MLB Team Hit with Record-Breaking Tax Bill After Fourth-Place Finish
The New York Mets must pay a record luxury tax of nearly $101 million after a fourth-place finish in their division, among an unprecedented eight teams that owe the penalty for the 2023 season.
Owner Steve Cohen’s Mets finished with a tax payroll of $374.7 million, according to figures finalized by Major League Baseball Thursday and obtained by The Associated Press. That topped the previous high of $291.1 million by the 2015 Los Angeles Dodgers.
The Mets’ tax bill came to $100,781,932 after they finished fourth in the NL East at 75-87 in the most expensive flop in baseball history. That more than doubled the prior high of $43.6 million by the 2015 Dodgers.
The Mets saved about $18 million for this year with their summer selloff that saw them trade Max Scherzer, Justin Verlander, David Robertson and Mark Canha. Their projected tax payroll on June 30 was $384 million, according to MLB, and that additional $9.3 million in payroll would have resulted in a tax $8.4 million higher.
The final amount owed by the Mets would have been slightly more, but they benefited from a tax credit of $2,126,471 under a provision in the latest collective bargaining agreement for a payroll overcharge involving three players they traded. New York’s two-year tax total is $131.6 million.
Other teams owing tax money are San Diego ($39.7 million), the New York Yankees ($32.4 million), the Dodgers ($19.4 million), Philadelphia ($6.98 million), Toronto ($5.5 million), Atlanta ($3.2 million) and World Series champion Texas ($1.8 million). The Blue Jays, Braves and Rangers are paying tax for the first time.
The Yankees and Mets were the only teams to exceed the fourth threshold of $293 million, added in the 2022 labor contract, an initiative dubbed the Cohen Tax and aimed at reining in Cohen.
The previous high for taxpayers was six, in 2016 and last year. This year’s tax totaled $209.8 million, more than double the prior record of $78.5 million for 2022.
The Los Angeles Angels finished with a tax payroll $28,654 below the $233 million tax threshold. The Angels were projected at $231.15 million on June 30 and got under by allowing pitchers Lucas Giolito, Matt Moore, Dominic Leone and Reynaldo López along with outfielder Hunter Renfroe to be claimed off waivers on Aug. 31.
Texas was projected at $220.2 million on June 30 before boosting its pitching staff by trading for Scherzer, Aroldis Chapman, Jordan Montgomery and Chris Stratton and also acquiring catcher Austin Hedges. The Rangers’ final payroll was $242.1 million.
Total spending on luxury tax payrolls rose 12.2 percent to $5.79 billion from $5.16 million last year, the previous high.
The Yankees have been taxed just under $390 million since the penalties began in 2003, 43 percent of the $901 million total, followed by the Dodgers at $234 million. Fourteen of 30 teams have owed tax over the two decades.
Tax payrolls are calculated by average annual values, including earned bonuses, for players on 40-man rosters along with just over $17.1 million per team for benefits and $1.67 million for each club’s share of the $50 million pool for pre-arbitration players that started in 2022. Deferred salaries and bonus payments are discounted to present-day values.
MLB has not finalized regular payrolls, which are based on 2023 salaries and earned bonuses plus prorated shares of signing bonuses.
Because they owe tax for the third straight year, the Padres and Dodgers pay at a 50 percent rate on the first $20 million above the $233 million threshold, a 62 percent rate on the next $20 million and a 95 percent rate on the amount from $273 million to $293 million.
The Mets, Yankees and Phillies owe tax for the second year in a row and pay 30 percent on the first $20 million over, 42 percent on the next $20 million, 75 percent on the third $20 million and 90 percent on the amount over $293 million.
The first $3.5 million of tax money is used to fund player benefits and 50 percent of the remainder will be used to fund player Individual Retirement Accounts. The other 50 percent of what’s left goes to a supplemental commissioner’s discretionary fund intended to be given to teams receiving revenue-sharing money that have grown their non-media local revenue over several years.
Next year’s initial threshold is $237 million. If the Mets, Yankees, Dodgers, Padres or Phillies go over, they would pay at the highest tax rate, rising to 110 percent for the amount over $297 million.
The Western Journal has reviewed this Associated Press story and may have altered it prior to publication to ensure that it meets our editorial standards.
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