Estimated 2018 Yankees’ luxury tax payroll: $193.7M
2018 luxury tax threshold: $197 million
We’re now into the stretch run of the 2018 season. The Yankees are, as expected, one of the best teams in baseball. They are currently 68-37 with a +139 run differential. Aaron Judge and Luis Severino remain awesome, Giancarlo Stanton has been a monster since May, and Gleyber Torres has been everything we could’ve hoped since arriving. The Baby Bombers are pretty rad.
One number has been hanging over the Yankees all year: $197M. That is the luxury tax threshold for the 2018 season. Ownership and the front office are 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 August 1st, the day after the trade deadline.
Compiling the luxury tax payroll point-by-point was getting tedious, so I threw it into a spreadsheet. The last time I updated the payroll situation, I had the Yankees at $188.1M projected luxury tax payroll for the season. It is now $193.7M following the trade deadline. A few things about the payroll.
1. The Yankees added salary at the trade deadline (duh). Boy, were the Yankees active at the trade deadline or what? They made six trades in the week leading up to July 31st and five had a direct impact on the 25-man (and thus 40-man) roster, which means they had luxury tax implications. Here’s a recap of the trade deadline activity:
- Dillon Tate, Josh Rogers, and Cody Carroll for Zach Britton. (RAB post)
- Brandon Drury and Billy McKinney for J.A. Happ. (RAB post)
- Chasen Shreve and Gio Gallegos for Luke Voit and $1M in international bonus money. (RAB post)
- Caleb Frare for $1.5M in international bonus money. (RAB post)
- Adam Warren for $1.25M in international bonus money. (RAB post)
- Tyler Austin and Luis Rijo for Lance Lynn. (RAB post)
(Frare was not on the 40-man roster. That trade had zero impact on the luxury tax payroll.)
Prior to all these moves, the projected luxury tax payroll sat at $184.1M. Now it’s up to $193.7M. So yes, the Yankees did take on salary at the deadline, though perhaps not as much as you’d think. Trading away Drury, Shreve, and especially Warren offset some of the salary gains, plus the Twins are paying half Lynn’s salary the rest of the season. The Lynn/Warren maneuver was roughly payroll neutral. The Yankees really only took on salary with Britton and Happ.
2. The Yankees still have money to spend. The summer trading season is not over just because the trade deadline has passed. Deals can still go down in August (and September) through trade waivers, which can sometimes be an impediment but are usually just a hoop that has to be jumped through. A quick primer on trade waivers:
- All 40-man roster players have to go through trade waivers to be traded after July 31st. Non-40-man roster players can be traded at any time.
- Players who go unclaimed on trade waivers can be traded to any team. Players who are claimed can only be traded to the claiming team. The two sides have 48 hours to work out a deal.
- Trade waivers are completely revocable. If a player is claimed, his team can pull him back and keep him.
Easy, right? The waiver priority order is reverse order of the standings by league, so AL players go through every AL team before the NL, and vice versa. Teams will often claim players simply to block them from going elsewhere. The Yankees are in second place behind the Red Sox at the moment, and if there’s a reliever on waivers the Yankees think Red Sox may want, they can claim him instead. They have the higher waiver priority and Boston would have no chance to acquire him.
The thing is, when you claim a player on trade waivers, you have to be prepared just in case the other team decisions to dump the player on you. Years ago the White Sox claimed Alex Rios on trade waivers and Blue Jays dumped Rios and the $61.6M remaining on his contract on them. The Yankees have a little less than $3.3M to spend under the $197M luxury tax threshold (luxury tax hits are pro-rated for players acquired in-season). So while they can still claim players on trade waivers, they have to be careful not to have a big contract dumped on them.
3. 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. The MLB season is 186 days long and 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. Jace Peterson, Shane Robinson, David Hale, and Ryan Bollinger were never on the 40-man and in the minors, so their minor league salary is irrelevant for luxury tax purposes. Guys like Thairo Estrada and Albert Abreu 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.
September call-ups are not too far away and they’ll add something like $1M to $1.5M to the luxury tax payroll. (Calling up 15 players with a $600,000 annual salary on September 1st equals $1.451M added to the luxury tax payroll.) There are also injury call-ups and whatnot. Those salaries are all pro-rated against the luxury tax threshold but they do add up.
4. The disabled list provides no relief. Jacoby Ellsbury’s salary doesn’t go away for luxury tax purposes just because he’s injured and hasn’t played. The Yankees are recouping some of his salary through insurance, though that doesn’t help the luxury tax situation. 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.
* * *
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 even more salary in trades in August. 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.