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  1. #1
    NYYF HOF


    Join Date
    May 2005
    Location
    Nassau County

    Either ESPN or the CBA Made A Math Mistake

    http://www.espn.com/blog/sweetspot/p...ggest-payrolls is about the luxury tax and surtax. I made an example in which a first time offender with a payroll of $230 million in 2017 would pay more surtax than a first time offender with a payroll of $237 million in 2017. There should never be a way for increasing payroll to make the surtax decrease. Here is an example I made up that I will e-mail to ESPN's Jayson Stark:

    http://www.espn.com/blog/sweetspot/p...ggest-payrolls says:

    "2017 threshold: $195 million
    2018: $197 million
    2019: $206 million

    These are the penalties:
    First time over: 20 percent tax on the overage
    Second time: 30 percent
    Third time: 50 percent

    There are also surtaxes:
    Between $20 million and $40 million over the threshold: 12 percent
    $40 million over: 42.5 percent
    Second time $40 million over: 45 percent

    The important thing to know here is the 42.5 percent tax rate, for example, is only on the dollars spent beyond the $40 million already above the threshold. So if the threshold is $195 million and a team spends $236 million, a potential 92.5 percent tax rate is applied only to the $1 million over $235 million, not the entire $41 million over the threshold.

    OK, let's see how this works in our theoretical examples.

    Los Angeles Dodgers

    2014/2017: $257.2 million payroll ($195 million threshold)

    Payroll: $62.2 million over threshold

    Tax: 20 percent for first time over ($12.4 million)

    Surtax: 42.5 percent on $22.2 million ($9.4 million)

    Total tax: $21.8 million

    2015/2018: $291.1 payroll ($197 million threshold)

    Payroll: $94.1 million over threshold

    Tax: 30 percent for second time over ($28.2 million)

    Surtax: 45 percent on $54.1 million ($24.3 million)

    Total tax: $52.5 million

    2016/2019: $275 million estimated payroll ($206 million threshold)

    Payroll: $69 million over threshold

    Tax: 50 percent for third time over ($34.5 million)

    Surtax: 45 percent on $29 million ($13.1 million)

    Total tax: $47.6 million"

    A payroll of $230 million would be over by $35 million and would have $15 million getting a 12 percent surtax. That's $1.8 million. According to the example given for the Dodgers (there was an example for the Yankees that I didn't copy here), a team that is over $40 million over the threshold pays the 42.5 percent or 45 percent, but not the 12 percent on any part of the money. This means that a team that was a first time offender with a payroll of $237 million would be over by $42 million and would pay a 42.5 percent surtax on $2 million, with no surtax on the first $40 million that is over. This would be $0.85 million of surtax, so the team with the higher payroll would have less surtax. I hope the $20 million to $40 million component always has a surtax and ESPN's David Schoenfield neglected that in his example. If the surtax is applied like how David Schoenfield said, the parties to the CBA need to go back to math class. I think it would be funny if the CBA had that math mistake and a team discovered that they had to pay more surtax than a team that offended for the same amount of years and had a higher payroll.
    To read my comments about baseball, soccer, and other things, go to https://twitter.com/EvanJ3535 which I joined on June 21, 2016.

  2. #2
    NYYF Legend


    Join Date
    Jul 2005
    Location
    Turn my headphones up

    Re: Either ESPN or the CBA Made A Math Mistake

    Without knowing the fine print, I would assume this works like our current federal income tax bracket system. IE, you pay all of the ascending brackets up to the bracket you are in, preventing weird loopholes around the bracket edges. I think you suggested this as a possibility in your last paragraph.

    I'm Dave Schoenfeld is just wrong or they haven't worked out the fine print yet (the owners don't sign the CBA until Dec 13th, I'm sure they'll have that worked out by then).

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