The "luxury tax model" refers to imposing a "tax" if a club crosses the
median total squad salary of clubs of that league. As per this tax, the club
will have to pay the league association an equal amount for every dollar/pound/euro spent over the median value.
e.g. If the median total salary of a club in a league is 100 Million, and club X
wants to have a total salary spending of 125 Million, then X will have to pay
the league association luxury tax of 25 Million making their total cost 150 Million (125 M + 25 M).