Luxury Tax...
A club exceeding the Competitive Balance Tax threshold for the first time must pay a 20 percent tax on all overages. A club exceeding the threshold for a second consecutive season will see that figure rise to 30 percent, and three or more straight seasons of exceeding the threshold comes with a 50 percent luxury tax. If a club dips below the luxury tax threshold for a season, the penalty level is reset. So, a club that exceeds the threshold for two straight seasons but then drops below that level would be back at 20 percent the next time it exceeds the threshold.
Clubs that exceed the threshold by $20 million to $40 million are also subject to a 12 percent surtax. Meanwhile, those who exceed it by more than $40 million are taxed at a 42.5 percent rate the first time and a 45 percent rate if they exceed it by more than $40 million again the following year(s).
Beginning in 2018, clubs that are $40 million or more above the threshold shall have their highest selection in the next Rule 4 Draft moved back 10 places unless the pick falls in the top six. In that case, the team will have its second-highest selection moved back 10 places instead.
I had originally thought going over by $20M was the trigger to a lower draft pick, but it's actually $40M.
Maybe Castillo does have a chance at making the 25 man roster. Also, a 20% tax on about $12M is not much, but once we add him back to the 40 man roster, we can't get rid of it. So, if we go over again next year, it's 30%. In 2020, it could be 50%.
The total added cost could possibly be ...
$2.4M (20% of $12M)
+
$3.6M (30% of $12M)
+
$6.0M (50% of $12M)
$12M/3 years
That's not a bad "added cost", assuming he does well. It's what we paid Young for 2 years.