Easy for all of us to say "just come out of the owners pockets." Yep, we dont have to pay that tax. As long as the fans are willing to pay those higher prices for seats, parking, food, etc. oh wait......
Based on everything I read. It's a simple rate progression. You can reset it, but it will climb annually if you exceed the threshold. I won't argue this is conclusive. I have not read anything that clarifies it 100%. It makes a lot of sense to hit the reset button, but the monkey climbs back on and takes a 5-year ride up the hill with you if you stay over.Quote:
The Yankees have paid the luxury tax every season since the tax’s inception. In 2011, the Yankees’ tax rate was 40% — the highest possible rate under the previous CBA. That means the team’s tax rate in 2012 is 42.5% and will be 50% in 2013. But if the Yankees keep payroll below $189 million in 2014, it not only avoids the tax that season, but it also lower the team’s luxury-tax rate for 2015 to only 17.5%. That’s right, avoiding the luxury tax for just one year re-sets a team’s tax rate to the lowest under the CBA. Even for the Yankees, the difference between a 50% tax rate and a 17.5% tax rate is significant.
So, for example, if a team’s payroll for 2012 was $185 million, that team would be taxed on $7 million ($185 million – $178 million). But what’s the tax rate? That depends. The rate is tied to a team’s luxury tax history. If the team wasn’t assessed a tax in the prior season, then the tax rate is 20%. If the team paid the luxury tax in 2011 at a 22.5% rate, then the tax rate for 2012 is 30%. A 30% luxury tax rate in 2011 would yield a 40% rate for the same team in 2012. And a 40% luxury tax rate in 2011 would mean a 42.5% rate in 2012. For the seasons 2013 through 2016, the initial rate goes down (from 20% to 17.5%), the 30% and 40% tax rates stay the same and the 42.5% rate shoots up to 50%.
50% down to 17%.... Thats huge.
Honestly, I'm all for this...
Not only for the idea of resetting the tax, but to stop the ridiculous spending on nothing. Keep giving youth a chance, make some seemingly small but smart moves here and there, and wait. Keep the resources (both in trade pieces and money) ready for worthwhile opportunities.
Made easier by the fact there isn't anyone worth thinking about spending a ton of cash on right now....
And why does an offseason full of dull scrap heap, bargain-type FA signings mean we can't or won't win? Did it last year, and made it to the 2nd round, right?
If they are under the cap in Year 1, the Yankees pay no luxury tax, so they save 50% in Yr 1, then in YR 2 save the difference between 50% and 17%, which is 33% savings, then in year 3 save the difference between 50% and 30% which is 20% savings, then in year 4, the difference between 50% and 40%, which is a 10% savings. So over a 4 year period 50% +33% +20% +10% = 113% over 4 years Then they can reset back to zero again and start those same savings all over again. Of course, they could reset in the middle of the time frame. Also, in addition to the salary cap penalties, I believe that there might also be non-financial penalties for being over 50% 2 or more years in a row. one good point is that the salary cap will also climb each year from the $189 K.