The luxury tax is a payment a basketball team owes when its payroll is above the tax line, a threshold set above the salary cap. The team pays a rate on every dollar over the line, and repeat offenders pay more.
In HoopSim the tax line is $187.9M by default and the tax rate is 1.5 (the commissioner can change both; 0 turns the tax off). The bill is measured once, on the last day of the regular season, on your total committed money; get under the line by that day and you owe nothing. The bill comes out of next season's coaching budget: 12.5% of the budget comes off the top. Being over the line also shrinks your mid-level exception to the taxpayer version and limits direct coach hires to the coach minimum, and a third straight season over it costs your least valuable second-round pick.
Rulebook: Luxury tax. Related: apron, salary cap.