To the surprise of nobody who closely follows the game of baseball, The New York Yankees will be paying baseball’s luxury tax yet again. However, this year they are alone in that honor.
According to the Associated Press, the Yankees will be the lone team paying baseball’s luxury tax in 2009 and will pay nearly $25.69 million in tax. The Yankees must pay the tax to the office of the commissioner by Jan. 31st.
New York’s payroll was $226.2 million for the purpose of the luxury tax and the Yankees pay at a 40 percent rate for the amount over $162 million. To compute the payroll, Major League Baseball uses the average annual values of contracts for players on 40-man rosters and adds benefits.
The Yankees’ regular payroll — using 2009 salaries and prorated shares of signing bonuses — finished at $220 million. That was a drop of $2.5 million from 2008 but more than $77.8 million higher than any other team — a gap larger than the payrolls of the bottom 11 clubs.
Here is my take on the luxury tax. Why have it?
It’s pretty clear the Yankees don’t mind paying this tax. So if the team that it affects the most doesn’t mind paying the tax, what’s the point of having it?
In order for this tax to really have an affect, then it has to be significant enough where the Yankees or any other team thinks twice before going over the tax.
$26 million to the Yankees is like $10 to you and me. It really doesn’t matter.
And you are probably asking where does this money go? Well, it doesn’t to small market teams. The money that the Yankees pay in luxury tax goes to an “industry growth fund” which is used to improve player benefits and to promote the game overseas.
I think baseball has two options going forward. Either increase the luxury tax, so teams hesitate before going over it or just get rid of it and implement a salary cap of $162 million.
I know the later is easier said than done because the Player’s Union will never agree to a salary cap. But until a change is made, the Yankees’ will have no problem paying the luxury tax.
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