The Yankees have long sought to reset their luxury tax penalty clock, and with payroll now finally nearing the tax’s cutoff point, GM Brian Cashman tells Joel Sherman of the New York Post are committed to getting under the $197MM threshold this winter.
“We haven’t had [offseason] meetings like this, but the exclamation point is we are getting under the threshold next year,” Cashman said. “[Greg] Bird is our first baseman moving forward because obviously we believe in him and also because of the cost control. The most important factor is if Bird is worthy enough to be our first baseman and our answer is yes.”
Since the modern luxury tax system was instituted prior to the 2003 season, the Yankees have been over the tax limit every single year, which cost them a whopping $325MM in penalty costs over those first 14 years. Between their financial means and their desire to always be competitive, exceeding the tax threshold was seen as a necessary evil. For instance, the Yankees planned to be under the tax limit several years ago, but after missing the postseason in 2013, they splurged on $555MM in player salaries that offseason to make another push in 2014.
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Now, however, the Yankees can realistically aim to avoid the tax thanks to the number of big contracts finally coming off the books this winter (Alex Rodriguez and C.C. Sabathia) as well as $20.4MM for Matt Holliday and Michael Pineda.
Masahiro Tanaka can also opt out of the three years and $67MM remaining on his contract this winter, though “the strong likelihood is that he does not,” according to Sherman. This is noteworthy of itself, as Tanaka would be one of the top pitchers on the open market this winter if he did exercise his opt-out clause. MLBTR’s Connor Byrne examined some of the pros and cons of Tanaka’s decision in a reader poll in early September, as Tanaka’s 4.74 ERA was somewhat inflated by some early-season home run problems, though his health issues and the qualifying offer could impact his market value. (MLBTR readers polled, by the way, were almost split on Tanaka’s decision, with a slim 52.59% voting that he will opt out.)
Beyond just escaping some large contracts, the bonus for the Yankees is that they’ve been able to stay competitive thanks to pre-arbitration players like Aaron Judge, Gary Sanchez and Luis Severino posting star numbers. Bird missed all of 2016 recovering from shoulder surgery and was limited to just 48 games this season due to ankle problems that required a surgical procedure, though Cashman clearly considers Bird to be another key part of the Yankees’ youth movement.
In counting on Bird as the regular first baseman in 2018, Sherman notes that the Yankees are foregoing a pursuit of top free agents options like Eric Hosmer. Chase Headley or Tyler Austin are on hand as in-house first base options if Bird is hurt again or just struggles, with top prospect Miguel Andujar knocking on the door to take over third base and Gleyber Torres potentially on track to make his big league debut in 2018 if he recovers as expected from Tommy John surgery. The Yankees will have positional flexibility with the DH spot open, and could use it to hand out more at-bats to players on rest days, or to lure Shohei Otani to New York.
Beyond just Hosmer and the other first basemen, the firm intent to avoid the luxury tax would seem to take the Bronx Bombers out of the running for most of the biggest free agents available this winter. Many of the most high-priced trade candidates could also be off the table, unless the dealing team is willing to eat some money or if the Yankees are able to unload a big salary back in return. This isn’t to say that New York couldn’t still be active in free agency, perhaps attracting veteran depth pieces who could be willing to play at a relative discount for a shot at a World Series.
Getting under the luxury tax threshold just once would send the Yankees from the highest level of tax payments all the way back to zero. In true Yankees fashion, of course, the team seems likely to exceed the level once again in the 2018-19 offseason, when the likes of Bryce Harper, Manny Machado, Josh Donaldson, and several other superstars hit the market in arguably the most distinguished free agent class of all time. The new CBA imposes stiffer penalties for exceeding the tax limit, both by how much a team exceeds the threshold and if it is exceeded in multiple years, though even that may not necessarily be an issue for the Yankees given their wave of young talent both now and in the near future, plus even more high-priced veterans (Headley, David Robertson, Brett Gardner) coming off the books after 2018.
What is the total they currently have on the books for next year?
Cots says 114.
You need to add the average annual value of all multi year contracts, plus all the one year contracts including arbitration eligible players, plus $ 13 million in player benefits, plus all players on the 40 man roster.
Taking the $ 213 million plus for 2017, subtract $82.5 million in expiring contracts for A Rod, Sabathia, Holliday, Pineda, Clippard and Carter, you get $ 130.6 million. That’s before you factor in nine arbitration increases and any replacements for those departing players.
They will have at least $ 65 million to spend on that. They can easily be under. That means that if they go over the threshold a year later, they are treated as a first time offender, with a 20% penalty instead of 50%.
The Tigers are well under next year, leaving the Dodgers as the only likely tax payer
“you get $ 130.6 million. That’s before you factor in nine arbitration increases and any replacements for those departing players. … They will have at least $ 65 million to spend on that. They can easily be under.”
It seems a common that people don’t seem to completely understand the threshold
All bonuses and benifits (roughly 20 million) need to be counted into the amount. And you need to allow for at least some flexibility for the season if you are trying to stay under, as everyone you add adds to it.
That means on a 195 threshold you max out at around 170, but probably don’t want to top around 160-165
If the Yankees do in fact have 130 committed than they have merely about 30-35 they can safely add, not “at least 65”
If their payroll for tax purposes is $ 130M and the cap is $ 197M, they have $ 67M to spend. That 130M does include signing bonuses and the $ 13M in player benefits.
It does not include any performance bonuses, which are generally not much, or the increases for 9 arb eligible players, and replacements on the 40 man roster for the players leaving who will vacate a roster spot.
I agree that there are moves during the season that will add to the total. Every time a player goes on the DL, another player is called up who starts to receive major league minimum pay. Those add up. There are in season moves if the team is contending.
All of that is what they have $ 65 M to spend on while staying under the tax threshold.
Baseball Reference puts the Yankees at $154.4 million because they have to go to arbitration with Didi, Betances, Kahnle, Gray, Warren, and Hicks. You do need to add benefits but you don’t need to add in the 15 men not on the 40-man roster.
Players only count when they’re on a Major League contract. So if a player doesn’t play in the big leagues he doesn’t count. If he plays 30 days he counts only for what he earns in the big leagues. Some of these players might spend most of the year in the big leagues but you probably only need to account for $3-$4 million. Allocate $6 million to be safe.
After you subtract benefits you don’t want to be above $177 million. Of course if you trade for an expensive player during the season you may have to have more room.
So the Yankees can add about $15-$20 million this off-season. You can get plenty of help with that but not big impact players.
Every player on the 40 man roster definitely counts for purposes of the tax threshold. The formula is described in the Collective Bargaining Agreement, Section XXIII, C, 1, (b). It specifically includes “optionally assigned contracts”.
It’s not a huge deal, financially. Cot’s contracts puts a figure of $ 2.25 million for the 15 optioned players. This figure would include some of the players being called up in September, earning pro rated MLB minimum pay.
Players on a 40 man roster have to have a major league contract, even if they are optioned to the minors and don’t make the major league minimum salary. They are also members of the MLBPA.
Cot’s does a payroll breakdown for luxury tax payroll. Baseball reference does not. For example, when you go to the Yankees’ payroll site on Cot’s, go to the “Yankees tax tracker.xls” and that is the payroll for tax purposes.
One thing this chart does not show is players added during the season. Cot’s other payroll chart keeps that updated throughout the season.
B-ref is great for providing the estimated arb increases, but they also use salaries for just that season. For tax purposes, the average annual value of all multi year contracts, including signing bonuses, is used.
That’s not correct, the Yanks will have about 35 million, not counting a Tanaka opt out or trading Gardner, Ellsbury, or Headley! River Ave Blues has the correct amount.
What is not correct?
If you’re referring to the River Ave Blues article dated 9/22/17, that looks like a very good guesstimate to me for the Yankees.
– It includes projected arbitration increases
– It includes all players on the 40 man roster
– It uses average annual value for the multi year contracts
– It includes player benefits
It’s probably a little conservative by a few million. Player benefits should be $14 million and the arbitration number could be higher. Keep in mind that payroll is what you pay all player all year. The Yankees might want to trade for player(s) at the deadline. They added $3-$4 million in the Robertson and Gray deals, even with trading Clippard. They need to leave themselves a cushion.
The player benefits number at $ 12M is definitely low. I believe it’s $ 13.6M this year and it won’t be going down.
It’s worth noting that the penalties for being a taxpayer under the new CBA go beyond just paying taxes. If a team over the threshold signs a player who rejected a qualifying offer from his club, the team loses their second and fifth highest draft picks, plus $1 million in international pool money.
If a team over the tax threshold loses a free agent, even after making a QO, they get a supplemental fourth round pick instead of a first or second. Ask the Tigers about JD Martinez on that one.
So the Yankees get under the threshold for next season, don’t sign any expensive FA’s that would cost draft picks, and gear up for some of the big FA’s next winter.
If Tanaka opts out, any team dumb enough to pay for him will be paying for his eventual TJ surgery.
Ervin Santana has pitched with the exact same injury since 2009 and he got a nice 4 year deal with Minnesota a couple of years ago.
A contract that seems to have worked well in Minnesota’s favor, if I might add.
There’s reasons to be optimistic: He tied Strasburg for most Strikeouts in a game (15) and didn’t issue any walks, his last game of the regular season, in seven shutout innings.
His opponent was the Toronto Blue Jays, the same team that obliterated him 8R, 7ER, 3HR, 3BB, 6SO in 5.2IP in his last start before that one.
Pitchers are outlier, just look at the playoffs so far, the top 3 pitchers in the AL all had bad outings. Watch Tanaka throw a shut out.
Does this preclude them from the Otani sweepstakes? Can’t see how they’d avoid going over the limit to get him, unless there’s an, um, “agreement” to defer payment, which may be illegal by MLB rules.
Not even close our curious visitor…
Tell me why, O steadfast resident. Like Dumbo, I’m all ears….
And divulge org secrets..I don’t think so…
It’s pretty simple. The Yankees will be at about $116 million with almost a full 25 man roster (Bird, Castro, Didi, Headley, Torreyes, Sanchez, Romine, Hicks, Judge, Gardner, Ellsbury, Tanaka, Severino, Gray, Montgomery, Green, Betances, Chapman, Robertson, Kahnle, Shreve, Cessa). They can fill out the roster with Frazier, Torres, Andujar, Adams and/or re-sign Sabathia for one year/10-15 million. Even with Sabathia at a reasonable salary, the team is give or take $50 million in annual commitments under the tax.
It is unlikely that Oteni would take up anywhere near that amount. He would have to crush the highest signing bonus ever for an international player (Yoan Moncada’s 31+ million) for it to come close.
Thanks for a civil, mature, and informative reply to an honest question. Very refreshing….
1. When calculating payroll for tax purposes
A. Use the average annual value of all multi year contracts, not just that year’s salary
B. Include the entire 40 man roster.
C. Add about $ 13 million for 1/30th share of player benefits
The Yankees will be at $ 130.6 million plus 9 arbitration increases and about five more replacements for departing players, whether those are minor leaguers promoted or free agents. Lots of room.
2. Otani will earn the major league minimum salary if he is in the major leagues. The big fees for him will be the $ 20 million posting fee, which goes to the Nippon Ham Fighters, and his signing bonus, which the Yankees can go higher than any team except the Rangers right now. He is exactly the guy that they want to sign if luxury tax is a concern.
Lester you weren’t looking for a real answer based on the final sentence in your original post…come on man.
That was pre cap
Wrong again, mr. famine. Yes I was looking for a real answer, with a bit of wordplay humor to carry along the request.
And you still haven’t answered me, although others have done a good job of trying to supply the numbers and the threshhold info. For them I am grateful … man.
He will be minor league contract because of under 25years old foreign player rule. So he won’t even cost million
He is bound by international signing restrictions. The most ANYONE could offer him is 10 mil if they have the biggest pool and sign nobody else.
Correct, tdaly, and that number is a signing bonus, which is not a salary that counts against the luxury tax threshold.
Aren’t bonuses pro-rated and taxed over the term of the contract? Else teams could avoid luxury tax consequences by calling a payment a “signing bonus” rather than “salary”. Which wouldn’t make a ton of sense. Sign Harper/Machado for ten years at $1M a year but give him a $400M signing bonus and only the first million counts for luxury tax purposes? Pretty sure that isn’t correct.
Signing bonuses on a major league contract are averaged over the duration of the contract and are included in the average annual value for tax purposes.
Performance bonuses are not known until the end of the season, at which time they are charged only to the season that they are earned.
Otani, or any international free agent subject to the bonus limits, or any player who is chosen in the Rule 4 draft, does not immediately sign a major league contract. Those signing bonuses are subject to the limits but not part of the equation for the tax threshold.
Thanks.
He seems pretty firm on getting under for next year.
Ohtani isn’t going to make more than 6 million… It’s whatever a team has for international money which is the reason the Yankees were tReading for international money.
He will be minor league contract because of under 25 years old foreign rule
Let’s say Braves take on all of Headley’s contract, could they maybe get Frazier or Torres also? Or even Judge? 😀
If they give up Swanson, albies, Newcombe and maybe the rest of their top ten prospects
I thought I laid the sarcasm on really good, but I guess not. And the three you mentioned have more of a track record than Torres and Frazier.
You’re dreaming braversed! Ain’t gonna happen in a million years no matter what you think of your guys!
The Yankees believe these two prospects fit into their plans forward and there’s no way both go in any trade.
Why would the Yankees do that?
Simply put the YANKEES wouldn’t!
I think the Yanks will have anywhere from 35 to 80 million to spend thsi off season. They could sign Ohtani and Jake McGee . Cashman has some flexibility and could move 5tplayers like Headley, Gardner, and Ellsbury to lower the budget further. Gardner would be easy to move to a team like the Nats or Giants. I would think Andujar and Torres will make the team sometime during the year. Adams might fit in the 5th spot in the rotation..
Dude I’m a Yankee fan first and most,but no ones taking any of those contracts. Gardner is to valuable and at a decent salary,Headley will be gone(and no one wants him),Ellsbury is a big white elephant. Otani is the only one to pursue…
I disagree regarding Headley and Ellsbury with respect to value looking forward.
Headley has shown versatility and a “team first” attitude with respect to his ability to play both third and first. At league worst, he’s an average offensive player that switch hits, and can play average to above average defense at least at third and with time most probably first as well. And, his contract is relatively team friendly given his O/D! One more year wouldn’t strap the Yankees, giving them some insurance at a couple of positions and then he moves on. Who knows, maybe in the last year of his contract, as most players do, he comes out of the gate in Spring Training and wins the third base job hands down! Stranger things have happened!!!
Ellsbury has shown the same average at worst offensive stats, and can still play an average or above average center field on defense. His albatross is his contract. Slims down the number of interested parties for sure but not impossible to imagine his ability to be moved.
Headley is not immovable. Headley would be an upgrade over a few 3b in the league. I disagree about Ellsbury. He’s a 4th outfielder and makes way too much money. Not really worried about it since the Yankees should have around 30 mil to spend this off-season after arb raises
I have to disagree on Headley being able to be moved,though he has proven himself in a rotating role…but teams have those type of players at considerable less. I also think you overestimate Ellsbury’s play in CF..with his weak arm and being injury prone LF should be more to his stature(and oh that salary). Moving forward Headley should be kept in the same role and Ellsbury an expensive 4th OF/DH.
Moving Gardner saves the Yanks over 11 million.
I can see the Giants or Nats taking Gardner, it’s a one year deal, and he is only making 11.5 million which is under his value. Ellsbury is worth about 8 million a year according to Fangraphs.
The Giants are up against the luxury tax threshold already. They were last place this year. If they spend more money it won’t be on a player that’s older and at the end of his deal. The Nats would have no place to play Gardner. They have Harper, Taylor, and Eaton, They’re also close to the tax. Gardner does have value but not every team is looking for an outfielder in his 30’s.
Headley and Ellsbury might be worth something if the Yankees eat quite a bit of salary and don’t expect much in return.
The Giants were near last in left and center field players last year, and Gardner is only a one year deal.
Why in the world would they want to move Gardy? He still plays a good LF,can still lead off,has some pop,can steal bases,and is a good veteran presence.
They are stuck with Ellsbury. The best outfield for next year is Frazier, Hicks, and Judge. Ellsbury can be a good backup as long as he doesn’t play too much. They can move Gardy and get something decent back in terms of prospects while not having to eat any money.
Your comment about Headley cracks me up….”might be worth something if the Yankees eat quite a bit of salary and don’t expect much in return”. Dude, he’s a switch hitting third baseman who has occasional pop and can play first base also. Defensively, he is league average or slightly above. And how about his contract being relatively team friendly compared to some of the dog contracts out there for players that aren’t half the ballplayer he is.
Who do the Giants have playing third??????Panda?????
Oh, I see your point now!
Your comment about Headley cracks me up. He was 24th in fWAR among 3B in 2017. So he’s not better than many 3B. His defensive metrics took a nose dive this year. Only in Yankee land is $13 million team friendly, especially for a guy at the bottom of his position. I’m sure there are worse contracts out there, but not being awful doesn’t make it a good one.
The Giants are a really really bad example. First, they are already at the luxury tax threshold. So they won’t be adding money. Second, they were horrible this year. They’d have to be stupid to make any moves just for 2018. They need long term assets. Finally, the Giants have two young prospects who can play 3B in Christian Arroyo and Ryder Jones. Neither of them hit this year in their try outs, but a lot of players need some time to develop. Look no further than Aaron Judge.
There are a few teams out there that Headley would be a 3B upgrade. The problem for the Yankees is that many of those teams are rebuilding clubs like the Padres and Braves. They’re unlikely to be looking for a 30 something veteran. The market will be limited, but if there’s a match it’ll be a deal similar to Brian McCann. There the Yankees paid down a third of the contract and got two lottery tickets.
I think a round of applause is in order here. I never thought I’d see the Yankees under the threshold.
They should have to be under it for at least five years to a decade before they get out from the tax penalty. Kind of a joke that one year under resets it.
I have long believed that the tax rate should depend upon how MUCH a team is above the threshold, rather than how many times they’ve gone over. But that’s just me.
Poor Yankees…..don’t forget to bring your coupons to winter meetings….
I enjoyed the part about the coupons.
As a Marlins fan, Justin Bour and Dan Straily are available, and cost almost nothing in terms of money. Just throwing that out there…
This is what is wrong with baseball. Yankees are allowed to double the payroll of teams like the Pirates,
Reds,
Brewers, etc. how can those teams ever hope to compete?
Through the draft, player development, trades, international signings, and then supplementing that with free agency…the Yankees have been able to develop or trade for a bunch of young guys that cost nothing, and are productive. That’s going to enable them to spend whatever money they want to add to that. If you’re the rest of the league, you’ve got to be worried about this next stretch of time b/c if they’re doing all of the the other stuff like that, and they’re already outspending everyone, it’s not going to be easy, so you can’t really afford to make mistakes
The difference between baseball and other sports is that so much of the revenue comes from local sources, local TV deals, and there is great disparity between markets. Even though almost half of local revenues go into a pool and are divided among all clubs, the gap is still huge as evidenced by payrolls.
And yet, markets like Kansas City, Cleveland, Detroit, Tampa Bay, St Louis, and others have put teams in the World Series and the Dodgers haven’t. The big difference is that the Dodgers and Yankees can screw up on huge contracts and keep on running.
The new CBA’s tax system is much more like a salary cap than before. The penalties are really steep now, so that will help. But there will always be disparity, moreso than in other sports.
The NFL and NBA are clogged with dynasties. Look at how few franchises have won championships in the last 20 years.
Baseball, on the other hand, sees more parity.
Spending doesn’t equal winning. If actually hurts teams when they sign bad contracts. How many $100M+ contracts have actually been good?
After 2018, Chase Headly $13M, Bret Gardner $11.5M and David Robertson $13M will expire.
Then, it will be after 2021 before the next group completely expire. Jacoby Ellsbury $22M, Starlin Castro $11M, Masahiro Tanaka $22M, Aroldis Chapman $17M, No matter what business you’re in, that’s allot to carry every year for just a few people.
$30 million a year for 130+/- innings for 2 relievers is outrageous itself.. That kind of money would get them a sure fire top 10 pitcher in free agency.. Heck for just a few million more than could easily sign Arrieta and Sabbathia (1 year) and get roughly 350 quality innings next year.. I have been a fan of Houdini since he was setting up Mariano, but I am still baffled as to why the Yankees took on his entire contract.. Seems like they could have gotten a cheaper alternative with Rutherford as the centerpiece of a trade (Herrera, Minor and Wison, come to mind)
Or perhaps they could actually let a relief pitcher develop before trading them away for a box of big league chew and watching them develop elsewhere. Swarzak, Goody, Martin and Kahnle (recent ones off the top of my head)..
I like the idea of the Yankees simply forgoing free agency completely and stay inside or making smart trades such as the Aaron Hicks trade. If the Yankees were more discrete and not hand out outrageous salaries, MLB will likely follow suite..
These are Baseball players, They get paid as if they cured cancer. The whole industry is a house of cards being propped up by money loosing TV contracts and public debt.
I like squishy squids.
They need to continue the youth movement. Trade Gardener and Headley, give the time to Frazier and Andujar. Hopefully Tanaka ptiches well enough in the playoffs to entice him to opt out so they can get out from under his contract. Move Green to the rotation next year to take his spot. Maybe bring CC back on a lower priced one year deal but all of the other free agents need to be let go.
OHTANI WILL BE MINOR LEAGUE CONTRACT BECAUSE OF UNDER 25FOREIGN PLAYER RULE!!!!