The LoHud Yankees Blog

A New York Yankees blog by Chad Jennings and the staff of The Journal News

The complicated world of luxury tax calculation

Posted by: Chad Jennings - Posted in Misc on Nov 01, 2013 Print This Post Print This Post | Email This Post Email This Post

This day has not been about Derek Jeter’s new contract. It’s been all about the luxury tax implications of Derek Jeter’s new contract.

Now weighing in is Ken Rosenthal, who’s one of the absolute best in the business and reports the Yankees will save about $1 million in luxury tax calculations on Jeter’s new deal. The previous contract with the player option included counted as roughly $14 million toward the luxury tax threshold, and the new deal will count somewhere between $12.8 million and $13.2 million, according to Rosenthal.

Here’s the thing: I just had a well-placed source email me saying the opposite, putting it bluntly that Jeter’s contract “doesn’t save money” toward the luxury tax threshold.

And Joel Sherman reports that Jeter picking up the option would have counted as less than $11 million, not $14 million, which means the new contract counts more heavily toward the luxury tax, which has been the prevailing thought most of the day.

Why all the confusion? Mostly because it’s confusing.

For starters, knowing that a $12 million contract counts somewhere between $12.8 million and $13.2 million is a pretty good indication that this stuff is not as cut-and-dry as putting salary figures into a calculator. Do the numbers being reported include penalties to make up for an artificially low average annual value of the previous contract? Is that being calculated separately? Does it depend on who you talk to whether adjustments are included in the Jeter figure? Could be. Could be that two people can look at the same bit of information, do the same math, and ultimately present the same information differently. And the whole thing is so complicated — even high-ranking people in the game always stop short of calling themselves CBA experts — that it’s hard to get a complete picture of what dollar figure counts and for what reason. Even if you go from source to source, or from reporter to reporter, each one could be presenting the same information differently, adding to the confusion along the way.




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