Definition of Luxury Tax (Sports)
What is a "luxury tax" as it applies to the world of sports? What does the term "luxury tax" mean in the sports world?
In the world of sports, a "luxury tax" is an amount that is paid by a team when they have a payroll that is over a certain amount.

The current luxury tax threshold in Major League Baseball is $178 million. If one team's total player salaries and benefits add up to more than $178 million in any given year, they will have to pay a "luxury tax".
In the NBA (National Basketball Association), a soft salary cap with a luxury tax is used. In the NBA, if a team exceeds a certain payroll threshold, they will be forced to pay a "luxury tax" which is then distributed to teams that are below the tax threshold.
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