• Taxing Times For Bombers

    Posted by on December 26th, 2007 · Comments (3)

    From the Daily News

    In the world of the Yankees, where anything short of a World Series title is seen as a failure, the 2007 team could be looked at as a $208 million bust.

    But that really would be understating it.

    After receiving a $24 million luxury tax bill at the end of last week, the Bombers really were a $232 million letdown.

    Major League Baseball clubs adopted a team payroll threshold during the collective bargaining sessions in 2002 in an effort to contain costs; each time a team exceeds the league-wide figure, its tax rate increases as punishment.

    The Yankees have been over the limit all five seasons and this year paid a 40% tax on all salary above $148 million. That means that when the club gave Roger Clemens a prorated $28 million deal at midseason – that equaled about $18 million in salary – the Bombers actually ended up paying him $25 million for the 18 starts during which he went 6-6 with a 4.18 ERA. Clemens then lasted only 2-1/3 innings in his lone playoff start before being named in the Mitchell Report.

    “I can’t imagine that was the return they were looking for on that deal,” said one executive from another AL club who requested anonymity. “If his postseason – and theirs – had gone better, it might have been a different story.”

    The archrival Red Sox were over the tax threshold for the fourth straight season, bringing their rate to 40% as well. They owed $6 million on their team salary of $163 million. The Angels were the only other team over the limit – a first for the franchise – and owed $927,000. The bills are to be paid by the end of January.

    Hard as it may be to believe, the free-spending Bombers have a lower tax bill this season than in either of the last two seasons. They owed a franchise-high $33.98 million in 2005 and $26 million in 2006 before the $23.88 million hit this season. Over the five seasons, the Yanks have paid $121.6 million to be redistributed among the league’s lowest-revenue clubs.

    The Red Sox won two championships over the past four seasons and paid $13.9 million in luxury taxes. During the same time, the Yankees’ tax bills totaled about $110 million for no titles.

    Over the five seasons, the Yanks have paid $121.6 million to be redistributed among the league’s lowest-revenue clubs.

    Man, you could buy a whole lotta Igawas with $120 million.

    Comments on Taxing Times For Bombers

    1. Rich
      December 26th, 2007 | 10:56 am

      Yet another reason to pass on Santana and to rely on the kids.

      That along with the payroll relief that the expiring contracts of Farnsworth, Giambi, Abreu, Pavano, and Mussina will offer after the upcoming season, would put the Yankees on a path to being able to make prudent expenditures while remaining fiscally responsible.

      In a larger sense, part of the reason that the payroll is so high is that the Yankee had previously adopted a business plan that was animated by the idea that since they make so much money it almost didn’t matter what they spend, which breeds an inefficient decision making process.

      It’s a mindset that Cash has wanted to move away from, but he knew that he couldn’t fully shift paradigms until the farm system started pumping out quality major league ready prospects. So he overspent on veteran pitchers (including Igawa) to fill the void in the period of transition. Obviously, some mistakes were made.

      The question going forward is whether or not Hank will allow Cash to continue to implement that plan, or will he override his judgment (e.g., insist on trading for Santana), just as he did by giving Posada and Rivera an extra year on their respective contracts.

    2. NJ_Rob
      December 26th, 2007 | 12:27 pm

      ….Or that’s just one Santana. Either way.

    3. singledd
      December 26th, 2007 | 8:33 pm

      An Igawa and a partridge in a pear tree?

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