;
Major League Baseball : Luxury tax ;
National Basketball Association : Soft salary cap + luxury tax ;
National Football League : Hard salary cap ;
National Hockey League : Hard salary cap ;
Major League Soccer : Hard salary cap +
Designated Player Rule exception (making it effectively a soft cap) ;
Major League Rugby : Hard salary cap ;
Major League Lacrosse : Hard salary cap ;
National Lacrosse League : Soft salary cap
Major League Baseball (MLB) As explained by
FanGraphs: "Technically called the 'Competitive Balance Tax', the luxury tax is the punishment that large market teams get for spending too much money. While MLB does not have a set salary cap, the luxury tax charges teams with high payrolls a considerable amount of money, giving teams ample reason to want to keep their payrolls below that level." The threshold level for the luxury tax was $189 million in 2014 (up from $178 M for 2011–2013) and remained at $189 M through 2016. From 2012 through 2016, teams who exceed the threshold for the first time must pay 17.5%
of the amount they are over, 30% for the second consecutive year over, 40% for the third consecutive year over, and 50% for four or more consecutive years over the cap. In 2017 the same six teams from 2016 were issued the tax. Against the $195 M threshold plus $13 M for player benefits, payrolls for the Dodgers ($244 M), Yankees ($209.3 M), Red Sox ($187.9 M), Tigers ($190.4 M), Giants ($186.4 M) and Cubs ($199.5 M) were in excess. This was the 15th straight year the Yankees paid the luxury tax. In 2018, only the Red Sox ($9.4 M) and Nationals ($1.2 M) passed the tax threshold. Several teams came just under the $197 M threshold: the Giants ($196.66 M), Cubs ($183.9 M),
Houston Astros ($182.4 M), Dodgers ($181.99 M) and Yankees ($178.8 M). The luxury tax is separate from
revenue sharing, which is a system to balance out the income distribution between large and small market teams by dividing money from merchandise sales and media contracts. The money generated from the tax is not distributed to the rest of the league, as is the case with the NBA, but rather is used for other purposes. The first $2,375,400 and 50% of the remaining total are used to fund player benefits, 25% goes to the Industry Growth Fund, and the remaining 25% is used to defray teams' funding obligations from player benefits.
National Basketball Association (NBA) The NBA utilizes a soft salary cap, meaning there is a salary cap but there are a variety of exceptions that allow teams to exceed that cap. For example, teams can re-sign players already on the team to an amount up to the maximum salary allowed by the league for up to five years regardless of where their payroll is relative to the cap. This provision is known as the
"Larry Bird" exception, named after the former
Boston Celtics player who was retained by that team until his retirement under the provisions of this rule. The result is that the majority of teams are over the cap at any given time. In addition to the soft cap, the NBA utilizes a luxury tax system that is applied if the team payroll exceeds a separate threshold higher than the salary cap. These teams pay a penalty for each dollar their team salary exceeds the tax level. From 2002 to 2013, if a team exceeded the luxury tax threshold, they must pay one dollar to the league for every dollar that they are over the limit. For the 2013–14 season and onward, teams paid an incremental rate based on their team salary. They also have to pay a repeat offender rate, which is an additional dollar for every dollar over. For 2014–15 teams pay the repeater rate if they also were taxpayers in all of the previous three seasons. For 2015-16 and all subsequent seasons, teams pay the repeater rate if they were taxpayers in at least three of the four previous seasons. The table of rates is shown below.
Current tax levels The resulting total is then distributed to the remaining teams that are under the tax threshold. There was no luxury tax implemented in the 2004–2005 season due to insufficient basketball-related income.
Canadian Football League The
Canadian Football League has a luxury tax. Penalties for teams that breach the salary cap regulations are:
Other leagues The National Football League (NFL) and the National Hockey League (NHL) both have hard salary caps, making it unnecessary to utilize the luxury tax. Several other leagues in the United States and abroad use salary caps, but the luxury tax is uncommon. ==See also==