Baseball Luxury Tax

"Competitive Balance Tax"
Major League Baseball uses the average annual values of contracts for players on 40-man rosters and adds benefits.

Stock Ticker

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 recent and future seasons are:

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

New York Yankees: $25,700,000

Top Five MLB Opening Day Payrolls for 2009

1) New York Yankees: $201,449,289
2) New York Mets: $135,773,988
3) Chicago Cubs: $135,050,000
4) Boston Red Sox: $122,696,000
5) Detroit Tigers: $115,085,145

2008 Luxury Tax

The Yankees were assessed a $26.9 million tax by the commissioner’s office on Monday, 12/22/08, up from $23.9 million last year and their biggest bill since paying nearly $34 million for 2005. The Detroit Tigers, who also failed to qualify for the postseason, are the only other team that must pay tax and owe $1.3 million to the commissioner’s office. While the Yankees pay at a 40 percent rate for the amount over $155 million, the Tigers pay at a 22.5 percent rate because they exceeded the specified threshold for the first time.

New York’s final payroll was $222.2 million and Detroit was second at $160.8 million for the purpose of the luxury tax. To compute it, Major League Baseball uses the average annual values of contracts for players on 40-man rosters and adds benefits. The threshold rose from $148 million last year to $155 million this season. It goes up to $162 million next year and rises by $8 million in each of the following two seasons.

NY Yankees: $26.9 million
Detroit Tigers: $1.3 million

Top Five MLB Opening Day Payrolls for 2008

1) New York Yankees: $209,081,577
2) New York Mets: $137,793,376
3) Detroit Tigers: $137,685,196
4) Boston Red Sox: $133,390,035
5) Chicago White Sox: $121,189,332

2007 Luxury Tax

Checks for the competitive-balance tax, as it is formally known, are due at the commissioner's office by Jan. 31. NY's payroll was $207.7 mil. & Boston was second at $163.1 mil. for luxury tax purposes, which uses the average annual values of contracts for 40-man rosters and adds benefits. Both teams pay at a 40 % rate for the amount over the tax threshold, which rises from $148 mil. this year to $155 mil. next season.

NY Yankees: $23.88 million
Boston Red Sox: $6.06 million

2006 Luxury Tax

The agreement started with the 2002 season and ran through Dec. 19, 2006.

NY Yankees: $26,000,000
Boston Red Sox: $497,549

2005 Luxury Tax

NY Yankees: $34,053,787
Boston Red Sox: $4,156,476

Checks for the competitive-balance tax, as it is formally known, are due at the commissioner's office by Jan. 31. Because they exceeded the payroll threshold for the third time under the labor contract that began after the 2002 season, the Yankees were taxed at a 40 percent rate on the amount above $128 million. Boston, which topped the threshold for the second time, was taxed at a 30 percent rate.

2004 Luxury Tax

NY Yankees: $25,026,352 - revised to $30,637,531 (4/05)
Boston Red Sox: $3,155,234
LA Angles of Anaheim: $927,059

Amounts are due in the commissioners office by 1/31/2004. In 2003, the first year of the luxury tax, the Yankees were the only team to pay. Because they exceeded the threshold a second time, the Yankees were taxed at a rate of 30 percent for the amount they were over. Boston and Anaheim were taxed at a 22.5 percent rate. If the Yankees go over the 2005 threshold of $128 million they would be taxed at a 40 percent rate.

2003 Luxury Tax

NY Yankees: $11,798,357.

Luxury Tax 2003 - 2006

The luxury tax provisions agreed to in 2002 by baseball owners and players. The tax will be levied on the portion of a team's payroll above a threshold, and the tax rate for a team would vary depending on the number of times it exceeded the threshold. Figures for thresholds are in millions of dollars. Figures for rates are in percent.

Threshold (millions of dollars)

2003 - 117.0
2004 - 120.5
2005 - 128.0
2006 - 136.5

Tax Rate (%)
  1st time 2nd time 3rd time 4th time
2003  17.5           
2004  22.5   30        
2005  22.5   30   40     
2006  0   40   40   40  

Note: Payrolls calculated using average annual values of contracts of players on 40-man rosters, earned bonuses and $9 million per team for benefits.

Original Luxury Tax

Money paid by teams under baseball's original luxury tax, which began for the 1997 season and ended with the 1999 season.

Team 1999 1998 1997 Totals
Baltimore $3,475,048 $3,138,621 $4,030,228 $10,643,897
NY Yankees 4,804,081 684,390 4,431,180 9,919,651
LA Dodgers 2,663,079 49,593 0 2,712,672
Boston 21,226 2,184,734 0 2,205,960
Cleveland 0 0 2,065,496 2,065,496
Atlanta 0 495,625 1,299,957 1,795,582
NY Mets 1,137,992 0 0 1,137,992
Florida 0 0 139,607 139,607
Totals $12,101,426 $6,552,963 $11,966,468 $30,618,857

Baseball Millionaires / Team Payrolls

Page back / Back to top