While the Yankees’ priorities include developing homegrown talent and winning ballgames, the front office also has its eyes set on one magic number: $197 million.
That figure happens to be MLB’s luxury tax threshold for the 2018 season, which was agreed upon in last December’s new collective bargaining agreement between the league and MLBPA. By November of next year, baseball will likely welcome a historic free-agent class, with superstars Bryce Harper, Manny Machado, and Matt Harvey on the market.
Yankees owner Hal Steinbrenner has expressed the team’s desire to pursue big-ticket items in the near future, but in order to be big spenders, it’ll require New York to hold onto money in the meantime. Fortunately, that plan has already been implemented.
According to a report by the Associated Press, the Yankees’ competitive balance tax is expected to be slated slightly under $9 million this season, over two-thirds less than their bill in 2016 ($27.4 million). Although the CBA has changed, New York hasn’t seen its payment sit this low since the tax was first enforced back in 2003.
Once the team is under the tax threshold, their tax rate would reset, and while the Yankees won’t fulfill this goal in 2017–due to CC Sabthia and Alex Rodriguez remaining on the payroll–the chances increase drastically in 2018 with those two veterans coming off the books.
Prior to the new CBA, the luxury tax threshold sat at $189 million, but it inceased by $6 million this year, and will reach as high as $206 million by 2019. The new agreement also created three levels of rates. If a team exceeds the threshold, they are hit with a tax rate of 20% on first-instance, 30% on second-instance, and as high as 50% on third-instance.
The Yankees current competitive balance tax can fluctuate if trades are conducted during the season. Entering April, the team had a payroll of $195 million–their lowest mark since 2007, per the AP.
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