In the MLB, the tax threshold for the 2012 and 2013 seasons was $178 million. Th
ID: 2413467 • Letter: I
Question
In the MLB, the tax threshold for the 2012 and 2013 seasons was $178 million. The tax threshold for the 2014, 2015 and 2016 seasons is $189 million. Suppose a team had a payroll of $178 million in 2012, $185 million in 2013, $195 million in 2014, $188 million in 2015 and $200 million in 2016. What is the luxury tax penalty the team will have to pay each season?
$_________________ 2012 Luxury Tax Penalty
$_________________ 2013 Luxury Tax Penalty
$_________________ 2014 Luxury Tax Penalty
$_________________ 2015 Luxury Tax Penalty
$_________________ 2016 Luxury Tax Penalty
Explanation / Answer
Calculation of Luxury tax Penalty.
Applicable tax rate are as follows:-
If actual club payroll exceeds the base tax threshhold:-
A) Exceeds by $20 Million
1) First Time Offender - 20%
2) Second time offender - 30%
3) Third Time Offender - 50%
Year Luxury Tax Penalty Remarks 2012 $0 (Actual payroll does not exceed base tax threshold) 2013 $1.4 Million ($185 Million - $178 Million)*20% First Time offender 2014 $1.8 Million ($195 Million - $189 Million)*30% Second time offender 2015 $0 (actual payroll does not exceed base tax threshold) 2016 $5.5 Million ($200 Million - $189 Million)*50% Third Time offender