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Yankees and Red Sox pay luxury tax

Posted by Peter Abraham, Globe Staff  December 21, 2010 05:38 PM

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According to the Associated Press, the Yankees paid $18 million on the competitive balance tax (commonly known as the luxury tax) on their payroll in 2010.

The Red Sox were the only other team taxed and paid $1.5 million.

The threshold in 2010 was $170 million. The Sox went over the threshold for the first time since 2007.

The Red Sox had a season-ending payroll of $170,650,856 for 2010. But for CBT purposes, the average annual value of contracts are taken into account along with all players on the 40-man roster and medical benefits. That total was approximately $176 million as the Sox were taxed at a rate of 22.5 percent over the threshold.

The threshold next season will be $178 million and under the current collective bargaining agreement, any excess would taxed at a rate of 30 percent.

Barring a deal to shed salary, the Red Sox almost certainly will go over that mark in 2011.

Of course, purchasing Liverpool means the Red Sox will have to trade all their players by May 1 anyway. Everybody knows that. It's a well-known financial principle that people can only own one business at a time or risk ruin.

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