Investigation of MLB’s luxurious tax boogeyman

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Investigation of MLB's luxury tax boogeyman

The tax brackets for 2021 are $ 210-230M, $ 230-250M, and $ 250M and beyond.

In their extrapolated 2020 payrolls, the Yankees, Astros, and Cubs passed the $ 208 million property tax threshold this year. It’s noteworthy that while MLB didn’t get these three teams to pay taxes in 2020, they still didn’t reset them for free. Because of this, the Yankees are currently sitting at around $ 200 million – they’re in the third column of the chart and want to get back to the first column for 2022. It’s all about the reset, not the actual tax amount if they slightly exceed $ 210 M in 2021.

The Cubs are also trying to avoid the third column of CBT payers, and they achieved that goal and then some by getting Yu Darvish, Jon Lester, Tyler Chatwood, Jose Quintana, and Kyle Schwarber off the books. For 2021, it’s only around $ 170 million, a full $ 40 million below the threshold. The Astros are sitting around 196 million US dollars, so they also have leeway. The machinations of these three teams, the Yankees in particular, assume the luxury tax system will remain similar in a new CBA, and there is actually a reason to roll back in 2021. If the union manages to drastically raise the thresholds, this should be an all three clubs could have easily reset in 2022 anyway.

The only club that didn’t receive the memo about treating $ 210 million as a soft cap is the Dodgers. The Dodgers canceled their reset in 2018 and have stayed below the property tax threshold since then. They were added to the first-time payers column in 2021, following the signings of Trevor Bauer, Justin Turner and Blake Treinen. With a projected CBT payroll of currently $ 254.4 million, a tax penalty of approximately $ 13 million is expected in 2021. If a third payer were to spend $ 254.4 million, their tax penalty would be over $ 26 million. In any event, if it exceeds $ 250 million, an additional tax will be levied: the club’s highest available selection will move back 10 spots in the next draft. So this year the Dodgers will likely find a way to get under $ 250 million.

It’s worth asking, if you’re not the Yankees, Astros, or Cubs, why are you so scared of the $ 210 million boogeyman? None of the other 27 teams need to be reset – they are already in the first-time CBT payer column. These include the Red Sox, who sit around $ 204 million and let the Blue Jays overtake them. The angels are around $ 191 million. The mets cost around $ 187 million. The Phillies cost around $ 196 million. The Nationals are around $ 194 million. That’s five teams this winter who appear to respect the $ 210 million property tax threshold. What would be so bad about spending $ 220 million, for example? = The tax penalty would be $ 2 million, exactly the price for one year from Hansel Robles.

So the Reset Club includes the Yankees, Astros and Cubs. And then five other teams – the Red Sox, Angels, Mets, Phillies and Nationals – belong to the Soft Cap Club. For the other 22 teams, the luxury tax simply has no meaning, which is only underlined if the thresholds rise significantly in the next CBA. It’s possible the eight luxury tax evaders have big plans for the free agent class 2021-22 – give it a try – and want to pay for the first time after making it big next winter. Otherwise, it’s hard to understand why a soft cap club makes up every low season.