Finances
Yearly Budget
Each team will begin the season with an amount of cash equal to the MLB luxury tax threshold,[1] plus any cash carried over from the previous year (subject to the LDB luxury tax, below).
Luxury Tax
Any cash carried over from one season to the next is subject to the LDB luxury tax. The luxury tax brackets are as follows:
| LDB Luxury Tax Brachets | |
|---|---|
| $0-15 million | No Tax |
| $15-25 million | $0.6 50% Tax |
| $25+ million | 75% Tax |
The tax rates are marginal, meaning that the first fifteen million is tax free, the ten million from $15-25 million is taxed at 50%, and only funds above $25 million are taxed at 75%.
Payroll
Payroll is tracked on a weekly basis. Teams will only pay players for the weeks during which they play for the team, except in cases where a player is dropped and clears waivers. Upon acquiring a player in trade or through waivers, the acquiring team will owe the player the balance of the player’s annual salary. If a player is acquired by waivers, the waiving team will no longer be responsible for the balance of the player’s annual salary.
Players signed as free agents during the season will be paid a prorated share of the league minimum, $400k. Beginning at 12:01 am the Monday of week 12, GMs can request payroll expansion from their “ownership group” in the form of a loan against the following season’s payroll. Payroll expansion can be any amount up to 7.5% of the league salary cap (12.2 million in 2009). The expanded payroll provides the team with space to acquire players in trade at the deadline. It cannot be transferred to another team or carried to the following season, but it can be used to acquire players that would otherwise put a team over budget, either through trade, the waiver wire, or mid-season free agency. In the following season, teams will forfeit 3/4ths of the amount requested for expansion. (Teams presumably make extra revenue from being in the playoff hunt when they ask for the extra cash from ownership, offsetting some of the borrowed money.) Teams making use of the ownership loan must announce whenever they obtain a new chunk of financing to the league via email in order to ensure that no team exceeds their allowed borrowing.
- ↑ LDB’s salary cap is pegged to Major League Baseball’s luxury tax thresholds as specified in the MLB-MLBPA current collective bargaining agreement. In 2012, the cap is $178 million. As the CBA is renegotiated, LDB will determine an appropriate cap.