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  1. #1
    It's About the Money
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    Sep 2011
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    Looking for a luxury tax prime?

    Apologies for posting multiple links in one day, but one of our readers put together a very thorough explanation of how baseball's new luxury tax rules work, specifically the provisions on revenue sharing refunds, and what it will mean for the Yankees to get below the spending threshold before 2014. I'm posting the link here just because I think it might interest people. Cheers!

    http://itsaboutthemoney.net/archives...d-the-yankees/

  2. #2

    Re: Looking for a luxury tax prime?

    I recommend everyone read this. Not just because I wrote it, but because its vital to understanding how the Yankees are going to operate moving forward. It is not as easy as going from 200mm payroll to 189mm. The calculations are different, there are costs you do you not expect, etc.

  3. #3
    Addicted Member

    Join Date
    Feb 2001
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    Canandaigua, NY

    Re: Looking for a luxury tax prime?

    Quote Originally Posted by Jerkface View Post
    I recommend everyone read this. Not just because I wrote it, but because its vital to understanding how the Yankees are going to operate moving forward. It is not as easy as going from 200mm payroll to 189mm. The calculations are different, there are costs you do you not expect, etc.
    Excellent job, thank you!
    Yogi - “It’s tough to make predictions, especially about the future.”

  4. #4

    Re: Looking for a luxury tax prime?

    JF, A question...


    In general, for every ten million the Yankees go OVER the threshold, How much TOTAL will it cost them to do so, [Between what they lose in money coming back and spend in tax going out? 40% 50% ???

  5. #5

    Re: Looking for a luxury tax prime?

    Quote Originally Posted by BobbytheMurcer View Post
    JF, A question...


    In general, for every ten million the Yankees go OVER the threshold, How much TOTAL will it cost them to do so, [Between what they lose in money coming back and spend in tax going out? 40% 50% ???
    If they do not reset the luxury tax it will cost them 50% on overages.

    If they are over in 2014-2016 they will lose $33 million in revenue sharing rebates assuming Oakland does not receive a new stadium. $50 million if Oakland receives a new stadium by 2014. 46 million if Oakland receives a new stadium in 2015. $40 million if Oakland receives a new stadium in 2016. As these losses are simply based on going over or not, they are binary choices.

    The team will spend an additional 5 million for every 10 million they spend over the cap if they do not reset the rate.

    Note that if the team stays under for 2014 & 2015 and then goes over the limit in 2016, they will still get 100% of their revenue sharing rebates.

  6. #6
    Richmond Virginians
    Join Date
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    Richmond Va

    Re: Looking for a luxury tax prime?


  7. #7
    NYYF Legend

    flymick24's Avatar
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    Re: Looking for a luxury tax prime?

    Quote Originally Posted by dpbddd99 View Post
    george sherman? did george king and joel sherman have sex and make a love child?
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    www.thehungersite.com

  8. #8
    dont mess with the jesus dont_ya_know24's Avatar
    Join Date
    Feb 2007
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    NJ

    Re: Looking for a luxury tax prime?

    after reading all that, am i correct in that the yankees are more motivated to get under the threshold for the reason of the revenue sharing rebates, and the savings in luxury tax are just supplemental to that?
    “I really thought I played great defense when the ball wasn't hit at me,” Alex Rodriguez said.

  9. #9
    NYYF Legend

    longtimeyankeefan's Avatar
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    Re: Looking for a luxury tax prime?

    Quote Originally Posted by dont_ya_know24 View Post
    after reading all that, am i correct in that the yankees are more motivated to get under the threshold for the reason of the revenue sharing rebates, and the savings in luxury tax are just supplemental to that?
    I think it is safe to say that the motivation is the aggregate of what can be saved and/or rebated, not just one fact specifically.

    Reducing their team payroll to the magic $189M number saves them whatever the reduction is - In March, their 2012 payroll was estimated to be $210M, but I am not sure if that was an AAV value or cash payments calculation. Still, let's assume that number (and adding the $11M to that number for benefits, which is also included in the $189M target) - there is $32M salary budget savings in 2014 by itself.

    Now, add the potential savings from the luxury tax. If the Yankees had a $210M team salary in 2014, it would cost them $16M in luxury tax (50% of the $32M).

    In addition, they would be forfeiting approximately $7M in revenue sharing rebates that was quoted in an earlier post.

    So, in aggregate, the Yankees can reduce expense and/or increase revenues by $55M in 2014 just by getting below the magic $189M threshold. If they can continue that frugality, then the savings get even better as their revenue sharing rebates could potentially approach $50M for three years, their luxury tax savings would continue, as would their salary budget savings.
    Forgive me for taking the Contrarian view

  10. #10

    Re: Looking for a luxury tax prime?

    This is really helpful. Thanks a lot!

  11. #11

    Re: Looking for a luxury tax prime?

    re: longtimeyankeesfan: That all looks like a great argument to keep the budget under the luxury tax threshold indefinitely. The benefit for just doing it for 1 year seems relatively small when you don't factor in salary savings.* It looks like it's in the ballpark of Soriano's contract. I don't think they would be killing themselves to get under 189 if they were just going to go back to 210 after that. Have we heard from Hal that this is a one time thing? The luxury tax increase to 50% is basically a non-factor as it was 40% and the cutoff is being increased to 189 from 170(?). That's basically a wash and the Yankees penalties aren't prohibitive (relatively. they paid 13 million in 2011). It's no more expensive for the Yankees to keep their normal payroll going forward, it's just more enticing now to reduce it. If they think it's worth it in 2014 to seek those rewards then I don't see why they wouldn't think the same in 2015, '16, etc.

    *I think it gets confusing when standard salary savings are added in with savings from the new CBA. I think it's more clear to separate the 2 as the motivation to cut budget has always been there e.g. they could always save 50 million by cutting spending by 50 million.

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