While most teams are penalised by the suspension of star players for using performance-enhancing drugs, the Yankees will actually benefit in a huge way if Alex Rodriguez is suspended for the entire 2014 season.
In addition to removing A-Rod’s 2014 salary of $25 million from the books, the suspension may also help the Yankees avoid paying an additional $12.5 million in luxury tax on his salary.
In Major League Baseball, teams that go over the luxury tax threshold ($189 million in 2014) are subjected to a tax (17.5% if the team was not over the threshold the year before). Teams that repeatedly go over the threshold are subjected to a higher tax rate.
The Yankees, who have been over the threshold each of the last 10 seasons, were facing a 50% tax rate in 2014 on all payroll above $189 million. That is the maximum rate allowable and would have meant a $19.9 million luxury tax bill if their payroll went unchanged from this season ($228.8 million).
It was believed that the Yankees had been aiming to get the 2014 payroll under $189 million in order to avoid the luxury tax, but there were reports before the season that the Yankees had scrapped those plans.
But with Rodriguez off the books and Mariano Rivera ($10 million salary this season) retiring, the Yankees will cut $35 million, and all of a sudden, getting to $189 million will be easy.
And the savings won’t stop there. Even if the Yankees go back over the threshold in 2015, they will only be subjected to the 17.5% tax rate since they will no longer be considered a repeat offender. That is a savings of $13 million for a team that is $40 million over the threshold.
The Yankees have been tighter than usual with their money in recent seasons. But instead of being penalised for using a cheater and being hurt by the $275 million contract they foolishly gave AR-od in 2007, the Yankees will suddenly free up at least $37.5 million in 2014 to spend on other players.
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