Dec
18

Update: The 2012 luxury tax bill: $18.9M $19.3M

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Tuesday: According to Chad Jennings, MLB screwed up the luxury tax calculation and sent the Yankees a revised bill today. The bill increased by $393,648, so the Yankees now owe $19,311,642. The team’s end of season payroll was revised up to $223,302,212.

Saturday: Major League Baseball has slapped the Yankees with an $18,917,994 luxury tax bill for the 2012 season according to Maury Brown. They were the lone team to pay the tax this season — the Red Sox fell short of the threshold by less than $50k — and their end-of-season payroll for luxury tax purposes was $222,512,928. Payment is due sometime in January.

The Yankees have paid $13.9M, $18M, and $25.69M in luxury tax in the three previous seasons. Since the tax was implemented in 2003, New York has paid over $224M in penalties compared to $22M for the rest of baseball combined. The Yankees will be taxed 50% for every dollar spent over $178M in 2013, but the threshold jumps to $189M in 2014. As you know, the team is going to great lengths to trim payroll and avoid that penalty, which would also trigger some revenue sharing rebates.

Categories : Asides

71 Comments»

  1. TomH says:

    Cashman:

    We get aggressive when there’s a vacancy. We’re not aggressive when there’s not a vacancy. That’s the true story. Not the daily, ‘What The Boss would have done’ or ‘The Boss would have done that.’ Well, I was operating with The Boss under those previous circumstances, and I can tell you that that’s the way it was. I don’t feel that it’s all that different now either. I think we might be a little more methodical, but I think we’re aggressive when the timing is right and the circumstances are right.

    [http://yankees.lhblogs.com]

    So, then, that’s the God’s honest truth for all you out there in media land and internet land, with your what-the-Boss-would-have-done theories. End of story.

    • Rich in NJ says:

      Sorry, but just because Cashman says something doesn’t make it an incontrovertible fact.

    • Andy Pettitte's Fibula says:

      What do you think he’s gonna say, “yeah I would have likely been able to Resign Marin and Swisher or sign Greinke and/or Hamilton if the boss was still around but his 2 asshole sons have tied my hands behind my back with their bullshit budget”

      • Rich in NJ says:

        He did publicly dissent from the Soriano decision. Maybe he picks his spots carefully, or maybe he doesn’t feel as secure about his position in the organization?

        • Havok9120 says:

          Soriano was a single, specific signing where he felt the president had gone behind his back. 189 is a long-term plan and the policy the owners themselves have set. And we have no idea what the discussions looked like in private; his views are probably already well known.

          • Rich in NJ says:

            He also publicly dissented on resigning A-Rod after he opted out of the subsidized contract that they acquired from Texas, and in the past, subsequent to specific signings, he has stated that he opposed signing Womack, Jaret Wright, and that he preferred Beltran over Sheffield.

            You’re right that we lack information on private discussions, but that’s what makes his various decisions to publicly dissent so curious. IOW, his true views are always known to his superiors, so why ever bother to go public?

      • Ted Nelson says:

        Or “the rules have changed and I have no idea how George would have reacted.” Which is the real case.

        Cashman’s point is totally valid, though. This image of George signing every big FA is a total fallacy. He missed a ton of big FAs whether because he was outbid or because the Yankees weren’t even in on them. Ended up settling for the Jimmy Key’s and Rondell White’s of the world all the time. The vast majority of the late 90s dynasty vets were brought in via trade or signed when they were well past their primes and no longer premier FAs. There have been some stretches where the Yankees grabbed a bunch of big FAs, but it hasn’t been constant.

        • Rich in NJ says:

          The vast majority of the late 90s dynasty vets were brought in via trade or signed when they were well past their primes and no longer premier FAs.

          The eras and respective means of player acquisition aren’t really comparable because subsequent CBAs have fostered parity by reducing the Yankees’ financial advantage as more teams have the ability to increase their spending in order to keep more talented players longer rather than moving them as they become more expensive, which was how the Yankees were able to trade for players like Tino and Knoblach.

          If indeed the Yankees adopt an austerity plan for even a couple of seasons, their advantage will be further reduced, making in-house development more important if they are to continue to be able to compete at the highest levels.

          • Ted Nelson says:

            They were able to trade for Swisher and Granderson in partially salary related deals just a few years ago, so I’m not so sure about your narrative. O’Neill, Clemens, Cone, Brosius, Nelson, Raines, David Justice, Neagle… a lot of those guys came via trade. Yankees signed Strawberry after he was released and paid him about 1/30th what LA was based on B-R. In those times the Yankees also brought back former Yankees as depth moves as happened with Roberto Kelly, Raines 2nd time around, etc.

        • Andy Pettitte's Fibula says:

          “Or “the rules have changed and I have no idea how George would have reacted.” Which is the real case.”

          Unless you’ve personally had a conversation with Cashman on this topic, assuming that this is what he really thinks is nothing more than total speculation on your part.

          Like your fond of telling others, just because you say it doesn’t make it true.

          I was playing devils advocate when I gave my example. No one but Cashman knows what his real opinion on this topic is.

          It’s wouldn’t be unreasonable for Cashman to think if that George was still around, the Yankees very well might have ignored the luxury tax and kept on with their $200+ million payroll. I doubt he’d ever say that in public if that’s what he thought since it would likely signal the end of his career as Yankee GM

          • Ted Nelson says:

            I didn’t say anything about what he thinks. I said that “the real case”… as in that is the state of reality. Unless you believe that Cashman has conversations with Cashman’s ghost about the new CBA or that George left him instructions on all possible outcomes of different CBAs going forward.

    • There's the Door says:

      Please.
      So then I guess there was no vacancy in right field when Hamilton was out there.
      And there’s vacancy at catcher now.
      Exactly what is the definition of a “vacancy”? If you have an ambulatory human, you’re good to go?

  2. 42isNotMortal says:

    Sort of fitting to have a 18.9 mil tax bill when 189 has been haunting most Yankee fans since the austerity plan came to light.

  3. Need Pitching & Hitting says:

    The 50% rate starts in 2013, fwiw.

  4. RetroRob says:

    A couple things. Didn’t the tax rate increase to 42.5% this year under the CBA, up from 40% last year? I thought there was an interim step before it went to 50% and this was the year for that step. Not sure.

    Second, the $222,512,928 figure is the fully loaded number, correct, meaning it includes the benefits that are factored into the luxury tax calculations? That would mean the Yankees need to cut at least $33,512,929 by 2014 to get under $189M, and in realitya little bit more as they’ll need to leave some room for additions during the season. Last, the $6M marketing bonus from A-Rod for hitting #660 may not happen until 2014, that means the Yankees next off season will have to reduce their payroll by nearly $40M from end of 2012 #s.

    I’m not saying this is correct, but I believe these are the numbers. Yes?

    • Andy Pettitte's Fibula says:

      If Arod reaches the 660 during 2014, wouldn’t it result in only a $600K increase in payroll, not $6 million since its based on AAV and he has a 10 year contract?

      • Need Pitching & Hitting says:

        No. Unfortunately bonuses count in full in the year they are earned/paid.

        • DC says:

          I thought there was some rumblings last year that Arod’s marketing bonuses do not count toward the AAV? And that’s why MLB will no longer allow contracts set up like Arod and Pujols’.

          • Need Pitching & Hitting says:

            There were some confusing and conflicting reports on that earlier this year. I’ve seen reported since then that the milestone bonuses definitely do count though, so I assume they do.
            I believe there were two issues with the Pujols contact,iirc, that the league wanted to address: the milestone bonuses and the post-career personal services contract. I think the league wanted to address the personal services contract because they viewed it as luxury tax circumvention.
            I believe the issue with Pujols’ and ARod’s milestone bonuses was just that they amounted to pay for statistical achievement, which isn’t allowed in MLB, and teams were calling them “marketing bonuses” as a way around that restriction.

            • DC says:

              Thanks. I hadn’t seen anything since those initial discussions.

            • RetroRob says:

              I think confusion surrounds the AAV of the player’s (in this case, A-Rod’s) contract. When he trips the marketing bonus, the $6M will not be added to the overall value of his contract and change his AAV. It will stay at $27.5M. Yet the $6M will count toward the Yankees payroll in the year(s) they’re tripped, and thus they will count toward the luxury-tax calculation in that year. So if he doesn’t hit #660 in 2013, then the Yankees will have to go into 2014 with a payroll another $6M lower.

              That’s my take on it, although in all things in this area I wouldn’t bet my life on it. The stories out there are not always clear.

              • RetroRob says:

                One addition. I mentioned this previously, although I doubt there’s anyway to answer the question, but it’s something the Yankees should be considering.

                I wonder if there is anything that will prevent the Yankees from paying the marketing bonus in 2013, even if he falls a few HRs short. Can’t imagine the union wouldn’t care. Question is, would Bud Selig care? They’re still going to get their tax on the bonus, just paid one year earlier.

        • Andy Pettitte's Fibula says:

          So we really need to root for Arod to hit at least 13 homers this year or else the Yankees will lose another $6 million off the 2014 budget.

    • Need Pitching & Hitting says:

      Looks correct.

  5. Bobby two knives says:

    sad, sad, sad. I know, it’s an old story, ten seasons now, but it seems so timely…again. A tax penalty on the most successful among MLB because they chose the “luxury” of reinvesting in their product.

    • JobaWockeeZ says:

      That assumes mass spending is better than the alternative which isn’t a fact. There needs to be a balance of spending and cheaper ways to get wins.

      Like in 2009. Cash spent the money but got a cheap starting player in Swisher. Now they have to rely less on free agents which will be for the better.

      • TomH says:

        Now they have to rely less on free agents which will be for the better.

        This is in principle correct, but unless it’s severely qualified it becomes an empty banality, like “self reliance is a good thing” or “God helps those who help themselves.”

        For example, would it not require a serious consideration of how–during any period of extended austerity–the Yankees might fare in,say, draft choices? Or, put more generally, how they would fare in the context of all the elements of Seligean “leveling of the playing field”?

        It’s not as if the deemphasis on largesse to free agents would occur in some pre-1998 baseball world.

        It’s easy enough to point to the various failings of reliance on free agents, as long as we don’t forget these changed, Seligean circumstances in which the Yankees of the future will have to compete.

        • Ted Nelson says:

          Speaking of empty words… Were you actually saying anything there?

          You know Bud Selig is an agent of the owners and baseball has constantly been behind the other two big sports in the US in terms of leveling the playing field during Selig’s tenure, right?

          “It’s not as if the deemphasis on largesse to free agents would occur in some pre-1998 baseball world.”

          If you’re going to use the thesaurus to try to sound all fancy, at least form a half way decent sentence.

          Your point is probably less valid than your sentence, as well.

          • TomH says:

            You’re an untutored fool, unable to read a sentence. Worse, you have a tendency to resent anything that isn’t written down to your level. Nothing you said is worth a response.

            • Ted Nelson says:

              That you have a thesaurus doesn’t make you smart, bud. You constantly use words that you don’t seem to understand improperly.

      • Andy Pettitte's Fibula says:

        Having to rely less on FAs is fine and dandy but then you need to consistently develop good young cost controlled players and as we’ve seen, that’s easier to say than to do.

    • Ted Nelson says:

      The size of the market in which you play has more to do with your revenues in MLB than how well run you are. The NY market is 20x larger than some other MLB markets, and more affluent to boot.

      Save me the ignorant political rant.

  6. bkight13 says:

    I’ve said it other threads, but I really hate this $189M plan. It is not the right time to do it with ARod, Tex, Jeter, Mo and Pettitte still around. Plus the new YES money is outrageous and the LA teams are spending their TV money like we used to. I think they should ride it out and go for 1 more ring with the old guys before tearing it up. Don’t let Robbie walk because of this.

    I know it’s easy to spend an $100M or two of someone else’s money, but the Yankees have never really worried about profits over titles. The draft, international signings and compensation rules have all changed to the Yankees detriment and money is one of their only remaining advantages and they need to use it.

    • Ted Nelson says:

      “the Yankees have never really worried about profits over titles”

      I think that you are wrong there. Profits result from titles. If he lost money from winning titles, I doubt George would have cared as much for them.

      “money is one of their only remaining advantages and they need to use it.”

      Just use it, or use it wisely? Throwing money around isn’t necessarily the answer. Improving a 95 win team to a 97 win team is probably not a good reason to spend tens or hundreds of millions in additional luxury taxes going forward.

      • Andy Pettitte's Fibula says:

        “Improving a 95 win team to a 97 win team is probably not a good reason to spend tens or hundreds of millions in additional luxury taxes going forward.”

        Is is worth spending tens of millions in additional luxury taxes to keep a 95 win team that made it to the ALCS from becoming a 90-91 win team that misses the playoffs for a year or 2?

        I’m not trying to be a wise ass, I’ve just never seen an analysis of how much the Yankees will save by getting under $189 in 2014 and how much it would cost if they missed the playoffs for a year or 2.

        • Ted Nelson says:

          I don’t know the exact numbers even for the luxury tax. Certainly not of making or missing the playoffs. If they’re un-competitive, I think they might be better off breaking the cap… though there would be an argument they’d be better off sticking to it and then spending more later. (I prefer a team that contends every year to more pronounced highs and lows, but a lot of people claim they’d prefer a championship and 5 losing seasons to 6 playoff seasons without a ring.)

          They can also potentially make some changes without exceeding the cap. There’s a lot of off-season left. Last off-season the official sign date for Kuroda on B-R is Jan 26th. The Montero-Pineda deal is listed as Jan. 23rd. Ibanez and Chavez, Feb. 21. Pettitte is listed on March 16th. Stewart wasn’t acquired for Kontos until April 4. They had just signed Garcia a week ago and Nix a month ago. So at this time last year the Yankees’ rotation looked a bit like a mess. That’s not to say that they will do anything more, but they might. Whether it’s just ink AJP or Shoppach or Hairston to a one year deal, or make a huge trade none of us saw coming.

          • LK says:

            I think the majority of the concern involves the 2014 team and not next year. While it seems as though the 2013 team will be a downgrade from previous years (largely due to the apparent willingness of the team to punt on catcher offense, the loss of Swisher, and the fact that everyone on the team is a year older which is almost exclusively a bad thing given the ages of the various players), 2014 is the one where it’s hard to see how they replace all these players without spending money and with a middle-of-the-pack farm. I don’t think it’s impossible that the Yankees put a championship-caliber team out there in 2014, but from where I sit it’s hard to see how they’ll pull it off.

            • Ted Nelson says:

              2014 is still far away. I don’t think there’s much sense in worrying about what the team will look like then. People seem to assume that they’ll have to replace every single FA they have with another FA. They can also replace them via trade or promotion. It’s pretty tough to say what exactly their needs will look like a year from now (could be more or less need than we expect), let alone who will be available to fill them. Will Pineda never pitch again or be good as new for 2014? How will A-Rod recover? Will Romine, Murphy, or even Sanchez be a viable C option? Will they re-sign Cano? What kind of year do Ichiro and Jeter have? Is Gardner fully healthy? What do Nova and Phelps do this season? Re-sign Hughes? Granderson?

              As I said above, we don’t even know what the 2013 team will look like yet, let alone 2014. Deciding the 2014 team will be bad reeks of paranoia to me.

              A middle of the pack farm can get you plenty via trade or promotion. They have three healthy guys that a lot of people are calling top 50 prospects, all in the mid-to-upper levels. (Another injury prone guy of the same caliber who might not have great trade value but could contribute if he stays healthy.) They might not be enough to get a superstar, but they have value and one or more could be ready by 2014 or certainly 2015. If CoJo and Adams continue to hit in AAA, they’re also likely to have some value as IF prospects who have a decent chance of hitting in MLB.
              And in the next year the farm could easily move either towards the bottom or top of the rankings, with either a very bad or very good year.

              I don’t think 2013 is necessarily worse. You’ve considered the negatives, and omitted the positives. And again… there’s a lot of off-season left. (Did you read the comment you responded to?)

    • dan gen says:

      you have the understanding while the others…do not get it..arod,jeter,are getting older instead of winning now they are only worried about189,189,189,189,189,189,189,189,…………….

  7. pistol pete says:

    Cashman never tips his hand, his words mean nothing just watch his actions. Saying that things are mostly as they always were insults our intelligence when publicly the 189 budget number is repeated over and over again. In the long run it might work out but the stop gap approach with aging veterans on one year deals is tricky but the only way to stay somewhat competitive and get under the 189 at the same time. One thing that does scare me is in the past the Yanks never let their home grown superstars leave, ie Bernie Jeter Mo Posada. Only Pettitte left for 3 years to Houston. It does scare me that Cano will go to free agency with Boras.

    • Andy Pettitte's Fibula says:

      I don’t really count losing Pettitte since they only made a half hearted effort to keep him. I think they strongly suspected his elbow was gonna blow like it eventually did when he was with Houston.

      If I remember correctly, that idea was even leaked around the time.

    • Andy Pettitte's Fibula says:

      I agree with you about Cano too. If those maniacs in LA offer him an 8/$200 deal like Mike has speculated, I don’t know if the Yankees could or should match it.

      I think they need to make their best offer sometime between now and the trading deadline and if he won’t sign, they need to trade him for something more than just a draft pick.

  8. endlessjose says:

    Why is this news.It’ only $18 million dollars.THe Yankees must make that on selling hotdogs.It’s crazy the Yankees after signing that YES network deal are acting like this effects them.

  9. The Moral Majority is Neither says:

    I’m hoping that this $189M phase is akin to George’s suspension when Stick had a chance to build things without reactionary headline-grabbing moves that were too short-term.

  10. dan gen says:

    no need to fear…cashman is going to do something really good like sign mitre…the only thing worse then our chances for 2013 are our chances for 2014……

  11. The Real Eddard says:

    And Hal just got reason to cut the 2014 budget even further. If George were alive he wouldn’t give a damn what the luxury tax bill was as long as we were winning WS. It pains me to see teams like the Angels, the Jays and even the Royals be more active in the offseason than the Yankees. Cashman’s biggest signing or trade this offseason, other than re-signing our own, is Kevin Youkilis, who was kicked out of Boston for poor performance. The best we can do is picking up Boston’s trash? George must be rolling over in his grave.

  12. Robinson Tilapia says:

    In order to make up for this tax, the New York Yankees had no choice but to put Kevin Youkilis to sleep this afternoon.

  13. turd surfer says:

    Makes me wish Barry Bonds was still saying he would play.

  14. LitFig says:

    I don’t blame the Stein Bros. one bit for wanting to reset the tax rate. $224 million on taxes ALONE is a ton of money, I don’t give a damn who you are. And you have to ask yourself, who exactly is worth going over the threshold for? Even with Alex, Tex, CC and Jeter, you still have over $100 million dollars to spend in 2014. People on this site are acting as if they have $10 dollars to spend.

    I’m sorry, but if you can’t build an OF, Rotation spots 2-5, Bullpen, 2B, C and DH on $100+ million dollars, you should be shot.

    Just look at the 2012 team. You paid Soriano $13 mil to be a luxury item (second closer). He pitched well, don’t get me wrong, but who on earth pays $28 million dollars to get saves?

    You paid AJ Burnett $11.5 mil to pitch for someone else.

    Freddy Garcia was your #7 starter, making $4 mil.

    Pedro Feleciano cost you $4 mil per year. He was a luxury signing when he was brought on (second LOOGY).

    The days of paying millions of dollars to fill roster spots 21-25 are over. And I say good riddance. Smart trades, using the farm a wee bit more, and maybe spending a little less on the edges of the team will probably produce the same amount of wins (heresy I know).

  15. There's the Door says:

    Hal is letting a $19 million tail wag a $4 billion dog.
    That’s not an owner who really wants to win, that’s a bean counter.

  16. Grover says:

    I tend to look at this as a business owner and feel grateful that the owners are willing to pay any tax at all. I can assure you that most leaders would never exceed any kind of tax threshold for the shareholder’s benefit. The new CBA is an effective soft cap with punitive luxury tax implications that will eventually benefit owners greatly. As with most collective bargaining agreements across sports, the early years tend to be favorable to labor while the out years tend to favor ownership. This year’s free agent salaries were predictably excessive, while the patience and one year contract strategy exercised by the brain trust shows great wisdom within the new confines of the CBA.. The ability to compete this year while creating reasonable flexibility next is too logical for most fans to absorb.

  17. Bill says:

    2013 will be the last year of the tax the Yankees wil pay.

    With Hal in charge they will never go over that figure again .

    Hopefully they will make the playoffs this year because after this year there will probably be a drought before we make the playoffs again.

    • MannyGeee says:

      Ouch…. that piece of sky just hit me.

      Realistically, this team can be competitive under $189M any year… once we are over the A-Rod/Tex contracts. You take that $40M and spread it a little better and this team can win 90+ games a season. any team can.

      But nah, fuck it. Go doom & gloom. Better narrative

      • DC says:

        Funny how a lot of these cry during the season that we should be more like the Rays (or insert name of other successful team with a sub-189 payroll) and then when NY takes one tiny step in that direction, they start crying gloom and doom.

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