How much does it cost to win a world championship? Apparently, just over $226 million. That’s how much the New York Yankees reportedly paid their players this year.
Today, the reigning world champs in baseball were assessed a luxury tax of $25.69 million as a result of their crazy spending. The Yanks are the only team to be hit with the tax this year.
The Yankees have been subject to the luxury tax every year since the tax began. They’ve paid a whopping 92% of all luxury tax collected by baseball since 2003 and won exactly one World Series for their trouble.
The only other teams that have been affected by the tax since its inception are Boston, Detroit and LA. Those teams have won a collective two World Series championships since the tax took effect. And by “those teams,” I mean Boston.
The Yankees spent more money on payroll than any other team this year. I know, I know, you’re going to start the whole “you have to spend money to win” argument. To that, I say, really? Last year’s world champs, those fabulous Phillies, spent less than half of that in 2008 when they won the big game (*throat clearing*). This year, the Phils, who made a great run to the World Series, spent just over half of what the Yanks did. Teams that spent more than the Phillies this year included the New York Mets, Chicago Cubs, Boston Red Sox and Detroit Tigers. And look how well those dollars worked out for some of them.
The limit for determining the luxury tax for 2010 is $170 million; it changes every year based on a system of averages. That limit means that the Yankees will find themselves doling out more dollars in luxury tax next year.
The luxury tax isn’t really a tax in the purest sense of the word. It’s more of a penalty imposed on teams whose payroll for the year exceeds the limit. The luxury tax is paid to Major League Baseball.
Interestingly, even though the luxury tax is sometimes referred to as the “Competitive Balance Tax,” the tax isn’t used to help smaller market teams at all. Instead, it’s used for a variety of other purposes, including player benefits and the promotion of baseball around the world. Ask the Pittsburgh Pirates how they feel about that…
(Note to my readers: I apologize for the offensive images at the top of the post. It makes me a little sick to my stomach, too.)