December 12, 2012
Yankees' Focus on $189 Million Not Just About the Luxury Tax
Taking stock of the Yankees this offseason is a little like watching The Walking Dead. With the injuries to Alex Rodriguez and Derek Jeter, the left-side of the infield has decimated, and who knows how their future Hall of Fame closer, Mariano Rivera, will rebound from his injury last year? At a time when getting aggressive in free agency would be part and parcel for the Yankees, they are, instead, paring back. As strange as it sounds, “fiscal restraint”—whatever that is for the Yankees—has become a hot topic. In interview after interview, be it Hal Steinbrenner or Brian Cashman, talk of getting below “189” seems to find its way into the conversation.
For the uninitiated, “189” is a reference to MLB’s luxury tax ceiling of $189 million in player payroll that is set to hit in 2014. The Yankees have said that they are serious about getting under the figure by then, when the tax rate for the club would hit a whopping 50 percent for every dollar over that $189 million threshold. Last year, the Yankees had a luxury tax bill of $13,896,069, and they’ll certainly be paying again this year when the end-of-year payroll figures are released just before the holiday. As of 2011, the Bronx Bombers have paid $206,109,142 in luxury tax penalties, or 91 percent of the $227,119,157 total collected since 2003. It’s been painful to the Yankees’ wallet, so getting under that $189 million threshold is all about avoiding the luxury tax, right? In part, but there is something else to consider.
The current CBA features an additional mechanism to thwart lavish player payroll spending via penalties through the revenue-sharing system. In the new labor deal, the top 15 clubs by market size now have some of the revenue-sharing money that they pay into set aside and transferred to the likes of the Pirates and Royals. Depending on whether they break the luxury tax threshold (as well as how many consecutive times they break it), they’ll now get hit with an additional tax begin