Braves Open To Exceeding Luxury Tax Threshold

Much attention this offseason has been paid to the Braves spending outlook. Atlanta boasts one of the league’s top rosters but currently faces a major question at shortstop. Dansby Swanson has hit the open market as one of the top players available, and the Braves have to determine whether to make another significant investment to keep the Gold Glove winner in the fold.

Retaining Swanson would surely involve pushing the club’s spending beyond the base competitive balance tax threshold. That figure is set at $233MM for 2023. Roster Resource presently forecasts Atlanta for around $228MM in luxury tax obligations. That includes projections for arbitration-eligible players Max Fried, A.J. Minter and Dennis Santana, which come with small error bars until those salaries are finalized. Still, one can estimate the team is at least within $10-15MM of next year’s base tax threshold before trying to retain Swanson or further augment the roster in left field or at designated hitter.

Justin Toscano of the Atlanta Journal-Constitution writes that the Braves are giving internal consideration to surpassing the luxury tax in the right situation. That’s hardly a surprising development. Atlanta brass has already gone on record about their affinity for Swanson, and they reportedly offered him a deal in the $100MM range during the season. An offer in that realm would push the Braves into luxury tax territory if accepted, and Swanson’s widely expected to beat that figure fairly handily. MLBTR predicts he’ll receive a seven-year, $154MM deal. If Swanson’s contract winds up falling in that area, it’d tack on somewhere in the neighborhood of $22MM annually to the signing team’s ledger.

A team’s competitive balance tax number is calculated by adding the average annual values of a club’s commitments, in addition to player benefits. For CBT purposes, there’s no difference between backloaded, frontloaded or evenly-distributed contracts. That reduces (but doesn’t entirely eliminate) teams’ ability to creatively structure deals around the tax. Yet for most teams it puts the club’s luxury tax number above their actual payroll for the upcoming season. That’s particularly true of the Braves, who have signed a number of players to early-career extensions with salaries that escalate later in the deal. For example, the Spencer Strider deal contains a $12.5MM tax hit, but he’ll actually make just $1MM next season.

Roster Resource projects Atlanta’s actual 2023 spending just under $196MM at the moment. Toscano writes the organization is placing a greater emphasis on that figure than on their current CBT number. While it seems there’s still some room to maneuver from that perspective, the Braves are already projected well above their previous franchise record. They opened this past season with a payroll just south of $178MM, per Cot’s Baseball Contracts. That was an organizational high, and they’re nearly $20MM above that for 2023 before considering Swanson or any outside additions.

One would certainly expect payroll to rise on the heels of five straight division titles, including their 2021 World Series. Much has been made of multiple members of the Liberty Media ownership group suggesting the organization planned to eventually have a top five payroll, but as MLBTR’s Steve Adams explored in October, they’re not far off that pace as is. It’s also difficult to identify ways for Atlanta to trim payroll without subtracting key contributors from the MLB roster. The team could probably find a taker for most or all of the $4.5MM owed to third catcher Manny Piña. They’d have a harder time shedding much of the $9MM they owe Eddie Rosario after the left fielder’s rough year, and they surely won’t find other clubs eager to assume much (or any) of the $37MM due to Marcell Ozuna over the next two seasons.

With the franchise already in uncharted waters, it’s difficult to glean from the outside how much flexibility is at hand for president of baseball operations Alex Anthopoulos and his staff. If the Braves wind up paying the luxury tax in 2023, the penalties they’d face would be relatively minor. They’d be taxed at a 20% rate for every dollar spent between $233MM and $253MM. That’d be followed by a 32% tax on spending between $253MM and $273MM, and they’d face stiffer penalties in the unlikely event they pushed beyond that second tier of penalization.

Finishing with a CBT number between $233MM and $253MM –which would be viable even if they re-signed Swanson — would come with a maximum of $4MM in additional fees. For a team that would already be spending upwards of $200MM on player payroll, that’s a relatively modest additional sum. Financial penalties escalate for teams that exceed the CBT threshold in multiple consecutive years, but the Braves are slated to see roughly $55MM in guaranteed commitments come off the books at the end of next season.