Mets Owner, Steve Cohen & The Saga Of Luxury Tax: Explained

At the end of the current season, Shohei Ohtani, who is now the most sought-after player in MLB, will be a free agent. Many anticipate that his new contract will set records. Despite the enormous financial commitment, the Steve Cohen-owned New York Mets are expected to be among the frontrunners to land his signature.

Since making his MLB debut in 2018, Ohtani has swept the league. In 2021, he was named the American League’s Most Valuable Player (MVP), but Aaron Judge of the New York Yankees won the award the following year.

Mets Owner, Steve Cohen & The Saga Of Luxury Tax: Explained

In his column for the New York Post, Jon Heyman talked about how much Cohen would be willing to pay to land the two-way superstar:

“While Cohen has risk tolerance we’ve never seen before, he does have limits. He lost Carlos Correa since he wouldn’t have matched the $33M salary in the Twins’ deal, which would have resulted in $63M for him counting the 90 percent Steve Cohen tax.

What’s more, the Cohen tax will rise to 110 percent for third-time payors in 2024, so if Ohtani’s deal is for $50M a year, that’d be $105M for Cohen., which would have resulted in $63M for him counting the 90 percent Steve Cohen tax. That potential $105M annual outlay for Ohtani alone is enough to discourage anyone. Almost anyone, anyway.”

When Steve Cohen bought the squad in 2020, that reputation was quickly altered.

The New York Mets are no longer intimidated by the nearby New York Yankees because they have become the league’s greatest spenders. MLB owners have consistently avoided paying the maximum luxury tax penalty of 90%. excluding Cohen.

Even the “Steve Cohen tax” has been dubbed for that top rate bracket. He has emerged as one of the few owners prepared to sacrifice a little bit of earnings in order to field the best club.

But the consequences for going above the luxury tax three seasons in a row are getting worse. It will increase to 110% by 2024.

It’s important to remember that in 2022, the MLB luxury tax threshold will increase by $20 million to $230 million. According to ESPN, a team enters the fourth rung, known as the “Cohen tax,” when its payroll exceeds $290 million.

Teams that go over this line for the first time are subject to an 80% tax on the entire sum over the $290 million cap. Tax rates for repeat offenders range from 90% for the second offence to 110% for the third.

How High Will Cohen Go For Ohtani?

Ohtani is unquestionably a very special player who excels both on offence and in the circle. However, the cost to repeat buyers like the Mets might be quite expensive due to the tax hike.

Ohtani would cost the Mets $110 million if he does earn the $50 million yearly salary as some predict he will. And if Cohen keeps running payrolls that high in the future, a $500 million salary might end up costing more than $1 billion.

The MLB owners are raising the tax threshold significantly in light of this.

According to Heyman, frustration throughout the league is growing enough that many want to “curtail” Mets’ payrolls.

“Word is going around that some owners were upset enough by the increasingly obvious wherewithal gap between Cohen and the have-nots that new measures may be tried to curtail him,” Heyman wrote.

Other owners are rapidly learning that their followers will think poorly of them as a result. In order to halt Cohen and bring him down to their level, efforts are still being made.

Given the consequences, it’s unclear if he’d genuinely commit to signing Ohtani. The Mets, though, are now the biggest bully in the room as evidenced by the fact that other owners are already concerned about it.

The LA Dodgers and the San Francisco Giants have also been touted as favorites to land the player. The end of the season may be far away, but the battle for Shohei Ohtani has already begun.

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