The World Series champion Red Sox and Nationals are the only two teams that will be subject to the Competitive Balance Tax (commonly referred to as the "luxury tax") after exceeding the payroll threshold of $197 million for the 2018 season, sources confirmed to MLB.com's Jon Paul Morosi on Friday.
Notably, the Yankees will finally accomplish principal owner Hal Steinbrenner's long-stated goal of dropping below the threshold for the first time since 2002 after paying a cumulative $341 million over 15 straight years from 2003-17. The Dodgers avoided surpassing the threshold for the first time in six seasons, while the Giants and Tigers will also not be taxed after facing the penalty in '17.
Because Boston didn't exceed the threshold in 2017, it will be charged the minimum 20-percent tax rate on any payroll exceeding $197 million, while the Nationals will face a 30-percent tax after exceeding the limit last season as well. Any overages next season will be taxed at the 30-percent rate for Boston and the maximum 50 percent for the Nationals.
With the establishment of the new Collective Bargaining Agreement in 2017, teams will also be charged a surtax of an additional 12 percent on any payroll exceeding $217 million, and an additional 42.5 percent beyond $237 million. In addition, for the first time in '18, teams exceeding $237 million will have its top pick in the following year's Draft moved back 10 spots, unless it falls in the top six, in which case the second-highest selection is lowered 10 places.
The official final payroll totals for the Red Sox and Nationals have not yet been reported. A report in The Associated Press on Sept. 12 put Boston's payroll at $238.4 million on Aug. 31, which would put the Red Sox in the highest surcharge bracket and subject them to the Draft penalty. The report put Washington's payroll in second at $203.9 million.