tax – they have paid:

  • 2008 – $26.9 million
  • 2007 – $23.9 million
  • 2005 – $34.0 million
  • $148.5 million in the six seasons since it began – 90% of the total
  • Luxury taxes are paid on Jan 31st of the following year.
  • Luxury tax = 40% rate for the amount over $155 million, the Tigers paid at a 22.5% rate [their tax was $1.3 million] because they exceeded the specified threshold for the first time.

Yanks have $26.9 million luxury tax


The New York Yankees not only failed to make the playoffs, they were hit with their highest luxury tax in three years.

The Yankees were assessed a $26.9 million tax by the commissioner’s office on Monday, 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.

Checks are due by Jan. 31.

Both teams got little for what they spent. The Yankees’ streak of 13 consecutive playoff appearances ended, and they finished third in the AL East at 89-73, prompting them to spend nearly a quarter-billion dollars to sign pitchers CC Sabathia and A.J. Burnett.

Detroit entered the year with lofty expectations after acquiring Miguel Cabrera and Dontrelle Willis but went 74-88 and finished last in the AL Central.

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.

This year’s figure brings the Yankees’ total tax to $148.5 million in the six seasons since it began – 90 percent of the total.

Before this year, the only other teams to pay were the Boston Red Sox, who owed $13.9 million for exceeding the threshold in four seasons, and the Los Angeles Angels, who paid $927,000 in 2004.

New York’s payroll was $222.2 million and Detroit was second at $160.8 million for the purpose of the luxury tax. To computer it, Major League Baseball uses the average annual values of contracts for players on 40-man rosters and adds benefits.

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.

About Jorge Costales

- Cuban Exile [veni] - Raised in Miami [vidi] - American Citizen [vici]
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