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Does the Major League Baseball Luxury Tax Really Work?
Cleveland Guardians fans were thrilled to see their team reach the American League Championship Series, but they couldn’t help but notice something about rest of the Final Four teams.
The Los Angeles Dodgers, New York Yankees, and New York Mets had the top three payrolls in Major League Baseball.
The Dodgers beat the Mets in the NL Championship Series and the Yankees in the World Series.
LA had a payroll of $353 million, followed by the Mets at $347 million and the Yankees at $316 million.
Cleveland was in a much lower stratosphere at $106 million, which ranked 23rd out of the 30 teams in Major League Baseball.
WHAT LUXURY TAX?
So, it’s safe to say that while the MLB Luxury Tax is doing a great job of supplementing the players’ retirement funds, it’s not leading to competitive balance on the field.
The Dodgers had to pay a whopping $103 million in luxury tax, which is almost as much as the Guardians’ payroll!
The arms race continues to escalate, as the Mets just outspent the Yankees for Juan Soto, who signed a 15-year, $765 million contract.
HOW DOES IT WORK?
According to an ESPN report, the MLB assesses a luxury tax on teams with a payroll of more than $237 million.
The Yankees, Dodgers, Mets, and Philadelphia Phillies had to pay a 50 percent tax on the amount over $237 million because they have exceeded the cap for three years in a row.
The Atlanta Braves and Texas Rangers paid 30 percent for exceeding the limit for the second year.
The Chicago Cubs, San Francisco Giants, and Houston Astros went over the limit for the first time and paid $20 percent.
So, while the MLB Luxury Tax may be better than nothing, it has nowhere near the effect of the NFL and NBA salary caps, which allow cities like Sacramento, Portland, and Green Bay to have major-league teams.
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