Thursday, December 22, 2011
Yanks, Red Sox hit with luxury tax
The New York Yankees were hit with a $13.9 million luxury tax bill Thursday, their lowest since 2003.
The fee, assessed by Major League Baseball under its labor contract, is down from $18 million last year and $25.7 million in 2009, when the Yankees won the World Series.
Boston, which missed the playoffs for the second straight season, is the only other team that will have to pay a tax. The Red Sox received a bill for $3.4 million, up from last year's $1.5 million.
Season-ending payroll information and the tax was sent to teams and obtained by The Associated Press.
According to the collective bargaining agreement, checks to pay the tax must be sent to the commissioner's office by Jan. 31.
New York has paid the tax in all nine years since it began, $206 million of the $227 million raised under the penalty for high payrolls. The only other teams to pay have been the Red Sox (a total of $18.8 million), Detroit ($1.3 million) and the Los Angeles Angels ($927,000).
The Yankees pay at a 40 percent rate on the amount of their payroll over $178 million, a figure that includes the average annual values of contracts plus benefits. Boston, which exceeded the threshold for the second straight year, pays at a 30 percent rate. For purposes of the tax, New York's final payroll was $212.7 million and Boston's was $189.4 million.
Under the new labor contract, the Yankees' rate would increase to 42.5 percent next year and 50 percent in 2013 if they continue to exceed the threshold, and Boston's rate would go up to 40 percent next season.
But if in any year a team goes under the threshold, its rate decreases to 17.5 percent the next time it pays the tax.
As an added incentive for the high-spenders to decrease payroll, if they get under the threshold they will become eligible to get back some of the money they contribute in revenue sharing. The tax threshold stays at $178 million through 2013, then goes to $189 million in each of the following three years.
New York's payroll under the conventional method of calculation -- salaries and prorated shares of signing bonuses -- increased from $215 million to $216 million, still below its high of $222.5 million in 2008.
Boston remained second and finished at $174 million, an increase of $3 million. Philadelphia stayed third at $165 million, a rise of nearly $20 million.
Even before adding Albert Pujols and C.J. Wilson, the Angels were fourth at $143 million, followed by the financially troubled New York Mets at $142 million, an increase of $14 million and a figure that likely will drop by $30 million or more next season. They were followed by the Chicago teams, who both missed the playoffs, with the Cubs at $141 million and the White Sox at $126 million.
World Series champion St. Louis was 11th at $113 million, and AL champion Texas was 13th at $104 million. Milwaukee (16th at $93 million), Arizona (24th at $66 million) and Tampa Bay (29th at $45 million) made the playoffs from the bottom half of payrolls, while the 2010 champion San Francisco Giants ($125 million) and Minnesota ($115 million) were among the high-spending teams to miss the postseason.
The Marlins, who have added free agents Jose Reyes, Mark Buehrle and Heath Bell as they prepare to open their new ballpark, were 25th at $62 million. The Los Angeles Dodgers kept their payroll steady at $110 million as owners Frank and Jamie McCourt argued in divorce proceedings that helped cause the team to file for bankruptcy. The Dodgers' payroll had been $132 million in 2009.
Kansas City dropped from $77 million to last at $45 million. Houston, sold during the season, fell to $81 million from $90 million last year and $108 million in 2009.
Overall payroll was $43,000 shy of the $3 billion mark, up from $2.91 billion last year.
Payroll figures are for 40-man rosters and include salaries and prorated shares of signing bonuses, earned incentive bonuses, non-cash compensation, buyouts of unexercised options and cash transactions, such as money included in trades. In some cases, parts of salaries that are deferred are discounted to reflect present-day values.
The commissioner's office computed the average salary at a record $3,039,161, up 3.6 percent from last year's $2,932,162. The players' association, which uses a slightly different method, pegged the average at $3,095,183 earlier this month, up 2.7 percent from $3,014,572.