What is the ultimate harm from being over the tax threshold? I admit I struggle to be well-versed about this aspect of the game. Is it forfeiting draft picks and a monetary penalty? Trying to understand why it was so unforgivable to some folks.
One thing is it knocks your first round draft pick back ten spots, with the corresponding loss of pool money.What is the ultimate harm from being over the tax threshold? I admit I struggle to be well-versed about this aspect of the game. Is it forfeiting draft picks and a monetary penalty? Trying to understand why it was so unforgivable to some folks.
Note: The phrase ‘Rule 4 draft’ is a technical term for the annual amateur draft.What is the ultimate harm from being over the tax threshold? I admit I struggle to be well-versed about this aspect of the game. Is it forfeiting draft picks and a monetary penalty? Trying to understand why it was so unforgivable to some folks.
Thanks for the break out, and thanks to those who have shared their expertise!I broke out these three posts from yesterday because there is so much discussion in MLB about staying under tax levels, but it's not very well known (including by me) what the exact ramifications for going over each limit are, especially since each new CBA changes it some, so I thought we could talk about that in one dedicated thread.
I'm not so interested in the solely financial penalties, but the other ones, like draft and international pool allotments. For instance, NYY stayed under the third tax line in 2022, and I am pretty sure that the main reason they did so was so they wouldn't lose international money and possibly affect their Jan 2023 signing of Brandon Mayea, but that kind of thing is rarely discussed in detail anywhere that I can find. So let's do it here!!
Seconded, this is a great educational thread on a facet of the game I don't normally pay much attention to.Thanks for the break out, and thanks to those who have shared their expertise!
Maybe a dumb question but speaking of squishy numbers - how (and when) is the actual payroll calculated for CBT purposes? Some weighted average at the end of the season based on pro-rated amounts of who was on the roster for how long, and at what salary?I posted in the other thread about this, and I really think the Sox wanted to get under the tax threshold last season, but nobody wanted to take on JD's contract (which may or may not have got them all the way under the threshold anyway, the numbers are.... squishy).
Terrific post, thank you. Question just out of curiosity, not doubting your #'s but sticking with the Mets example, 2023 will be their 2nd year over in general, but their first time that much over. Is being over for the second consecutive year enough to slot them into that "2nd time offender" tier across all salary bands? Or would it be 2nd time offender for the first two tranches (up to 273m) and 1st time offender for the latter two? Thank you.So the new CBT runs from '22 to '26. It increased the tax threshold from $210m in 2021 to:
2022: $230 million
2023: $233 million
2024: $237 million
2025: $241 million
2026: $244 million
It also added a 4th tax level $60m over the threshold. Since '22 is already done, let's just use 2023 #s:
I know you said you weren't interested in the financial penalties, but they're the easiest place to start, & they aren't nothing:
$233m to $253m - 20% if 1st time, 30% if 2nd time, 50% if 3rd or more.
$253m to $273m - 32% if 1st time, 42% if 2nd time, 62% if 3rd or more.
$273m to $293m - 62.5% if 1st time, 75% if 2nd time, 95% if 3rd or more.
$293m or more - 80% if 1st time, 90% if 2nd time, 110% if 3rd or more.
These tax rates are calculated kind of like income tax, so you're paying the % at each level & not suddenly paying the larger % if you're over the highest threshold.
Using the Mets is the simplest way to show how this works in reality. The Mets were under the tax in 2021 with a payroll of approximately $203m. Last year they jumped to $268m, & they are currently projected for a payroll of $353.9m. This would mean this they would be a "2nd time offender" (oddly derogatory term which shows what owners are really up to - especially with the new 4th tax level which is widely referred to as the "Steve Cohen Tax").
Anyway the 2nd time "offender" rate is 30% of the first $20 million ($6 million), 42% of the 2nd $20 million ($8.4 million), 75% of the 3rd $20 million ($15 million), & if their payroll holds at what it's projected at now, 90% of the last $60.9 million ($54.8 million), for a total tax bill of $84.2 million and an overall outlay of $438.1 million on player salaries + taxes.
It’s only the lowest line that counts for this, you are either under or over each season. NY reset theirs in 2021 by a tiny amount and the Dodgers are at least taking a run at it so far this winter.Question just out of curiosity, not doubting your #'s but sticking with the Mets example, 2023 will be their 2nd year over in general, but their first time that much over. Is being over for the second consecutive year enough to slot them into that "2nd time offender" tier across all salary bands? Or would it be 2nd time offender for the first two tranches (up to 273m) and 1st time offender for the latter two? Thank you.
Yes, the Mets hit the 2nd tier across all bands this year, which is why you see teams (like the Dodgers this year) periodically trying to duck under the threshold and reset before going big again.
Got it, thanks guys.It’s only the lowest line that counts for this, you are either under or over each season. NY reset theirs in 2021 by a tiny amount and the Dodgers are at least taking a run at it so far this winter.
It's a good question, & I double-checked it myself when I was running through the post but Simplicio & JA are correct. Under the CBA, you're either an offender or you aren't.Seconded, this is a great educational thread on a facet of the game I don't normally pay much attention to.
Maybe a dumb question but speaking of squishy numbers - how (and when) is the actual payroll calculated for CBT purposes? Some weighted average at the end of the season based on pro-rated amounts of who was on the roster for how long, and at what salary?
Terrific post, thank you. Question just out of curiosity, not doubting your #'s but sticking with the Mets example, 2023 will be their 2nd year over in general, but their first time that much over. Is being over for the second consecutive year enough to slot them into that "2nd time offender" tier across all salary bands? Or would it be 2nd time offender for the first two tranches (up to 273m) and 1st time offender for the latter two? Thank you.
Plus some nebulous amount for "benefits", which I'm not too sure about. It always shows up on Cots contract's calculations but I don't know what it covers, if it's just for the MLB guys or if minor league guys have benefits too, and of it is the same for everyone or if it varies based on salary, seniority or anything else. I never see it defined in any of the cba stuff, but other writers have mentioned it being part of the tax calculation too.Sorry, tired, but basically you take the AAV of every player on the 40-man roster + 60 day disabled list & add it up. You could either tabulate daily or prorate.
AAV could definitely use an explanation post or two at some point.