cubs payroll is too low (aka ptr lives)

[treebird]

we’ve talked about this a little bit this offseason, but mlbtr did a nice breakdown of how minimal the panalties are for crossing the luxury tax threshold are here:

 

https://www.mlbtraderumors.com/2018/03/offseason-in-review-chicago-cubs-10.html

 

IN RELEVANT PART:

 

The Cubs may be willing to exceed next year’s $206MM CBT threshold, but aim to be considered a “first-time CBT payor.” Second-time payors pay 30% on the overage, while first-time payors pay 20%. Avoiding the CBT threshold in 2018 also affects what the Cubs would have to surrender next year upon signing a qualified free agent. They’d give up their second-highest draft pick regardless, but avoiding the threshold allows them to keep their fifth-highest pick and also have their international signing bonus pool reduced by $500K instead of $1MM. I have to ask of the Cubs, Yankees, and Dodgers: why does this difference in penalties matter so much?

 

Say the Cubs had gone all out and also signed Addison Reed and Mike Minor this winter, adding $17.7MM to the 2018 payroll. That would put the team’s 2018 payroll at $202MM for luxury tax purposes. Say they spend another $12MM on midseason acquisitions and end at $214MM for 2018. That means they’d pay a tax of…$3.4MM. Basically a rounding error for this franchise. Paying the tax for a potential 2018 overage is irrelevant at this spending level.

 

Therefore, this has to be all about being a first-time payor in 2019 rather than a second-time payor. If you’ll indulge me, let’s play that out for a team with a massive $275MM payroll in 2019. On a $275MM payroll, a first-time CBT payor is penalized $28.525MM, while a second-time payor is penalized $36.15MM. If a team is conceding being a first-time payor in 2019 (as the Cubs seem to be), being a second-time payor only results in less than $8MM in additional tax, even at a very high payroll level. Carrying that hypothetical payroll level forward for yet another season would result in a larger hit, but it would still be less than $14MM, and from that point forward the tax rate would be the same for an organization that stayed over the luxury line. Ah, but what about the draft pick penalty for exceeding the 2019 second surcharge threshold of $246MM? That’ll knock your 2020 draft pick back a full ten spots. Meaning, a good team has to pick at #37 instead of #27, something like that. Compared to the previous CBA, where draft picks as high as 11th overall were surrendered for signing certain free agents, dropping ten spots doesn’t seem that bad.

 

Large market teams are treating the CBT thresholds as lines they absolutely cannot cross. Or at least that they cannot cross for consecutive years. Rather than take that at face value, we need to ask whether the CBT thresholds are being used as a convenient excuse to spend less. The tax can be hefty, no doubt, and it is understandable that organizations already facing max penalties — particularly those that often spend well over the threshold — would look for an opportunity to reset. But the timing of entering CBT payor status does not appear to be a particularly compelling limitation on spending in and of itself.

[davell]

I think its a matter of since they could absolutely field a WS contender without going over, it made sense to stay under until next year and start that clock then. Especially since adding those types of players weren't moving the needle much anyway, due to us already being excellent.

 

Not to mention,if you were just skimming past the threshold, its not great strategy anyway. No reason to incur those penalties, if you're not blowing past it. Makes sense to push them back an extra season.

[Cubswin11]

I think its a matter of since they could absolutely field a WS contender without going over, it made sense to stay under until next year and start that clock then. Especially since adding those types of players weren't moving the needle much anyway, due to us already being excellent.

 

Not to mention,if you were just skimming past the threshold, its not great strategy anyway. No reason to incur those penalties, if you're not blowing past it. Makes sense to push them back an extra season.

Yeah, there was nothing worth going over for us this offseason and we still added pretty much the best outcome of players we could anyways and next year we almost certainly are going over even without a Harper addition.

[David]

You can definitely criticize the Yankees and Dodgers for not going over for Darvish though.

[Cubswin11]

You can definitely criticize the Yankees and Dodgers for not going over for Darvish though.

Oh, most definitely

[Transmogrified Tiger]

Tough to make that argument when they dropped 33 million AAV to fill out the rotation and 19 million on 3 relievers plus another 5 million for a rehabbing Smyly. Could they have gone higher and gotten a different reliever? Probably, although those appreciably higher than Cishek might have wanted the closer role. Diminishing returns are a very real thing and it's really hard for me to say that dollars kept the Cubs from being any better than they are(which is one of the 2-3 best teams in MLB on paper).

[champaignchris]

Odd observation. Every team could spend more in theory. It’s not like there’s a salary cap. But weren’t the Cubs by far the biggest spenders in free agency this year?

[Cubswin11]

Odd observation. Every team could spend more in theory. It’s not like there’s a salary cap. But weren’t the Cubs by far the biggest spenders in free agency this year?

On FA’s yes. Added around $200 million is total salary obligations. Think Yankees technically “spent” the most by taking on Stanton I believe.

[champaignchris]

Cubs handed out guaranteed contracts totaling $216.45M.

 

The Phillies paid out the second most at $169.25M.

 

The Pirates get all that competitive balance money and didn’t spend a dime in free agency.

[UMFan83]

Cubs handed out guaranteed contracts totaling $216.45M.

 

The Phillies paid out the second most at $169.25M.

 

The Pirates get all that competitive balance money and didn’t spend a dime in free agency.

 

Not only spent nothing in FA, but slashed their payroll by $30 million year over year

[ddwyer]

How much competitive balance money do teams like the Pirates / Brewers receive?

[mul21]

How much competitive balance money do teams like the Pirates / Brewers receive?

 

Something like $46 million (or at least it used to be).

[Donzo]

we’ve talked about this a little bit this offseason, but mlbtr did a nice breakdown of how minimal the panalties are for crossing the luxury tax threshold are here:

 

https://www.mlbtraderumors.com/2018/03/offseason-in-review-chicago-cubs-10.html

 

The awfulness is obscene with that entire mess... One of the most myopic spins I've seen in a while.

 

It's not about going over the cap for one year, It's about what happens when a team is over the cap three and four years in a row- why did the Dodgers and Yankees decide they needed to be under the cap this year?

 

Once the Cubs go over the cap, they're gonna be over the cap for a number of years. The longer they can hold that off the better. Even if they go over in 2019, the Cubs would pay a steep price in 2021 for a team over the cap for a third consecutive year. Somehow, if they can wait until 2020 to go over the cap, then the penalties won't be too bad in 2020 and 2021.

 

Then, the CBA expires after 2021, and things will be much different after that... So, really, it's about getting through 2021 without getting hurt too bad. Going over the cap this year would have put the Cubs in a tough spot in 2020 and 2021, like the Yankees and Dodgers this year.