Tuesday, October 15, 2013

Can the Yankees get under the luxury tax threshold?

If the Yankees don’t make it under the 2014 Luxury Tax threshold, their luxury tax rate could be 50% but can they get under the magical $189 million figure?

In a recent interview, Hal Steinbrenner, basically came out and said that getting under the threshold is a nice to do, not necessarily a need to do. The big thing for the Yankees is that they need to compete in the postseason and add to their 27 World Series titles. Now, given the performance this year which, at times was mediocre at best and sometimes just downright lousy, has the focus shifted from staying under the threshold to competing at any cost? Earlier this year, we were told that the key thing next year is for the Yankees to be under the threshold but with Hal’s comments, who knows how true this is anymore.

Do we want to see the Yankees winning in October again? Of course we do! Do we want to see that happen at the expense of a huge luxury tax bill again? I’m not so sure. All the Yankees have to do is get under the threshold in 2014 and the whole thing will be reset to 17.5%.

Sounds easy right? Well it may not be as easy as hoped.

The Yankees have 3 players who will definitely (I’m betting that Jeter will NOT retire this offseason) be bumping up the payroll in 2014:

Jeter – $9.5 million option 
Sabathia – $23 million 
Teixeira – $22.5 million

They also have A-Rod who may or may not be included in the figures. If he is then the Yankees will have $80 million tied up in 4 players (none of whom made it through the entire 2013 season unscathed).

If we add Wells, Soriano and Ichiro to the above figure, we look at $95 million and this increases to roughly $110 million when the arbitration guys get factored in.

The rumours now are also that the Yankees could be prepared to bid big on Masahiro Tanaka when he becomes available. Having seen what Yu Darvish got from the Rangers ($5.5 million in year 1), if the Yankees do decide to go big on Tanaka, then it will be increasingly difficult to get under the threshold. Throw into the mix, the Yankees 2 biggest free agents of the offseason, Robinson Cano and Curtis Granderson, who could achieve in the region of $40 million between them (I’m working on $25 million for Cano and $15 million for Granderson), and the figure is already $150 million! That leaves just $39 million to finish filling the 40 man roster and maybe make a bid on Tanaka! Oh, I forgot to mention…Hiroki Kuroda would attract a qualifying offer this year of $14.1 million, which would be a pay cut but it is unclear whether he would take this. It is also unclear whether the Yankees will attempt to re-sign him but if they do, even at $14.1 million, there’s another large chunk of money gone.

$39 million (or $25 million if Kuroda were to be re-signed and accept the qualifying offer) only really allows for 1 or maybe 2 big name free agent signings and pretty much decimates the remaining budget to fill the 40 man roster. The Yankees could really benefit from another couple of starting pitchers (maybe Tanaka and Garza?) and a decent catcher (Brian McCann anybody?) as Chris Stewart and Austin Romine haven’t proven to be the most reliable catchers in the major leagues. This would more or less end up blowing the budget though

This situation wouldn’t be so bad, if the Yankees farm system was better but at the moment, there aren’t a great deal of prospects coming through that are likely to aid the Yankees postseason run in 2014. We have traded away a lot of prospects in the past couple of years and it now appears that this has come back to bite us.

In my opinion, the threshold is going to be breached if Hal has anything to do with it. It is more than likely that the Yankees will need to spend in order to make the improvements necessary to get to the playoffs next year but this will come at a cost. With the luxury tax rate not being reset, it is likely to cost the Yankees more in the long term if we sign current young players who become eligible for free agency in the next 3-5 years time. The big examples of this are Mike Trout and Bryce Harper who are likely to be commanding mega contracts if/when they hit the market.

This may all be a bit of a moot point if A-Rod ends up having to take a suspension for all of next year as this would free up $25 million dollars in the Yankees budget and allow some more wiggle room. Ultimately though, this situation really highlights the need to improve the farm system and aim to develop some of the players we already have. Maybe for now, we should look to the medium term (2015 and beyond) and not focus on the short term gain we MIGHT get by blowing the budget and signing a few more big names. If we focus on the medium term and do everything possible to get the tax rate reset, we will be in a much better position going forward and potentially could be even more successful without hurting the pocket so much.


  1. Clive, very well done...
    Big test for Hal and Hank, do they want to win or get under the TAX?
    My guess is they will try to do both...will it work that way? Not really!
    We have a problem in Tampa, with Dumb-Hal, Dumber-Hank and Dumbest-Randy...Randy being the worse of the lot.
    Bookkeepers and horse farmers should let the people they hire do their job and stay out-of-the-way as far as picking talent and trading away our Farm for older players. If they have so little respect for the people running the day-to-day operations of the baseball team...replace them but, don't interfere with them!


  2. Money is the NEW driving force for the Yankees...right? Well, I don't think they made the money they had been making in the past, maybe it is a wake-up call...put a good team on the field and the fans will come back.
    1-The fans come back...the team makes money!
    2-Put a good team on the field and the advertisement price per minute goes up...more money, right?
    3-Next couple of years there will be some young good players hitting the open market. Go for them!
    4-Add Tanaka and a good power hitting right-handed OF, keep Granderson and Cano (as you pointed out).
    5-Do not add any-other pitchers or catchers...CC, Nova, Tanaka plus what we have will do better than what happened this year.
    6-Yes, I hear every fan saying; spend, spend and spend, we need this guy, that guy and this other guy?
    7-As usual, I disagree with the majority
    8-One must start with key people...we have some keys on the team and hope to add one or two more.

    The team as it is now, is strong up the middle defensively right? I hope you said yes. Thus, we start on the right track, add a right-handed power bat, Tanaka and we have upgraded our pitching and kept the hitting in good shape.
    Plus, stayed under the Tax, right?

    My opinion, not a statement of fact!


  3. The team can absolutely compete and be cheap but it has to be a team effort. Everyone has to perform up to or exceed expectations and everyone has to be healthy all season.

    Nunez needs to step in as a cheap and effective 3b option if arod is suspensed which I think he can be. Then a Jeter and Ryan combo is not that expensive, around 10 mill, as a shortstop combo. Cano is gonna get paid and teix too with David Adams as a league minimum back up for both.

    Gardner, ichiro, and Soriano are locks. Wells is expendable with Zoilo although it doesn't help us with the tax. We can go with an all home grown or close to league minimum bullpen and use the Andy, Hughes, Kuroda, and mo money to sign tanaka for 10-12 mill a year and go with cc, tanaka, nova, Pineda, warren.

    It's not sexy but it would win an would be in the 160 USB million dollar range

  4. Also Clive I do not think you are using AAV to calculate like you should.

    Ichiro aav is 6.5 mil
    Soriano aav is 5 mill
    Wells aav is 0

    I am on my phone so I am going on memory but I believe cc's aav is a little lower with the extension he signed as well. We could easily resign cano, Granderson, an tanaka and be under the 189 if we fill in with a lot of cheap and young contracts


Sorry for the Capatcha... Blame the Russians :)