For all the short-term joy the New York Yankees derived from Wednesday night’s signing of closer Aroldis Chapman to a record five-year, $86 million deal – joy that certainly is not shared by all, considering Chapman’s history of alleged domestic violence – the long play always has been about 2018 and whether they can sneak under the luxury-tax threshold and reset their tax rate.
The answer, even after giving the 105-mph-throwing left-hander $24 million more than the previous record for a relief pitcher set by Mark Melancon earlier this week, is yes. And if the Yankees can end 2018 with a payroll under $198 million, it will set them up for a free-agent bonanza in the expected-to-be-historic offseason after 2018.
Chapman’s deal almost certainly takes the Yankees over the $195 million threshold this season. With the final year of Alex Rodriguez’s and CC Sabathia’s deals counting at more than $50 million – for the purposes of luxury-tax payments, the average annual value of a player’s contract is considered – Masahiro Tanaka and Jacoby Ellsbury also at more than $20 million each, Chapman’s $17.2 million and $13 million apiece for Matt Holliday, Brett Gardner and Chase Headley, the Yankees are over $150 million. Add in nearly $15 million for Starlin Castro and Tyler Clippard, the money owed Brian McCann, plus hefty arbitration raises for Michael Pineda, Dellin Betances and Didi Gregorius, and the number is almost certain to exceed the threshold.
In 2018, on the other hand, the Yankees have a stellar opportunity to dip underneath $198 million and a chance to save tens of millions of dollars in future years. Not only are Rodriguez’s and Sabathia’s contracts off the books, Tanaka could opt out of his deal, Holliday will hit free agency, and Gardner or Headley – or both – could be traded. The only substantive long-term deals on the books would be Ellsbury’s and Chapman’s.
By then, ideally, the Yankees will have promoted a number of their top prospects. Gary Sanchez is a lock at catcher. They expect Greg Bird to lock down their first-base job. Top prospect Gleyber Torres could play second with Gregorius at shortstop and either Headley or prospect Miguel Andujar at third. An outfield of Ellsbury, prospect Clint Frazier and Aaron Judge is possible – or Judge could slide to DH and a one-year fill-in could patrol a corner spot.
Whatever the case, the savings could be massive. One year underneath the threshold would allow the Yankees not to pay a 50 percent tax on every dollar over, as they’ve done for years as a multiple-time offender. Going under in 2018 would allow them to splurge in an offseason that could include free agents Bryce Harper, Manny Machado, Josh Donaldson, Clayton Kershaw, David Price, Andrew McCutchen, Matt Harvey, Dallas Keuchel, Andrew Miller, Craig Kimbrel, Zach Britton and a dozen other potential high-impact players.
The tax for a first-time payer, as the Yankees would be if they played financially prudent in 2018, would be only 20 percent. A two-time offender is hit at 30 percent. The Yankees would get a reprieve from the 50 percent tax until at earliest 2021 were their austerity plan to work.
Because it’s the Yankees, of course, all of this could be moot. The revenue-sharing portion of the new collective-bargain agreement was a gift, withdrawing an additional tax they paid in revenue-sharing money and saving them at least $10 million a year in the process. Even with the windfall, their desire to reset the tax is well-known throughout baseball, and the ascendance of their loaded farm system may well allow them to do so, a $17 million-a-year pitcher who throws one inning at a time notwithstanding.
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