- Boston Red Sox could pay steep luxury tax for a second year
- The team may not make it into the play-offs
- Luxury tax is bad news for MLB fans
The Boston Red Sox are breaking the luxury tax threshold for a second consecutive year at a time when the team is likely to miss on this year’s play-offs.
Boston Red Sox Break Luxury Tax Threshold
MLB franchise the Boston Red Sox will honor their $13.05 million luxury tax for the season, even though the team has had a rough spell and they are likely to miss out on the play-offs. With the tax jumping to $242.8 million as of August 31, many teams are now facing sterner taxation rules. In fact, the tax threshold – resulting from the change – will now begin from $206 million, the Associated Press has reported.
With the team being over the luxury tax threshold themselves, they will need to pay 30% on the first $20 million they generate over the new $206 million limit and at a rate of 42% for the following $20 million. To put things in perspective, last year, the team finished with a $239.5 million luxury tax payroll.
They are not alone. The New York Yankees came in a close second with a payroll of $233.9 million and their overall tax payments will need to go up to $6.54 million from $3.98 million previously. Other clubs are also seemingly coming under the heavy hits of taxation, including the Chicago Cubs which are close after the Yankees with $233.8 million.
Meanwhile, the Los Angeles Dodgers managed to squeeze well below the threshold, exhibiting a less profligate approach towards their team’s operations. The Dodgers have only $150 million on the payroll, which means they can be saving money and reinvesting them in better facilities and players.
In so far the payout of bonuses and shares goes, Boston comes at $227.9 million, with the Yankees coming second with $225.3 million. Third are the Cubs with $217.2 million and of course the Dodgers with $201.2 million, which shows that you needn’t break the luxury tax threshold to act generously towards the team’s investors and players.
The Luxury Tax – Fair Play or Way to Consolidate Team Profits?
The luxury tax has been seen by many as a way for greedy owners and investors to cap the payments and limit the negotiating power of MLB free contractors. With the revenue dedicated to player salary falling for a second consecutive year in 2019, many observers agree.
But the truth lies beyond that. Clubs aren’t trying to shave off player salaries. Rather, they are focused on avoiding paying the luxury tax – or put another way, making sure they save up from player salaries so that they can foot that additional $5 million or $7 million that they would need to pay under the luxury tax.
The Red Sox had to pay up last year in 2018 and they will have to do so now. With their performance already suffering in 2019, one cannot help but wonder what having to spend more on taxation and less on the game and roster will do to the game?
All in all, it’s bad news for the fans.