O's Socked With Huge Luxury Tax

The Baltimore Orioles must pay for their awful season.

After spending the most money in the major leagues last season and finishing with a losing record, the Orioles were socked Friday for the largest luxury tax bill in the major leagues: $3,138,621.

The money must be paid to the commissioner's office by Jan. 31.

Baltimore, which finished 79-83 and 35 games behind the first-place New York Yankees in the AL East, had a final payroll of $79,468,674 for luxury tax purposes, according to figures received by teams Friday and obtained by The Associated Press.

Unlike conventional payroll figures, these are computed by using the average annual value of contracts instead of salaries for single seasons. They also include the entire 40-man roster plus $5,576,415 per team in benefits paid to players.

The luxury tax was adopted as part of the settlement following the 1994-95 strike and was designed to discourage spending by high-revenue teams. For the teams with the five highest payrolls, the tax is assessed at a 35 percent rate on the amount above the midpoint between teams Nos. 5 and 6.

The Yankees, who paid the highest 1997 tax at $4,431,180, lowered their tax bill to $684,390 but still managed to win the World Series and set a record for combined regular- and postseason wins, going 125-50.

New York had the third-highest tax, finishing behind Boston, which will pay $2,184,734 after winning the AL wild-card spot with a 92-70 record, 22 games behind the Yankees.

Atlanta, which advanced to the NL championship series for the seventh consecutive time, has the fourth-highest tax at $495,625, followed by the Los Angeles Dodgers.

Los Angeles, taken over by one of Rupert Murdoch's companies before the season, rose from 11th to fifth and will pay $49,593. The Dodgers' payroll was about $283,000 above the Cleveland Indians, who finished sixth in the payroll standings.

In the first season of the tax, the Yankees were followed by Baltimore ($4,030,228), Cleveland ($2,065,496), Atlanta ($1,299,957) and Florida ($139,607).

Teams will combine to pay $6,552,963 in tax, down from $11,966,468 the previous year.

While the top four or five spenders probably spent less on payroll than they would have without the tax, high-revenue teams are continuing to pull away from baseball's middle and lower class.

That's because the tax is relatively ineffective as long as there are six high-spending teams, since the threshold automatically adjusts to the midpoint between the fifth and six teams. Owners originally hoped it would be $55 million last season but it wound up at $70,501,185.

For 1999, owners originally hoped the threshold would be $58.9 million, but it will be at lest $75,506,769, because of the automatic adjustment contained in the collective bargaining agreement. The tax rate drops to 34 percent this year.

While this is scheduled to be the final year of the tax, some lawyers among both the players' association and management appear open to extending the tax as part of an overall extension of the labor agreement.

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