The Yankees are working to get to a $189 million budget for 2014, but they certainly weren’t cutting costs last year as they were hit with a $18.9 million luxury tax bill on a $222.5 million payroll, according to an Associated Press report.
The Yankees were charged a 42.5 percent tax on everything over the $178 million luxury tax threshold. Typically the penalty is just 17.5 percent, but the Yankees have to pay more since they are repeat offenders. Their rate was 42.5 percent this year after it was just 40 percent the year before (when they paid just $13.9 million). Next season it will be 50 percent which is why they are trying to cut payroll. Their total tax bill has been $224.2 million over the past 10 years.
For tax purposes the average annual value of all the contracts on the 40-man roster are counted plus any bonuses, incentives, buyouts, and $10.8 million in team benefits. The $11 million the Yankees paid to A.J. Burnett also counts toward the tax.
They were the only team to exceed that limit with the Phillies, Red Sox, and Angels being the next three closest. The Red Sox would have had to pay if it had not been for their salary dumping trade with the Dodgers midseason.
This gives us a good idea of how much the Yankees will save by getting under the tax threshold in 2014. They paid a total of $243.1 million in 2012 between the payroll and tax. If they cut their payroll to $189 million and avoid the tax in 2014 that’s a savings of $54.1 million plus they’ll qualify for millions more in revenue sharing and rebates.