The Associated Press is reporting that the Boston Red Sox and the Washington Nationals will be the only teams to pay the luxury tax this offseason. For the first time since the advent of the luxury tax in 2003, the New York Yankees will not be paying the tax.
Baseball teams pay a 17.5 percent luxury tax for going over the designated threshold. If those teams stay over for a second, third, and fourth consecutive year, those penalties rise to 30, 40, and 50 percent, respectively. Those thresholds for 2018-21 are $197 million, $206 million, $208 million, and $210 million, respectively.
August 31st payroll levels are what trigger the tax. Boston’s luxury tax payroll as of that date was $238.4 million. It is projected that they will pay $11.3 million in luxury tax as a result. The Nationals’ payroll is $203.9 million, forcing them to pay a projected tax of $2.1 million. The Yankees are just under the threshold at $192.1 million. The Giants and Dodgers are even closer to that threshold than the Yankees. San Francisco’s August 31 payroll is at $195.3 million, L.A’s is at $194.5 million.
By getting under the $197 million mark, the Yankees reset their luxury tax rate going forward, so if they exceed it next year, their tax rate will be down at that 17.5% rate instead of the 50% rate they’d be paying if they remained above it in 2018. That means they’re more likely to be a player for free agents this offseason than if they hadn’t tightened their belts a bit down from 50% for being multi-year offenders of MLB’s soft salary cap.