The new collective bargaining agreement increases the penalties for going over the luxury tax threshold so much more that the Yankees are determined to get their payroll down to $189 million by 2014 to avoid paying the new huge fees, according to Joel Sherman of the NY Post. Their payroll was $207 million for luxury tax purposes in 2011, meaning they would have to cut at least $18 million in salaries over the next two seasons.
Here is more from Sherman:
For if they are at $189 million or less for the three seasons from 2014-16, they not only avoid paying one cent in luxury tax, which would rise to 50 percent for them as repeat offenders, but they also would get roughly $40 million in savings via the to-be-implemented market disqualification revenue sharing program. However, only teams under the luxury-tax threshold get reimbursed in this program, which is designed to prevent big markets such as Toronto and Washington from receiving revenue sharing dollars, which in turn will lower how much teams such as the Yanks pay (as long as they are under the threshold).
And even if they just went under $189 million for 2014 before going over again in 2015, the Yankees would receive serious benefits. They would get about $10 million in the revenue sharing disqualification program. Also, by simply going under the threshold once, the Yankees would go back to having a 17.5 percent tax rather than the 50 percent that begins in 2014 for them if they never go under. Keep in mind that since the luxury tax went to 40 percent for them in 2005, the Yankees have averaged paying $25.75 million in tax annually.
If the Yankees did manage to avoid paying the luxury tax from 2014-16, that would mean they would save $25.75 million per season plus they could get in on the new “market disqualification revenue sharing program” that supposedly could net them another $40 million a year. Or essentially, the Yankees would be pocketing an extra $65 million a season by cutting payroll by just $18 million.
Now it won’t exactly be easy cutting payroll. They have three players under contract in 2014 – Alex Rodriguez, Mark Teixeira, and CC Sabathia – that make a combined $70.5 million. Then there is Derek Jeter who has an $8 million player option bringing them to $78.5 million. Then, as Sherman points out, Robinson Cano and Curtis Granderson will be hitting free agency that year and will likely cost at least another $20 million each. That’s potentially $118.5 million for six players, leaving them just $70.5 million remaining for 19 other players.
Oh, and those $5 million “milestone” bonuses that A-Rod can stack on, up to $30 million, will count toward the luxury tax. He should reach the first one in 2012, so the Yankees will get that out of the way, but he very well could get at least one milestone in 2014 that would cut into that $70.5 million they have left to spend. So really, that number should be considered $65.5 million left to spend on 19 players in 2014.
This almost guarantees that the Yankees will not be able to add anymore big $15-$20 million-per-season free agent contracts over the next two years if they are taking this seriously. And it is almost certainly the reason why Brian Cashman is reluctant to spend upwards of $20 million for C.J. Wilson, a pitcher he considers a No. 3. And if he is going to squeeze 19 players on the roster for just $65.5 million, then it is exactly the reason why he has been reluctant to deal any of the top prospects.