3 Dec 2016
Here’s a good summary of the new baseball labor deal.
For the Yankees, the key numbers are the luxury tax thresholds, actually called the “competitive balance tax” which start at 195 million this year and increase to 210 in the last year of the deal.
There are two keys to the CBT. First, the more times you violate it, the bigger the tax for the excess. 20% then 30%, then 50%. Second, there are additional penalties for going $20-million over, an additional 12% of that amount, and $40-million over, let’s call it 45% of that amount.
So a team that has a $250-million payroll in 2017 would pay a flat 20% on the first $20-million over 195. 32% on the next 20 million and 62.5% on the last 15 million. Add that all up and you have an extra $20-million, not prohibitive. But shift that $250-million to a third-time violator, and you have $36.65-million in tax.
For the Yankees, this presents an opportunity. Even with arbitration cases, their payroll is “only” going to be around $160-million next season before any potential free agent signings or trades. Next year it gets cut by at least $50-million, and you can add another $22-million to that if Tanaka opts out. So, barring complete stupidity, they should be well under the luxury tax the next two years
And I suspect that’s exactly what they will do. The post-2018 free agent class will be headlined by Bryce Harper and Manny Machado, both younger than Aaron Judge, and has lots of depth behind it. The Yankees can spend the next two years seeing how their prospects pan out and then jump in to free agency with a big splash after 2018. They certainly may sign a free agent this offseason, they might take on payroll in a trade, they might try to buy out some free agency years from arbitration-eligible guys like Didi, but I bet they won’t spend more than an additional $35-million.