MLB: On Playing The Luxury Tax Game And Winning Big Time

Yankees 2019: The Elusive Prize, (Photo by Chris McGrath/Getty Images)

Though hard to believe, both the Los Angeles Dodgers and New York Yankees, two of the wealthiest teams in baseball in the two most significant markets are making an “all in” effort to fall under the $197 million luxury tax threshold – and still win. The rules are in their favor because if they can get under this year, all hell is liable to break out next year.

Yankees and Dodgers fans are not used to seeing their team operating with weights attached to their checkbook when it comes to spending freely and vociferously on free agents during an offseason. Yet, getting under the threshold has been the constant mantra voiced by each, and primarily by the Yankees, where COO Hal Steinbrenner has issued firm orders to Brian Cashman about holding the line this season, despite the fact the franchise is still printing money on a daily basis. Why, for instance, would a team like the Yankees make a complete U-turn from the past when they’re on the cusp of having at least even odds of capturing their 28th Championship in 2018?

At first glance, you might think it’s the grand total of $341 million the Yankees have paid into the revenue sharing system since its inception in 2003. But that’s all water under the bridge, and no one associated with the Yankees has been seen waiting in a soup line because of that expenditure. But no, it’s not that which is driving teams like the Yankees and Dodgers, who by the way paid a whopping $36 million and more than double what the Yankees spent in 2017 alone.

Instead, it’s more about the way the rules are written allowing for teams to call for a “do-over” in the middle of the game at a time of their discretion. Here’s how the game is played.

Under the 2016 CBA, first time offenders would pay a fee of 20% on the dollar, second time offenders would pay a 30% on the dollar, and third or subsequent time offenders would have to pay 50% on the dollar (These offenses must be in consecutive years for these percentages. If a team falls below the threshold one year the penalty re-sets the next year to the “first offense”) .FanGraphs

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Now, you see what is happening this year, and if you infer a bit more, it suddenly becomes apparent why there are such reluctance and back-up in the signing of high-priced free agents, and even the 100 or so others, who are still looking for a job.

20 percent of the dollar over the tax instead of 50 percent, which by the way goes up to $210 million next year, is more than manageable for a team like the Yankees and Dodgers. And this is precisely what will happen next year if either or both teams can get under the bar for 2018 and their past “sins” are erased.

Why, for instance, did the Yankees and Dodgers pretty much back out of the Yu Darvish sweepstakes in the waning moments before he signed with the Chicago Cubs? It wasn’t they changed their mind; it was they switched back to their focus. In the case of the Yankees, it was clear Darvish would cost them the reset if they couldn’t clear enough salary (read Jacoby Ellsbury) to accommodate the influx that would come with Darvish.

What’s interesting about both teams, though, is each most likely has all they need to win a division title, even if, they stand pat from here to Opening Day. Come July, when both teams see where they and the holes they have to fill to push them over the top, it could become a brand new ballgame, but again, the advantages of staying under the threshold outweigh going for the ultimate prize this season.

The Yankees could, next November, target both Manny Machado and Bryce Harper to add to their already potent lineup, and for good measure, they could also sign up for Stephen Strasburg, all of whom will be free agents when this season closes. With oodles of money to spend, the Evil Empire is poised to obliterate all other teams in the mix – if they choose to go that route.

In return, the luxury tax clock gets a reset, creating another march to pay the hefty taxes until they decide, once again, okay we give, and make the moves necessary (as they are now) to reset the clock, and so on.

Who Said You Shouldn’t Play By The Rules

Make no mistake, though. The teams at the bottom of the pile are making good by the luxury tax – no, let’s change that to what it really is – a salary cap. And someday, MLB will come clean as to how the teams who are receiving money actually spend it. But that’s a story for another day.

Finally, we should remember this is the system the players signed up for in the Collective Bargaining Agreement in 2016, which is the rule of law until 2021 when the next contract will be negotiated. And before the players leap ahead to some half-brained idea like boycotting Spring Training, they need to remember that it’s not collusion if it’s common sense on the part of owners.

After all, who can argue it’s not okay to play by the rules?

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Author: stevecontursi

I am an amateur writer with a passion for baseball and all things Yankees and Mets.

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