MLB Luxury Tax Breakdown in New CBA

Posted by Pat Gallen, Wed, December 21, 2011 10:33 AM | | Comments: 0

Luxury Tax

Teams whose payrolls exceed set thresholds will be taxed on the portions above them:

  • 2012-$178 million
  • 2013-$178 million
  • 2014-$189 million
  • 2015-$189 million
  • 2016-$189 million

For 2012 only, there are transition rates:

  • 1st time over threshold: 20 percent
  • 2nd time over threshold: 30 percent
  • Third or subsequent time over threshold: 42.5 percent

The following tax rates apply: starting in 2013:

  • 1st time over threshold: 17.5 percent
  • 2nd time over threshold: 30 percent
  • 3rd time over threshold: 40 percent
  • 4th or subsequent times over threshold: 50 percent
  • A team that does not pay tax in a year that goes over the threshold in a subsequent year pays at 17.5 percent.

Payrolls are for 40-man rosters and include averages of multiyear contracts; health and pension benefits; clubs medical costs; insurance; workman’s compensation, payroll, unemployment and Social Security taxes; spring training allowances; meal and tip money; All-Star game expenses; travel and moving expenses; postseason pay; and college scholarships.

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