Yankees already over the luxury tax

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The Yankees have a ton of holes they need to fill on the roster, ranging from shortstop to relief pitching to finding a primary third basemen. However, if the Yankees are going to upgrade their roster, it’s going to cost money. Obviously money is not an issue for the Bronx Bombers as they have one of the highest payrolls in baseball. But big contracts already on their payroll might stop them from going on another spending spree this offseason.

For those who are new to the business aspect of baseball or don’t completely grasp the concept of what the luxury tax really is, FanGraphs offers a simple yet informational definition:

Technically called the “Competitive Balance Tax”, the Luxury Tax is the punishment that large market teams get for spending too much money. While MLB does not have a set salary cap, the luxury tax charges teams with high payrolls a considerable amount of money, giving teams ample reason to want to keep their payrolls below that level.

The luxury tax remained relatively unchanged in the new CBA. The threshold level for the luxury tax will be $178 million in both 2012 and 2013 (the same as it was in 2011), and will be raised to $189 million from 2014-2016.

Hal Steinbrenner insisted the Yankees weren’t going to go above $189 million last offseason but despite his insistence, the organization signed Masahiro Tanaka, Jacoby Ellsbury, Carlos Beltran and Brian McCann, sending them well past the $189 Million threshold.  There’s an excellent chance the team’s payroll will be over $189 Million to start next season, but by how much? In order to predict how much the Yankees could spend this offseason, we’re going to start by calculating what the payroll looks like with the players they already have.

We’re going to start by calculating the average annual salary of the guaranteed contracts towards next season. But how do you calculate the average annual salary? It’s quite simple actually and I’ll show you.

  • Alex Rodriguez‘s contract is 10-years and $275 Million. To calculate the average annual salary we’re going to divide the years of the contract to the monetary value. $275 Million divided by 10 is $27.5 Million, so $27.5 Million is Rodriguez’s value towards the luxury tax.

Now that we’ve done A-Rod, let’s calculate the rest of the guaranteed contracts.

  • Mark Teixeira‘s contract: 8-years and $180 Million. Average annual salary is $22.5 Million.
  • CC Sabathia‘s contract: 5-years and $122 Million. Average annual salary is $24.4 Million.
  • Masahiro Tanaka’s contract: 7-years and $155 Million. Average annual salary is $22.1 Million.
  • Jacoby Ellsbury’s contract: 7-years and $153 Million. Average annual salary is $21.9 Million.
  • Brian McCann’s contract: 5-years and $85 Million. Average annual salary is $17 Million
  • Carlos Beltran’s contract: 3-years and $45 Million. Average annual salary is $15 Million.
  • Martin Prado‘s contract (including years w/Diamondbacks): 4-years and $40 Million. Average annual salary is $10 Million.
  • Brett Gardner‘s contract: 4-years and $52 Million. His average annual salary is $13 Million.
  • Brendan Ryan‘s contract: 2-years and $5 Million. Average annual salary is $2.5 Million.

If you added the average annual salary together, the total would be $175.9 Million.  Now, let’s add in all the arbitration eligible candidates by using their arbitration projections. Keep in mind, the arbitration projections aren’t official, it’s just a rough estimate of what they player could receive.

The arbitration projections (should the Yankees offer all of them contracts) equals $12.9 Million. If we add that with the guaranteed contract average, the total would be $188.8 Million.

There’s one more thing we have to factor in that counts towards the luxury tax: the minor leagues. The Yankees have to add an additional $12 Million for minor league salaries, benefits, etc. With the minor league numbers included, our final total will be $200.8 Million.

Whatever the Yankees do this offseason, they’ll be over the luxury tax before they even pick up the phone to call a free agent. So with the Yankees already over the luxury tax, could they find someone to replace some of the glaring holes on the roster in the organization or will they spend money in the free agent market?

— If the Yankees are looking into shortstop, they have no one major-league ready to take over the position from Derek Jeter.

— If you’re looking at third base, that’s one place the Yankees are going to have to spend money since Rodriguez no longer can play an entire season at third. My pick to replace Rodriguez at third would be Chase Headley, but then again, I’m not Yankees management.

— The Yankees are going to need a closer but they don’t have to look very far if they re-sign David Robertson. If they can’t re-sign Robertson, there’s always pushing Dellin Betances to the 9th inning, but as I’ve said in numerous posts before I’m not comfortable with having Betances close games after having one good season. Robertson’s had multiple great seasons and learned everything he knew about closing from the great Mariano Rivera.

— They’re also going to need to fill a few rotation spots. Ivan Nova won’t be ready until May at the earliest and there’s no telling yet whether Hiroki Kuroda will return. The Yankees have many options to fill one of the rotation spots (for the other spot I’d suggest re-signing Brandon McCarthy). Yankees fans got a glimpse of Shane Greene and Chase Whitley last season and both did impress so there’s always an opportunity for them to compete for a rotation spot in Spring Training and David Phelps will be another possibility as well.

The Yankees are going to need to spend money at some capacity this offseason and they’re already well above the luxury tax. If we’re being honest, the Yankees might not be below the $189 Million threshold until the contracts of Mark Teixeira, Alex Rodriguez and CC Sabathia are officially off the books. I guess that’s the price the Yankees have to pay for winning it all in 2009.

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11 Responses to Yankees already over the luxury tax

  1. Balt Yank says:

    The Yankees have problems but make short-term problems worse by signing stop-gaps to long contracts. I.e., Beltran. Yankees should sign Drew for SS, since he can be had for 1 year, put Prado & AROD at 3B, and put a rookie at 2B. If AROD gets hurt, then they collect insurance on his contract and we don't have to watch him.

    • tom says:

      Unless Yankees sign Hanley Ramirez, I won't worry about it.

      Only long term projects are David Robertson and Chase Headley. Thats it.

  2. tom says:

    I think Prado's AAV would be 11m. 2 years 22m.

  3. Celerino says:

    Even if they are relatively modest in free agent spending, they are going to add 30-40 million, assuming they sign Headley and McCarthy for around $15 each a year, plus a few bargain bin spare parts. Sorry D-Rob fans. I like him too, but I don't see them spending $12 a year for him to be their second best reliever.

  4. hotdog says:

    forgot about Shane Greene…i'm rooting for him…would like to see a young gun get a shot…

  5. Ron Tamoschat says:

    Yankees need Headly , a shortstop (Asdrubal Cabrera ? ) a right handed power bat (Nelson Cruz ?) and a top of the rotation pitcher ( Lester or shields .Scherzer will be too expensive.) Also resign D Rob and McCarthy.. Those moves will be expensive but it will make the Yankees strongly competitive again. If the Steinbrenners really want to win , this is the path. Ron Tamoschat.

  6. Balt Yank says:

    The Yankees probably won't sign DROB but that evidences utterly stupidity. Give DROB what they have Beltran for hitting 89 RBIs in the national league. He's been the Yankees best young righthander not named Rivera from Day 1. He's better than Jeff Nelson and Ramiro Mendoza were and these two lasted only a few years. DROB has given us around six very good years. I liked Nelson though; he had zip and grit.

  7. Balt Yank says:

    In fact, how can you give McCarthy $15 and not first sign DROB. McCarthy's a big gamble with an inconsistent track records as a 4-5 starter who did great for us for 1/3 a season. Hmmm. DROB is a top 6-10 reliever in baseball period.

  8. the first thing yanks should've done was sign robertson,headley and mccarthy:ending the questions of 3rd base,closer and 1needed starter…latest rumor has the yanks offering scherzer a 6yr deal atm i'm not sure of the amount my guess will be for kuroda's replacement
    next yr scrap a-roid and sabathia and get price:placing the rotation in my mind as…scherzer,price,tanaka,pineda,mccarthy with plenty of options in the pen and in minors who can start j.i.c,not to mention our prospects in another yr or 2 and for our pen cut kelley,rogers and call lindgren and rumbelow.

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