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Home MLB News Yankees Hit With Luxury Tax Bill of Nearly $26 Million for 2009

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Yankees Hit With Luxury Tax Bill of Nearly $26 Million for 2009 PDF Print E-mail
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Written by Maury Brown   
Monday, 21 December 2009 21:26


The Yankees have now paid over
$174 million in Luxury Tax bills
since 2003

For the seventh straight year, the New York Yankees have broken through Major League Baseball’s soft cap, also known as the Luxury Tax, and in doing so, will pay $25,689,173 in penalties. Since the collectively bargained tax designed to stop clubs from lavishly outspending on player payroll was put in place, the Yankees have paid a total of $174,183,419 of $190,275,477 in total dollars paid into luxury tax, or 92 percent of the total since the tax was put into place.

The only other clubs that have paid the tax include the Red Sox (2004-’07), Angels (2004), and Tigers (2008).

The Luxury Tax, or Competitive Balance Tax, as it is called in the MLB Collective Bargaining Agreement, has set thresholds by which teams that exceed the figure are then taxed. For 2009, that figure was $162 million. For 2010 the threshold will be $170 million, and in 2011, the last year of the current CBA, the threshold will be $178 million.

The Competitive Balance Tax rates that are assessed are 22.5% for those that breaking the threshold for the first time. After that, should a club break the threshold in concurrent years the tax rate is 30% (2nd time) and 40% for each concurrent contract year thereafter. The Yankees and Red Sox are the only clubs that have broken through the threshold in concurrent years.

According to the current Basic Agreement, clubs that do not pay their luxury tax on or before January 31 of the next calendar year “shall have its next Major League Central Fund  distribution and subsequent distributions, each net of any debt service obligation under the industry credit facility, reduced by up to 50% until such obligation is satisfied.” Only, royalty payments from Major League Baseball Properties shall not be considered part of a Club’s Central Fund distribution.

The monies collected from the Competitive Balance Tax is distributed in several areas. Five-million dollars of the funds are held in reserve. Of any remaining funds, 75% is “used to fund benefits to Players, as provided in the Major League Baseball Players Benefit Plan Agreements.”

According to the CBA, “Twenty-five percent (25%) of the remaining proceeds collected for each Contract Year shall be contributed to the Industry Growth Fund and, with accrued interest.”

Per the current Basic Agreement, the Competitive Balance Tax ends after the 2011 regular season. A new system, or the system as it currently is in some revised fashion, could be put in place.

See the table below for a complete breakdown of luxury tax payments since 2003

Luxury Tax Figures: 2003-2009
Yanks $11,798,357 $25,964,060 $33,978,702 $26,009,039 $23,881,386 $26,862,702 $25,689,173 $174,183,419
R. Sox $3,148,962 $4,148,981 $497,549 $6,064,287 $13,859,779
Angels $927,059 $927,059
Tigers $1,305,220 $1,305,220
Total $11,798,357 $30,040,081 $38,127,683 $26,506,587 $29,945,673 $28,167,922 $25,689,173 $190,275,477

Luxury Tax data by way of The Associated Press

Maury BrownMaury Brown is the Founder and President of the Business of Sports Network, which includes The Biz of Baseball, The Biz of Football, The Biz of Basketball and The Biz of Hockey. He is available for hire or freelance. Brown's full bio is here. He looks forward to your comments via email and can be contacted through the Business of Sports Network.

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