How does the Luxury Tax work?

[mgwiz22]

Some recent trades such as the Kemp and Haren deals have involved significant amount of cash being paid by the trading team. By including cash in the deals are the salaries of the traded players off the books of the Dodgers for next season and now on the books of the Marlins and the Padres? Perhaps,the Dodgers can take the full luxury cap hit in 2014 by having made these trades before 2014 ended? Do they at least save themselves from having to pay state and federal employment taxes by having made these deals?

I'm curious to see if teams can save money by making trades involving bad contracts, given the present baseball luxury tax system.

[joncarlos]

I think the 10mil they pay for Haren stays on their own books for the purposes of the luxury tax. But maybe they get out of employment taxes... I don't know if Haren is *actually* on their payroll.

What I want to know is how buyouts work. Can the Yankees give A-Rod 61mil to go away, count it all against this year, and then have a shot at getting under the luxury tax limit next year since his 30mil is off the books?