Skip to content
Search AI Powered

Latest Stories

What Are The Luxury Tax Rules In Baseball?

What Are The Luxury Tax Rules In Baseball?
NEW YORK, NY - OCTOBER 18: The Yankees have paid the luxury tax during the majority of the past decade (Al Bello/Getty Images)
NEW YORK, NY - OCTOBER 18: The Yankees have paid the luxury tax during the majority of the past decade (Al Bello/Getty Images)

The luxury tax, otherwise known as the Competitive Balance Tax, is essentially a soft payroll ceiling. The purpose of the tax is to reduce the advantage of large-market teams that can afford to spend more money. Baseball teams in smaller markets (such as the Cleveland Indians, Kansas City Royals and Milwaukee Brewers) can't afford to spend money like the New York Yankees or Los Angeles Dodgers. As a result, the latter teams can buy free agents of higher quality and in higher quantity. The luxury tax forces those teams to incur penalties if their payroll rises above a certain cap.

Upcoming Luxury Tax Thresholds (via MLB.com)

2018: $197 million


2019: $206 million

2020: $208 million

2021: $210 million

Any team that goes over the threshold in its respective year pays a 20% tax on the overage. However, the 20% figure only applies to the first time a team exceeds the cap. If a team passes the threshold in a second consecutive year, it pays a 30% tax on the overage. If that becomes three years in a row, the tax raises to 50%. The tax resets every time a team spends a full season under the luxury tax ceiling.

The penalties get stricter the higher a team spends above the tax threshold. Any team that exceeds the cap by $20-$40 million pays a 12% surtax. A team that goes $40 million over the cap has to pay a 42.5% tax the first year. That figure rises to 45% the following year. In addition, a team that hits the $40 million mark gets its first round draft pick lowered by ten spots the next season. If that pick is in the top six, the team's second round selection is lowered by ten spots instead.

Part of the money paid due to the luxury tax obligations is allocated to player benefits. The rest is distributed among teams that did not pay the cap.

More from News

A Man Playing A Violin
man playing violin
Photo by Joel Wyncott on Unsplash

People Share The Best Hacks From Their Profession That Most People Don't Know About

It's easy to contemplate a job or profession different from our own and constantly wonder, "how do they do that?"

Often, this is for complicated jobs that take a skill and discipline we know we could never have ourselves.

Keep ReadingShow less
shocked woman
Olivia Hutcherson on Unsplash

People Break Down The Most Brutal Insults They've Ever Heard

Let's be honest, it doesn't take any talent to insult someone.

After all, by the time children learn to speak in complete sentences, they're hurling sophisticated comebacks like:

Keep ReadingShow less
Dubai Princess Publicly Demands 'Divorce' From Cheating Royal Husband In Blunt Instagram Post
@hhshmahra/Instagram

Dubai Princess Publicly Demands 'Divorce' From Cheating Royal Husband In Blunt Instagram Post

In an unexpected move, Her Highness Sheikha Mahra bint Mohammed bin Rashid Al Maktoum, the Dubai princess, addressed her husband's infidelity on Instagram, declaring their divorce.

Sheikha Mahra, who is daughter of the UAE Vice President and Prime Minister, His Highness Sheikh Mohammed bin Rashid Al Maktoum, wrote a scathing and short message to her husband.

Keep ReadingShow less
TikTok screenshot of Jodi Benson watching daughter sing; Ariel from the 1989 'The Little Mermaid'
@coolzjay/TikTok; Disney

'Little Mermaid' Star Jodi Benson Tears Up Watching Daughter Sing 'Part Of Your World' On Stage

A clip of the original voice of Ariel, Jodi Benson, watching her daughter Delaney play the lead role in a stage production of The Little Mermaid has gone viral, and Benson revealed she was moved to tears by the performance.

Posted to TikTok, the video has already garnered more than 4.2 million views in only a few days, and people on the platform said they got a bit emotional, as well.

Keep ReadingShow less
Kate Beckinsale
@houseofmuamua_

Kate Beckinsale's Custom Swimsuit Sends Blunt Message To Her Haters Online

British actor Kate Beckinsale has no time for trolls criticizing her looks.

Instead of addressing haters' unsolicited assessments of her online, the 50-year-old actor came for them with a fierce fashion statement that said it all.

Keep ReadingShow less