In the realm of Major League Baseball, the New York Mets have found themselves in an unprecedented financial situation, being slapped with a record luxury tax bill of nearly $101 million. This hefty penalty stems from their fourth-place finish in the NL East, among an extraordinary eight teams facing similar fiscal penalties for the 2023 season.
Under the ownership of Steve Cohen, the Mets accrued a tax payroll of $374.7 million, marking an all-time high, even surpassing the previous record set by the 2015 Los Angeles Dodgers at $291.1 million. The Mets’ substantial tax obligation amounted to $100,781,932 following their lackluster performance, concluding the season at 75-87—a colossal disappointment given their staggering expenses, making it the most expensive underperformance in baseball history. This financial burden more than doubled the previous high of $43.6 million, set by the 2015 Dodgers.
To mitigate their financial commitments, the Mets underwent a significant cost-saving strategy during the summer, executing a series of trades involving prominent players like Max Scherzer, Justin Verlander, David Robertson, and Mark Canha. This maneuver, while reducing their payroll by approximately $18 million, helped the Mets slightly diminish their tax burden. Notably, by June 30, their projected tax payroll stood at $384 million, suggesting that an additional $9.3 million in payroll would have incurred an $8.4 million higher tax liability.
The Mets did receive a slight reprieve in the form of a tax credit amounting to $2,126,471, attributed to a provision in the collective bargaining agreement involving three traded players. Nonetheless, their accumulated tax over two years now amounts to a staggering $131.6 million.
Joining the Mets in shouldering substantial tax bills are the San Diego Padres ($39.7 million), the New York Yankees ($32.4 million), the Dodgers ($19.4 million), Philadelphia Phillies ($6.98 million), Toronto Blue Jays ($5.5 million), Atlanta Braves ($3.2 million), and the World Series-winning Texas Rangers ($1.8 million). It’s noteworthy that the Blue Jays, Braves, and Rangers find themselves in this situation for the first time.
Of particular significance, the Yankees and Mets were the sole franchises to exceed the $293 million threshold introduced in the 2022 labor contract—a measure dubbed the “Cohen Tax,” specifically aimed at reining in the excessive spending of the Mets’ owner, Steve Cohen. This year’s tax toll of $209.8 million notably eclipsed the previous record of $78.5 million for the 2022 season.
The intricacies of luxury tax payroll calculations involve various parameters, including average annual values of player contracts, earned bonuses, benefits, and the allocation of funds for pre-arbitration players. Deferred payments and bonuses are discounted to their present-day values.
Teams that owe tax for multiple consecutive years face increasing tax rates based on exceeding certain thresholds, with the money collected from taxes allocated toward player benefits, retirement accounts, and a supplemental commissioner’s discretionary fund intended to support revenue-sharing teams that have bolstered their non-media local revenue over consecutive years.
Looking ahead, next year’s initial threshold stands at $237 million, with the possibility of increased tax rates for teams like the Mets, Yankees, Dodgers, Padres, or Phillies if they surpass this mark, eventually escalating to a staggering 110% for any amount over $297 million.