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Did the implementation of the luxury tax in Major League Baseball prove to be effective in increasing a competitive balance the year after it was put into place?

I. Introduction

In 2003, Major League Baseball implemented a luxury tax forcing teams to pay an additional fee to the league on any payroll expenditure above a certain amount. In the first year of existence, any MLB team that spent more than $117 million on salaries for the year had to pay a tax of 17.5% of any overage into a league fund, which was then distributed to low-revenue teams as a form of revenue sharing. In subsequent years, the tax rate rises for second and third time offenders. The luxury tax can be seen as a weaker form of a salary cap. With a normal salary cap, no team is permitted to exceed the cap, but with the luxury tax, teams may choose to exceed the tax threshold as long as they are willing to pay the tax.
The whole purpose of the luxury tax is to increase revenue sharing and therefore......

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Approximate Word Count: 665
Approximate Pages: 3 (250 words per double-spaced page)

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