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Articles Tagged Luxury Tax 

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Tying up the Tanaka loose ends.

R.J. Anderson wrote the rapid response to the news that Masahiro Tanaka had agreed to a seven-year, $155 million contract with the Yankees. That's where you’ll find all the juicy details on the player and the contract, which you should want to take a look at. This is where you’ll find a few other thoughts that crossed my mind as I digested the signing, as laid out below.

The $189 million mark, in memoriam
December 4, 2011. That’s the day when we first heard, via the New York Post’s Joel Sherman, that the Yankees were determined to keep their 2014 payroll below $189 million, which they blew by in adding Tanaka. This is how long ago that was: Mike Trout’s career OPS was .672, and Alex Rodriguez and Randy Levine were still penpals. Granted, Steinbrenner never technically guaranteed that the team’s payroll would sink below the luxury tax threshold, but he came close, saying, “I’m looking at it as a goal, but my goals are normally considered a requirement.”


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A look at the multi-fold reasons the Yankees have for getting under the luxury tax threshold by 2014.

Taking stock of the Yankees this offseason is a little like watching The Walking Dead. With the injuries to Alex Rodriguez and Derek Jeter, the left-side of the infield has decimated, and who knows how their future Hall of Fame closer, Mariano Rivera, will rebound from his injury last year? At a time when getting aggressive in free agency would be part and parcel for the Yankees, they are, instead, paring back. As strange as it sounds, “fiscal restraint”—whatever that is for the Yankees—has become a hot topic. In interview after interview, be it Hal Steinbrenner or Brian Cashman, talk of getting below “189” seems to find its way into the conversation.

For the uninitiated, “189” is a reference to MLB’s luxury tax ceiling of $189 million in player payroll that is set to hit in 2014. The Yankees have said that they are serious about getting under the figure by then, when the tax rate for the club would hit a whopping 50 percent for every dollar over that $189 million threshold. Last year, the Yankees had a luxury tax bill of $13,896,069, and they’ll certainly be paying again this year when the end-of-year payroll figures are released just before the holiday. As of 2011, the Bronx Bombers have paid $206,109,142 in luxury tax penalties, or 91 percent of the $227,119,157 total collected since 2003. It’s been painful to the Yankees’ wallet, so getting under that $189 million threshold is all about avoiding the luxury tax, right? In part, but there is something else to consider.

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Ben and Sam discuss whether Josh Hamilton could end up signing a reasonable contract after all and talk about whether the Yankees can commit to and compete despite their goal to get under the luxury tax threshold by 2014.

Ben and Sam discuss whether Josh Hamilton could end up signing a reasonable contract after all and talk about whether the Yankees can commit to and compete despite their goal to get under the luxury tax threshold by 2014.

Episode 80: "Could Josh Hamilton Be a Bargain?/Are the Financially Responsible Yankees for Real?"

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A look at the growing trend of huge free agent contracts.

Money has a way of making people do funny things. A lot of it can alter your perception of what is (and is not) extravagant.  It certainly changes how you approach purchases, and in MLB, it’s no different.

The times were different and the circumstances far removed, but I can’t help but recall former commissioner Peter Ueberroth speaking to the owners on October 22, 1985. As I said, the topic was far, far different (collusion), but nothing (maybe ever) has changed about owners being hyper-competitive. As outlined in John Helyar’s seminal book, Lords of the Realm, Ueberroth was quoted as saying:

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Digging deeper into the new CBA.

In Part One of this series on MLB’s new Collective Bargaining Agreement, the focus was on the changes to the draft system. Today, we look at changes to minimum salaries and the soft-cap via a luxury tax on total player payroll.

Each time a new labor agreement is reached in professional sports, there is invariably the question of, “Who came out on top?” You might be able to say the needle swung slightly one way or the other, but in the end the only real winner is “compromise.”

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Our first look inside the new Collective Bargaining Agreement.

This is Part 1 of a multi-part series on the latest Collective Bargaining Agreement

On November 22 of last year, Major League Baseball and the MLBPA did something that the NFL and the NBA could not: reached a new labor agreement without a work stoppage. For those that follow baseball’s labor history, it has become a miraculous run. By the time the current five-year Basic Agreement (read here) expires on December 1, 2016, it will have been 21 years of uninterrupted labor peace.

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August 26, 2010 8:00 am

Prospectus Perspective: Acting Like Thieves or Rational Agents?

35

Matt Swartz

Are the Pirates not trying to be competitive by making a profit or just being good businessmen?

Many fans were outraged last weekend when the Associated Press, which had leaked some of the team's financial statements, reported that the Pirates had earned a profit while receiving money from Major League Baseball via revenue sharing while spending less on player payroll than nearly every other team in the sport. Apparently, fans are shocked that the people who charge them $5 for a hot dog are more interested in their money than their happiness. However, this is exactly what a system like MLB's revenue sharing is bound to do. It creates an incentive for small-market teams to earn more money by not investing in the product on the field.

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How is the luxury tax changing in the new CBA, and what will clubs be able to do with money received? Maury's latest article on what the CBA means for baseball.

Today, I'll look at two more pieces of the CBA puzzle that are designed in place to bolster better competitive balance. As I previously noted, this look at the CBA comes without a ratified CBA in hand. You can guarantee that BP will be going over the finalized agreement with a fine-tooth comb, once it is made public.

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December 5, 2005 12:00 am

Ghosts of 2002

0

Neil deMause

Neil outlines how the most recent CBA is impacting the current news around baseball.

Something like that must have gone on in the waning days of baseball's labor talks in 2002, because the resulting collective bargaining agreement is filled with odd clauses that could only have been concocted at 4 a.m. after the coffee had run out. One of these is already having an impact in the world of stadium-building, where the deductibility of construction costs from revenue-sharing--aka "the Steinbrenner dodge"--has given teams like the Yankees a loophole by which to build new stadiums and force their competitors to help pay for them.

Then there are the clauses that lurk like time bombs, lying forgotten until years after the fact. As Chris Isidore and Jayson Stark have pointed out in recent weeks, the luxury-tax system agreed to four years ago contains an odd wrinkle in its implementation schedule:

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May 9, 2003 12:00 am

The New CBA

0

Doug Pappas

Although the owners and players shook hands on a new collective bargaining agreement last August 30, the final version of the CBA was not published until this week. The eight-month delay becomes easier to understand when one looks at the document. The table of contents alone runs 11 pages; counting the attachments, the CBA itself is 223 pages long. Over the next few months I'll be writing a series of articles about the new CBA. These articles will walk through the document from beginning to end, translating the key points from legalese to English and discussing them in the context of past agreements.

Over the next few months I'll be writing a series of articles about the new CBA. These articles will walk through the document from beginning to end, translating the key points from legalese to English and discussing them in the context of past agreements.

Not quite yet, though. I'll be on vacation next week, with two transcontinental flights, two Pizza Feeds, three national parks, my first visit to Pac Bell Park, quality time with several friends from college, and at least 2,000 miles of driving to occupy me as I generate content for the other side of my Web site. For now I'll summarize three things I learned from a first pass through the CBA.

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March 4, 2003 12:00 am

Surveying the Authors

0

Doug Pappas

For the past seven years, I've surveyed the members of the Society For American Baseball Research's Business of Baseball Committee about issues relating to baseball labor and economics, publishing the results and a cross-section of the comments in the winter issue of the Committee's quarterly newsletter. With a new CBA in place and the Expos still in limbo, I decided to survey my fellow Prospectus writers, too. Unlike the usual Prospectus roundtable, no one saw or commented on anyone else's answers. BP writers who responded to the survey included Jeffrey Bower, Will Carroll, Gary Huckabay, Rany Jazayerli, Jonah Keri, Doug Pappas, Joe Sheehan, Nate Silver and Derek Zumsteg. As you'll see, our views are far from monolithic.

BP writers who responded to the survey included Jeffrey Bower, Will Carroll, Gary Huckabay, Rany Jazayerli, Jonah Keri, Doug Pappas, Joe Sheehan, Nate Silver and Derek Zumsteg. As you'll see, our views are far from monolithic.

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Whenever "competitive balance" is debated, the debaters inevitably turn to published information about team payrolls to support their positions. This sounds straightforward. Unfortunately, "team payroll" is a fluid concept. The four most widely reported measures each use different methods and can lead to different conclusions.

Whenever "competitive balance" is debated, the debaters inevitably turn to published information about team payrolls to support their positions. This sounds straightforward... but unfortunately, "team payroll" is a fluid concept. The four most widely reported measures each use different methods and can lead to different conclusions.

The four measures are (1) the Opening Day payrolls reported by the AP and USA Today a week or so into the season; (2) the August 31 payrolls reported by MLB after the season; (3) the August 31 average team salaries reported by the MLBPA after the season; and (4) the luxury tax payrolls reported by MLB after the season.

The first three have a lot in common. Each begins with the salary of every player on a club's 25-man roster, or its major league disabled list, as of the stated date. Each computes each player's base salary in the same way: the actual amount he is paid during the season, plus a pro-rated share of his signing bonus and the discounted present value of any part of his salary which is deferred to a future year. Each has a common flaw: by taking a snapshot of the roster as of a specific date, it ignores the effect of midseason player moves.

The MLBPA's formula has a more serious flaw which renders it essentially useless for meaningful team-to-team comparison. Its averaging method involves dividing the club's total payroll by the number of players on its roster-plus-DL. However, the size of the disabled list varies widely from team to team. In 2002 just 26 players were used to compute the Kansas City and Oakland averages, while San Diego's average was based on a 36-man roster. Thus while the August 31 payrolls for Oakland and San Diego were virtually identical, Oakland's reported average was $450,000 higher. Given the other information available, that's an unacceptable variance.

Here are each club's 2002 payrolls as computed by the three other methods:

Opening Day Aug. 31 Luxury Tax Team Payroll Payroll Difference Payroll Difference Anaheim Angels $ 61,721,667 $ 62,757,041 $ 1,035,374 $ 69,449,444 $ 7,727,777 Arizona Diamondbacks $102,820,000 $103,528,877 $ 708,877 $106,590,086 $ 3,770,086 Atlanta Braves $ 93,470,367 $ 93,786,065 $ 315,698 $103,035,498 $ 9,565,131 Baltimore Orioles $ 60,493,487 $ 56,504,685 ($ 3,988,802) $ 64,351,025 $ 3,857,538 Boston Red Sox $108,366,060 $110,249,535 $ 1,883,475 $106,060,766 ($ 2,305,294) Chicago Cubs $ 75,690,833 $ 74,950,543 ($ 740,290) $ 81,104,031 $ 5,413,198 Chicago White Sox $ 57,052,833 $ 54,534,084 ($ 2,518,749) $ 57,800,783 $ 747,950 Cincinnati Reds $ 45,050,390 $ 46,310,698 $ 1,260,308 $ 54,663,420 $ 9,613,030 Cleveland Indians $ 78,909,448 $ 74,888,365 ($ 4,021,083) $ 82,693,915 $ 3,784,467 Colorado Rockies $ 56,851,043 $ 56,509,185 ($ 341,858) $ 72,300,867 $15,449,824 Detroit Tigers $ 55,048,000 $ 54,390,870 ($ 657,130) $ 67,589,693 $12,541,693 Florida Marlins $ 41,979,917 $ 40,822,536 ($ 1,157,381) $ 45,369,104 $ 3,389,187 Houston Astros $ 63,448,417 $ 65,412,960 $ 1,964,543 $ 74,384,060 $10,935,643 Kansas City Royals $ 47,257,000 $ 49,362,709 $ 2,105,709 $ 50,973,807 $ 3,716,807 Los Angeles Dodgers $ 94,850,952 $101,504,889 $ 6,653,937 $112,274,884 $17,423,932 Milwaukee Brewers $ 50,287,333 $ 49,259,130 ($ 1,028,203) $ 50,455,737 $ 168,404 Minnesota Twins $ 40,225,000 $ 41,309,031 $ 1,084,031 $ 45,931,954 $ 5,706,954 Montreal Expos $ 38,670,500 $ 37,901,032 ($ 769,468) $ 35,814,751 ($ 2,855,749) New York Mets $ 94,633,593 $ 94,395,575 ($ 238,018) $102,182,193 $ 7,548,600 New York Yankees $125,928,583 $133,429,757 $ 7,500,992 $167,592,745 $41,664,162 Oakland Athletics $ 39,679,746 $ 41,942,665 $ 2,262,919 $ 58,143,776 $18,464,030 Philadelphia Phillies $ 57,955,000 $ 59,593,741 $ 1,638,741 $ 64,505,697 $ 6,550,697 Pittsburgh Pirates $ 42,323,598 $ 46,059,984 $ 3,736,386 $ 55,967,080 $13,643,482 St. Louis Cardinals $ 74,098,267 $ 76,227,801 $ 2,129,534 $ 88,378,549 $14,280,282 San Diego Padres $ 41,425,000 $ 41,791,170 $ 366,170 $ 57,943,130 $16,518,130 San Francisco Giants $ 78,299,835 $ 78,426,572 $ 126,737 $ 88,488,058 $10,188,223 Seattle Mariners $ 80,282,668 $ 86,084,710 $ 5,802,432 $ 92,310,287 $12,027,619 Tampa Bay Devil Rays $ 34,380,000 $ 34,728,540 $ 348,540 $ 36,249,505 $ 1,869,505 Texas Rangers $105,302,124 $106,915,180 $ 1,613,056 $122,887,987 $17,585,863 Toronto Blue Jays $ 76,864,333 $ 66,814,971 ($10,049,762) $ 58,963,374 ($17,900,959)

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