There has been some talk recently about contraction in baseball. And that talk may be driven by rich teams that contribute to Major League Baseball’s revenue sharing and luxury tax and then watch other teams either pocket the cash (e.g. Pirates) or use it to beat the teams footing the bills (e.g. Rays).
But while revenue sharing in baseball affects many of the high-revenue teams, the luxury tax typically only impacts one or two teams each year. And in reality, it only truly impacts the Yankees.
The luxury tax in baseball is a tax on payrolls above a specific threshold each year. That number has risen from $117 million in the first year of the current luxury tax system (2003), to $170 million in 2010.
Here is a breakdown of the teams that have been hit with the luxury tax since 2003…
The Yankees and Red Sox are the only two teams to be hit with the luxury tax more than once. And the Yankees are the only team to pay the tax every year. In fact, the Yankees have contributed 91.6 per cent of the dollars paid into the luxury tax system.
The Yankees total contribution of $192.2 million peaked in 2005 when they paid $34.0 million in luxury tax. Interestingly, the Yankees contribution to the system has consistently fallen since 2005. This is because the luxury tax threshold has risen nearly 33 per cent (from $128M in 2005 to $170 million in 2010) and the average big league salary has only risen about 22 per cent.
All data via BizofBaseball.com