Estimated 2018 Yankees’ luxury tax payroll: $184.1M
2018 luxury tax threshold: $197 million
The 2018 season is now three weeks old. The Yankees have gotten off to an uneven start, to put it lightly, and they are currently 8-8 with a +3 run differential. On the bright side, Aaron Judge and Didi Gregorius remain pretty awesome. The Yankees have that going for them.
One number is going to hang over the Yankees all year: $197M. That is the luxury tax threshold for the 2018 season. Ownership and the front office is adamant the Yankees will get under the threshold this year — they’ve paid luxury tax every year since the system was put in place in 2003 — which would reset their luxury tax rate. Right now the Yankees are taxed at the maximum 50%.
As the season progresses, the Yankees’ payroll situation will evolve due to call-ups and midseason additions, possibly even contract extensions. Every change to the roster results in a change to the luxury tax payroll. Because getting under the $197M threshold this year is an important stated goal, we’re going to do our best to keep track of the payroll situation with this continually updated post. Here’s where the Yankees stand as of April 18th.
Compiling the luxury tax payroll point-by-point was getting tedious, so I decided to throw it into a spreadsheet. The last time I updated the payroll situation, I had the Yankees at $183.5M projected for the season. Now it’s $184.1M because of injury call-ups. A few other things about the payroll situation.
1. The call-ups are complicated. Pre-arbitration-eligible players on split contracts — the majority of the players on the roster, basically — get paid one salary at the Major League level and a different salary in the minors, and their luxury tax hits are pro-rated. Say, for example, a player spends 100 days in MLB and 86 days in the minors. His luxury tax hit is then 100 days of MLB salary plus 86 days of MiLB salary.
It’s important to note only minor leaguers on the 40-man roster count against the luxury tax payroll. Peterson and Robinson were never on the 40-man and in the minors, so their minor league salary is irrelevant for luxury tax purposes. Guys like Gleyber, Acevedo, Loaisiga are on the 40-man though, so their minor league salaries count against the luxury tax payroll. It’s not much, but every dollar counts.
2. Trades work in a similar way. Any player who comes over in a midseason trade — or even a waiver claim, for that matter — has their luxury tax hit pro-rated. If the Yankees were to trade for a player making $10M this season at the halfway point, they’d be charged with a $5M luxury tax hit. The math isn’t quite that neat in real life, but you get the idea. The Yankees figure to be active the trade deadline. They have money to spend and prospects to trade.
3. The disabled list provides no relief. Ellsbury’s salary doesn’t go away for luxury tax purposes just because he’s injured and hasn’t played. Players on the disabled list still count against the luxury tax payroll. It’s like they’re on the active roster. Ben Heller underwent Tommy John surgery and will miss the entire season — he didn’t throw a single pitch during the regular season — yet his full salary will count against the luxury tax payroll. Such is life.
4. There’s still lots of room under the threshold. Even with all the injuries and call-ups, and even with the potential bonuses looming, the Yankees are still way under the luxury tax threshold. That leaves them plenty of room for trades and plenty of room just to breath easy. They don’t have to sweat every call-up and every dollar spent, at least not right now. The Giants want to avoid luxury tax this year and they’re within $2M of the $197M threshold. They have no wiggle room. The Yankees have lots.
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Like it or not, the Yankees are going to get under the luxury tax threshold this season, and they are currently in good position to do so. They have room to cover injury call-ups and room to take on salary at the deadline. If you have any questions about the luxury tax payroll, or if you notice an error, shoot me an email at RABmailbag (at) gmail (dot) com.