Enough time has passed that my memory could be faulty, but I seem to recall that a year or so ago New York Yankees executives were saying – boasting may be too strong – they planned to get under Major League Baseball’s luxury tax threshold so they could avoid paying millions of dollars in tax and get themselves to the lowest tax rate for next season.
Just as they fell short of reaching the playoffs, the Yankees fell short of achieving their economic goal. The tax threshold was $189 million, and the Yankees’ payroll for luxury tax purposes was $244 million. As a result, they incurred a $27.4 million tax.
Undaunted, the Yankees are now looking to 2019 when they feel confident they will be able to get under the tax threshold, which will be higher at $206 million than the $189 million threshold they have battled the past three seasons.
It’s not just the higher threshold that gives the Yankees hope that they can avoid it. By 2019, they will have shed some of their more costly contracts. For example, their two most expensive contracts expire after next season: the $27.5 million average annual value of Alex Rodriguez’s 10-year contract and C.C. Sabathia’s $24.5 million a.a.v. contract. (Luxury-tax payrolls are based not on each year’s salaries but on average annual values of contracts.)
Matt Holliday’s recent $13 million free-agent contract is for only next season. Two other $13 million contract belonging to Brett Gardner and Chase Headley are up after the 2018 season.
The Yankees and their fans, however, are accustomed to competing, if not post-season participation. They need good players to get to the post-season, a destination they have failed to reach three of the past four seasons. To have teams good enough to play post-season games, the Yankees need to spend money.
To win in spite of a lack of money to spend, whatever the reason, a team needs an exceptional general manager, as Oakland had with Billy Beane and Minnesota had with Terry Ryan. The Yankees have no such general manager and will not have one as long as the managing general partner, Hal Steinbrenner, refuses to fire Brian Cashman.
In the last four years under Cashman, the Yankees have played in one post-season game, a shutout by Houston, in spite of a succession of payrolls exceeding $200 million. If Cashman can’t put together a playoff team with that kind of money to spend, how is he going to do it with below-threshold money at his disposal?
The Yankees are counting on their youth corps to pull them through their below-threshold period. This approach would be a departure from the George Steinbrenner era in which the Yankees lived on expensive free agents. That strategy, of course, led to life above the tax threshold, where the Yankees have resided for all 14 years of the luxury tax’s existence.
In becoming younger and cheaper, the Yankees are gambling on their future. Their fans got excited late last season when the team, led by a barrage of home runs and runs batted in by rookie catcher Gary Sanchez, staged what turned out to be a mirage of an assault on the division leaders.
There’s no question Sanchez was terrific (20 homers, 42 r.b.i. in 53 games), but he’ll be hard-pressed to produce at those rates now that the league has seen him for a third of a season. Nevertheless the Yankees look to him to lead their band of youngsters.
If the season were opening today, Sanchez would be the catcher, Greg Bird the first baseman, Aaron Judge the right fielder and Luis Severino a likely member of the starting rotation.
The following season, 2018, even more youngsters could penetrate the lineup. In an uncharacteristic development, the Yankees are impressing knowledgeable observers. “New York now has the best and deepest farm system in the game – and also the most improved over the last 12 months,” wrote Jim Callis of MLB.com.
I am skeptical about such proclamations because the Yankees for years have had a fallow farm system. But I am willing to wait to see if the Yankees can duplicate the success this year of the Chicago Cubs and their good young players – Kris Bryant, Anthony Rizzo, Kyle Schwarber, Javier Baez, Addison Russell, Jake Arrieta. My advice to Yankee fans – don’t hold your breath.
How long will Yankees fans tolerate Octobers without post-season games? The Yankees have spoiled them. The fans have become accustomed to the Yankees spending whatever it takes to be a contender. The Yankees’ front-office has become accustomed to it, too.
The quest to get below the tax threshold will face its biggest challenge after next season when players like Yu Darvish of Texas, Jake Arrieta of the Cubs and Johnny Cueto of San Francisco can be free agents if they haven’t signed contract extensions with their teams.
Would any of those players or any other free agents appeal to the Yankees enough that they would sign him to a lucrative contract and threaten to undermine the threshold quest?
And if it doesn’t happen after next season, could the Yankees resist the free agents who could be available after the 2018 season? These are some of the players who are potential 2018 free agents:
Bryce Harper, Clayton Kershaw (he can opt out of his contract after the ’18 season, as David Price can also do), Matt Harvey, Dallas Keuchel, Manny Machado, Josh Donaldson. It could be a free-agent festival, and how could the Yankees say no, thanks, especially when Scott Boras has his client, Harper, wrapped in a huge pinstripe bow?
There goes the tax threshold.
And if there’s any doubt that the Yankees could avert their eyes to the free agents available, they recently signed free-agent Aroldis Chapman to a 5-year, $86 million contract. That’s $17.2 million annually on the luxury tax scale.
Teams don’t pay tax on individual contracts. However, when the Yankees, say, hit the threshold, they pay a 50 percent tax on every contract they subsequently sign. In the 14 years the tax has been assessed, the Yankees have paid $325 million. The Los Angeles Dodgers have paid the next highest amount, $113 million, all in the last four years when their new owners discovered the fun of paying their players more than $200 million a year.
They are the only team besides the Yankees to have a $200 million payroll, but they have spent more productively than the Yankees. While the Yankees have played only one post-season game the last four years – and lost it – the Dodgers have won four consecutive National League West titles and reached the N.L. championship series this year.
The Yankees, meanwhile, hope to ride their Kiddie Corps into the playoffs next season. Their hopes remind me of a gimmick my 10th grade English teacher, Regis Wiegand, used to teach the subjunctive mode of speaking and writing: If wishes were horses, beggars would ride.