Dec
22

An $18 million luxury tax bill

By

Major League Baseball sent out the luxury taxes bills on Tuesday, and the Yankees are on the hook for $18 million. It’s their lowest luxury tax payment since 2003, down from $25.7 last offseason. “Atta baby. And right now we’re in the $170s,” joked Brian Cashman, referring to the team payroll (in millions, of course). The Red Sox are the only other team over the limit, and their luxury tax payment comes in at $1.49M. Checks are due January 31st.

For luxury tax purposes, the Yankees had a $215.1M payroll in 2010, down $11.1M from 2009. The threshold climbed to $170M this past year, so the Yankees were taxed the maximum 40% (since they’re repeat offenders) on the $45.1M they spent in excess of the threshold.  Since the current incarnation of the luxury tax was instituted in 2003, the Yankees have paid out a total of $192.2M. Boston is the second biggest luxury tax culprit at $15.34M. The money goes into MLB’s central fund, which is used to cover player benefits, “injury growth,” and other vaguely described items.

Here’s what Brian Cashman had to say, courtesy of ESPN NY

“We’re doing a better job of managing our payroll and managing our decision-making as we enter the free-agent market,” Cashman said. “Our payroll doesn’t necessarily have to live at that level, but it’s nice to know that our owners are committed to allow us to get there if we need to.”

[snip]

“We weren’t going to exceed where we were this past year, but the bottom line is that now that the Lee thing has declared itself, it would be hard-pressed for us to get up to that level,” Cashman said.

[snip]

“You need a strong farm system that prevents you from being desperate in the free-agent market,” Cashman said. “You don’t want to be desperate in the free-agent market, because you’ll get slaughtered.”

Because of the Lee non-signing, the Yankees have a good amount of extra cash burning a hole in their pocket, but the problem is there are no decent players to spend it on. The top free agents still on the market don’t fit with the Yankees, and spending upwards of $20 million on complimentary pieces isn’t the wisest idea. Instead, Cashman has said the team will be patient and add a piece here and there, then take the payroll savings into the season. Then when some team is looking to unload a contract during the summer, the Yankees will be first in line.

Categories : News

76 Comments»

  1. Yyzz says:

    Is the Luxury Tax something you agree with?

    • king of fruitless hypotheticals says:

      Luxury tax, sure.
      Estate tax, no.
      Carpet tax, ABSOLUTELY.

      i mean…it would be stupid to have carpet peeling up everywhere.

      i think the issue i have with the luxury tax is that Yanks put so much in, but it seems like–and i say seems because i’ve never seen real numbers–that some teams don’t put as much into their teams as they take out.

      i’m not saying you can’t make a profit–i love that idea–i’m just saying if you make a profit, and your team sucks, and you charge extra when the Yankees come to town…

  2. Angelo says:

    Gotta try to keep the Yankees down some how, right? haha.

  3. Carlosologist says:

    Fun fact: The Red Sox have the highest payroll in baseball.

  4. MikeD says:

    The only reason the players’ union agreed to it the luxury tax (the competitive balance tax) is because 75% of the revenue goes to fund players’ benefits. Yet, if the Yankees didn’t trip over the luxury tax threshold, the benefits will still need to be funded, so even though it sounds as if the luxury tax is beneficial to the players, it still benefits MLB overall by making the Yankees fund a large chunk of player benefits, instead of having it come out from other pockets.

    The CBA is coming up for negotiation again after 2011. There is no other issue more important to the Yankee organization right now than the CBA. The threat of an increase in the luxury tax threshold, and the tax associated penalty, as well as an increase in revenue sharing, is far more important to the Yankees than any other issue. In fact, I believe it’s impacting their willingness to spend this off-season. They are not going to do anything extreme, even though I believe the Yankees could pretty much crush any team right now on the salary front, easily adding tens of millions, if not $100 million, in yearly salary. They’re not going to do it since that could lead to an attempt to try and redistribute more money from the Yankees’ pockets.

    This is going to be the 7th consecutive season the Yankees have held around $200 million. There will be no increase in the yearly payroll until the Yankees know what their facing post 2011. It’s so critical, I believe they’d be willing to miss the play-offs entirely in 2011, as opposed to substantially increasing the payroll.

    • Sleepykarl says:

      How do you explain offering Lee $23m-$25m a year?

      • MikeD says:

        How do I explain it? They could have offered him $27-$29 million per and closed the deal, and I don’t think they would have phased the team.

        I’m not saying the Yankees won’t go after free agents. They obviously will since they still have a $200 million payroll, give or take ten million. It just has to fit in their budget, and that budget is very much limited by the current luxury tax threshold and how much they’ll willing to go over it. They seem to be purposely allowing the threshold to creep closer to their payroll. The threshold hits $178 million in 2011.

        There is too much uncertainty out there until the new CBA is finished, so I believe the Yankees do not want to ramp substantially higher until they know what they’re facing. They also don’t want to draw even more attention to their payroll heading into the CBA.

    • Gonzo says:

      Never thought of it before. I think they can point to the $100mm+ contracts this offseason and say “not it” to the oter owners. They can definitely say that maintaining the status quo would continue to reign in the spending even if it is or isn’t true.

      I like your line of thinking. I can’t say one way or another if I agree, but I like the logic.

  5. Matt DiBari says:

    I kind of have a hard time reconciling the team that’s not just throwing the Cliff Lee money around with the team that’s going to pay a LOOGY four million dollar this year

    • king of fruitless hypotheticals says:

      that’s value…nothing in the luxury tax says you can’t pay Arod $170MM at age 47 and surround with veteran minimums does it? it would be stupid, but there’s no rule against it.

  6. Jess says:

    Reading boards like YES and nyyfans makes we wonder how many Yankee fans only root for the team because they have the highest payroll and always buy or trade for the shiniest toys. This is the first year it hasn’t happened and they are whining like a bunch of spoiled brats. It’s like they can’t deal with a team that doesn’t win the off-season and not projected to win 120 games. It’s actually sickening. It’s like they have no joy about the game.

    Now they want Cash to throw huge money at a 31 year old Soriano to setup or this off-season was the worst ever to them. It’s like Yankee fans can’t deal with not having loads of presents under their tree so they are grasping at anything. It’s sad really.

    • Midland TX says:

      It’s unfortunate, isn’t it? nyyfans is notorious for that sort of nonsense. I think it comes from too much Francessa, Lupica, Sherman, etc., mixed with OCD or other social disorders. Didn’t use to be that way at NoMaas but it’s been downhill there since the offseason after 2008.

      I also think it’s like this every winter with many fans until pitchers and catchers report. (Then the same fans start to draw ludicrous conclusions about players based on small spring-training samples.) I think this place does a good job contradicting the ignorant and foolish without descending into a middle-school food fight.

    • Mike says:

      They have been conditioned to think that way. They don’t remember the days when our star players came from our farm system. In their minds, big salary = big production.

      • OldYanksFan says:

        Really… we old farts who were around for 1965 really appreciate and are greatful for what has happened over the last 15 years. But if the Yanks need to re-tool a bit, I got no problem. My concern is having a well managed and run organization, that uses the magic checkbook, to back a guy that uses intelligence to run the show.

        I’m very glad we didn’t get Lee.
        I think Cashman is VERY good.
        There are 29 GMs in MLB, and Brian Cashman.
        He is separate, not because he is so much better then others, but because the Yankees have an agenda unique to professional sports.

        Name ANY other team in any other sport that literally had an expectation, and had a legitamate chance, of Winning it all 15 years in a row.

        Anyone that bashes Cashman should understand his position. No breaks. No rest. No time for rebuilding. Even ‘just’ the ALCS is failure. He job is so easy. He has unlimited money. Hell… If I had $200 to burn, the Yankees would never lose a game.

        Right?

        “You need a strong farm system that prevents you from being desperate in the free-agent market,” Cashman said. “You don’t want to be desperate in the free-agent market, because you’ll get slaughtered.”

        This is what makes me feel good above the future.

        • LarryM.,Fl. says:

          Amen; Cashman’s statement in which you highlighted makes me smile. This from a real old fart and fan since ’57 as best as I can remember.

          • Jorge says:

            The problem is that you don’t even have to be that old a fart to understand (sorry, guys.) Really, seeing what spending, year-in, year-out, with no long-term plan, in the 1980′s, should be enough for any fan.

            • jsbrendog (returns) says:

              problem is most if not all of these irrational fans (pure conjecture here) are products of the 94-2001 run of greatness and they don’t know what it is like to have to retool and be a real franchise. While I love the yankees and am a fan for life they are def not a real team in the sense of the other 29 because of their financial resources and willingness of ownership to spend to win year in and year out.

        • The Big City of Dreams says:

          “This is what makes me feel good above the future.”

          Why is that exactly? Even though George is no longer with us his philosophy of going with vets over kids is still used by the organization. Sure they’ll give a kid a chance but if he struggles they’ll pull the plug on him. You’ll see them do that with Montero if he struggles out of the gate.

          • Guest says:

            I don’t think this is exactly true. While the Yanks were not patient with Joba and handle that situation terribly, they were indeed patient with Phil. Melky and Gardner have received real, true shots. Robinson Cano got the chance to exceed everyone’s expectations because they kept the faith, even after his terrible 2008 when everyone not in the organization wanted him traded.

            Furthermore, they have invested heavily in the farm system. I think Cash’s point is not just that you need to give young talent a chance, but also that you need to develop and hold on to at least SOME young talent. If you have young talent around, like a Montero, a Robertson, or even a Nova or Nunez; then you don’t feel desperate to go sign a mediocre accessory piece for way too much money (cough, Kyle Farnsworth and Jaret Wright, cough).

            • The Big City of Dreams says:

              Not only Joba but Kennedy and Melancon as well. How much patience did they have for those players after they didn’t live up to expectations. There are examples here and there but for the most part I still think they have very little patience when it comes to prospects.

              • Jess says:

                It’s actually the fanbase and media that has no patience with prospects. Not the Yankees. Our fanbase believes that only atomic supermen can wear a Yankee uniform and don’t expect any growing pains from young players. Which sets them up to fail unless they are great from the start. And rarely are young players.

                Kennedy and Melancon are bad examples. They are middling talents the type of which pass through every organization. David Robertson was a player they have stuck with. If Cashman believes in a player, they’ll stick with him. It’s our crazy fanbase that won’t.

                • The Big City of Dreams says:

                  The might be middling but you could say that they might have been valuable pieces on the team right now. The Yankees are looking under every rock for starters because they have none ready to step in

                  • Jess says:

                    Valuable? In what way? We already cashed in on them. I think most Yankee fans would agree that Kennedy and his high 80s FB was more likely to succeed in the NL. Especially the NL West. Unless you can tell me he was obviously going to post an ERA+ of 111 in the AL East. I don’t think anyone would buy that. Melancon couldn’t throw strikes the few chances he got. The Yankees liked Robertson more, and most would agree. The Yankee have much better arms in the minors now.

                    The key is having patience with the right prospects.

                    • The Big City of Dreams says:

                      Kennedy’s ceiling might only be a middle to back end starter but that’s what the Yankees are looking for right now aren’t. They’re looking at Garcia’s medical records for God’s sake.

          • OldYanksFan says:

            It is obviously a balance is needed, and even with our homegrown Core 5, hi-end talent was brought in to put us over the top.

            We will never be TB or KC… a team that gets years and years of top picks. We will never field a team that has more then half the roster of home grown talent. But we do have a number of ‘kids’ on this team. The Joba, DRob, other BP visitors, Hughes, Cano, Gritner, Cervelli, Pena and Nunez. From 2002 to 2006, how many kids played on the team?

            As with Santana, Zach and others, Cashman has shown while he is willing to trade kids IF the deal is right (Granderson), that he still values our kids and will give them a chance.

            Again, it’s about balance.

            • The Big City of Dreams says:

              True we will never be like TB but I just don’t get the sense that they have the stomach to withstand developing the kids.

              “The Joba, DRob, other BP visitors, Hughes, Cano, Gritner, Cervelli, Pena and Nunez.”

              A disaster, solid, good, great, solid, not good, not good, and too early to tell but everyone is high on him.

    • king of fruitless hypotheticals says:

      …wait.

      who said this team isn’t projected to not win 120 games?

      /notme’d

  7. NYYROC says:

    I agree with what Cashman said about the farm and not being desperate. I only hope he listens to his own advice. He always seems to be desperate, no future SS or closer or SP. The players and their agents always seem to get the best of him because he has no alternatives.

    • OldYanksFan says:

      This is the cost of ALWAYS having to Win.
      Rock…. meet Hard Place.

      • jsbrendog (returns) says:

        fact city

        • RL says:

          Additionally, it’s reeeaaallly difficult to fill all your needs from within. Especially when you place in the draft order is below that of most other teams. Who’s left when your turn comes around? Do they fit your future projected needs? If not, choose the best available and work from there. It’s a tough situation.

          • king of fruitless hypotheticals says:

            no, you always take best availabe…its 3-4 years from impact, and so few make it. just take the best.

  8. The Big City of Dreams says:

    “You need a strong farm system that prevents you from being desperate in the free-agent market,” Cashman said. “You don’t want to be desperate in the free-agent market, because you’ll get slaughtered.”

    But they are desperate and everyone knows they are. What type of crap is he trying to pull.

    • The Real JobaWockeeZ says:

      Yeah what he’s supposed to say is that the farm is unimportant and spending money on free agents every year is the only way to go.

      • The Big City of Dreams says:

        “Yeah what he’s supposed to say is that the farm is unimportant and spending money on free agents every year is the only way to go.”

        They have made it the only way to go haven’t they. They missed the PS in 08 and spent money like drunk sailors that off season. I’m not a Yankee fan that believes we need to have an all-star at every position I like seeing the kids get a chance but I find it funny that they’re to paint the picture that they are not desperate. You could literally feel their desperation.

      • OldYanksFan says:

        Well… that’s what George said, or acted out, for many years.

  9. nathan says:

    IIRC around the time the new stadium was being built I read a bunch of articles (including some posts on RAB) which stated that the Yanks can show their debt on the stadium or some other accounting measure to completely stop paying the luxury tax.

    Anyone know anything more on this. I remember Mike stating this a couple of times alteast.

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