How does the MLB luxury tax work?

Question

How much does a team need to spend to start hitting the luxury tax point? What is the rate of the luxury tax? How is the tax divided / how much do other teams get?

Answer 1

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. The amounts for the next several seasons are:

2007 - $148m
2008 - $155m
2009 - $162m
2010 - $170m
2011 - $178m

A team that goes over the luxury tax cap for the first time would pay a penalty of 17.5% of the amount they were over that cap. Second-time violators would pay 30%, and those doing it beyond a second time would be taxed at 40%.

Answer 2

The rate is 50% of everything spent over the salary cap. The Cap kicks in at different dollar values each year I beleive. I think it is tied to inflation. The entire amount of money is put into a pool and is reallocated to the smaller market teams. The smaller mareket teams can only get allocations if they meet minimum salary outlays. I beleive each smaller market club is forced to spend a minimum of 50 million on payroll in order to get an allocation.

Answer 3

believe jrc, and this tax is besides to the quantity of the gross sales an excellent marketplace team, let's imagine, the yankees, would desire to share with smaller marketplace communities, which they'd desire to on no account would desire to in a loose marketplace. the franchises below MLB are heavily held agencies working in a loose marketplace. it is a typical actuality many fail to understand right here. to indicate that each and every of the communities could have equality is largely being in a socialist physique of concepts. A team does not pass to a place the place it won't see gross sales besides. As for taxing, How this, or the "aggressive stability tax" that no person different than the long island Yankees will pay, revives the "wish and faith" of everyone yet incompetent vendors is extremely open to question. The gross sales-sharing plan does not attempt to compensate communities that play in small cities for the risks they face, which might make experience. It quite penalizes extreme-gross sales communities and rewards low-gross sales communities.it rewards incompetence and punishes competence it is not in any respect obtrusive that gross sales sharing is mandatory to team fulfillment. certainly, one suspects the full ingredient to the cutting-edge CBA -- which contains a "luxurious tax" on communities whose payrolls exceed $XXX million-- is to shrink the quantity of money golf equipment would desire to spend on participant salaries, hence depressing the salary marketplace and ensuring extra beneficial income for vendors.