Only Red Sox, Nationals owe luxury tax in 2018 as MLB teams combine for smallest bill in 15 years
Baseball's unofficial salary cap is working
For the first time since the current system was put in place in 2003, Major League Baseball teams combined to owe less than $15 million in luxury tax penalties in 2018. One two teams, the Boston Red Sox and Washington Nationals, exceeded the $197 million luxury tax threshold this past season, according to the Associated Press
Here are the six highest 2018 payrolls for luxury tax purposes:
- Red Sox: $239.5 million ($11.95 million luxury tax bill)
- Nationals: $205 million ($2.39 million luxury tax bill)
- Giants: $195.7 million
- Dodgers: $195 million
- Cubs: $193.3 million
- Yankees: $192.98 million
The Yankees had paid luxury tax every year since the system was implemented in 2003 before getting under the threshold in 2018. They paid over $340 million in luxury tax penalties from 2003-17. The Dodgers paid luxury tax each year from 2013-17 before getting under this past season..
As for the Red Sox, because they exceeded the $197 million threshold by more than $40 million, they were hit with the harshest possible penalties. That means their first draft pick moves back 10 spots and they pay an increased tax rate for going $20 million over the threshold, plus another increased tax rate for going $40 million over the threshold. Boston of course won the World Series, so I doubt the mind the luxury tax bill. The luxury tax bill might be tougher for the Nationals to swallow following an 82-80 season.
The $14.34 million combined luxury tax bill this past season is the smallest since the system was put in place in 2003. Here's a graph showing total luxury tax penalties by year:
The current collective bargaining agreement increased penalties for going over the luxury tax threshold and, for all intents and purposes,. More and more teams are trying to get under -- and stay under -- the luxury tax threshold each year, including some of the game's biggest spenders. The luxury tax is one reason why free agency has been so slow moving to date.
According to the CBA, the first $13 million of this year's $14.34 million luxury tax bill goes towards the Major League Baseball Players Benefit Plan. Half the remainder is used to fund player retirement accounts, and the rest is distributed to non-luxury tax paying teams. The 28 other teams each received roughly $24,000 in luxury tax money this year.
Luxury tax payment checks to the commissioner's office are due January 21. The luxury tax threshold rises to $206 million in 2019, $208 million in 2020, and $210 million in 2021.
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