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Luxury Tax Newsbeat

Thursday, January 09, 2020

Explaining MLB’s luxury tax in relation to 2020 Phillies

The conversation around the Phillies last January was all Bryce Harper and Manny Machado.

The conversation this January is all about the luxury tax.

The Phillies are approximately $6 million below MLB’s $208 million competitive balance tax, colloquially referred to as the luxury tax.

What is the tax? What are the harms of going over? Here’s a quick explainer

 

 

QLE Posted: January 09, 2020 at 05:18 AM | 0 comment(s)
  Beats: luxury tax, phillies

Tuesday, November 12, 2019

Dodgers to shop for starting pitchers, right-handed power as offseason begins

Jumping ahead to points of interest:

How the Dodgers operate this offseason could again depend on their willingness to spend significant money and perhaps exceed the competitive tax threshold — a soft cap that has hardened not only in Los Angeles but in big markets across the majors in recent years. Only the Chicago Cubs, Boston Red Sox and Yankees will pay a tax for the 2019 season, and all three franchises are striving to avoid the penalty.

Despite playing in the second-largest market in the country, drawing the highest attendance in the majors the last seven seasons, and securing a television contract that pays the organization $8.35 billion over 25 years, the Dodgers have not surpassed the line since 2017.

A document prepared for potential investors before the 2017 playoffs reviewed by the Los Angeles Times outlined a plan to keep the Dodgers’ payroll below the threshold through at least 2021 after they paid a luxury tax in each of the first six seasons of the Guggenheim group’s ownership. The projections were not binding, but the Dodgers have remained under the line through two of the four projected seasons.

In January, team President Stan Kasten maintained there were important baseball reasons to stay under the threshold beyond avoiding the 20% tax, which include keeping draft picks and international bonus pool money. In February, chairman Mark Walter insisted there wasn’t a directive to remain below the threshold.

I have to wonder if this maneuvering will have an impact- especially as the Dodgers keep seeming to fall apart in October…..

 

QLE Posted: November 12, 2019 at 12:28 AM | 2 comment(s)
  Beats: dodgers, luxury tax

Saturday, November 09, 2019

Giants won’t have any tax concerns as they dive into free agency

SAN FRANCISCO—You almost needed an accounting degree to fully understand all the offseason moves the Giants made two years ago.

The trade for Evan Longoria included nearly $15 million coming back from the Rays. The Pirates covered $2.5 million of Andrew McCutchen’s salary. When Tony Watson walked into the Scottsdale Stadium clubhouse a few days into spring training, he did so on a complicated contract that was structured to keep the Giants under the competitive balance tax line.

The CBT was mentioned often by team officials for a couple of years and was constantly lingering in the background, a penalty that colored many of the organization’s moves. That’s still the case for several teams around baseball—most notably the Red Sox, who might trade superstar Mookie Betts because of payroll concerns—but as the Giants enter Farhan Zaidi’s first full offseason in charge, they at least know they don’t have payroll concerns.

After paying the tax for three consecutive seasons, the Giants dipped just under in 2018 and didn’t come close last year. While exact numbers are not available to the public, the Giants were estimated to have a tax number of about $177 million, according to Cot’s Contracts, putting them well below the $206 million threshold. They’ll open this offseason with even more breathing room.

Mind you, if both the players they made qualifying offers to accept them, that breathing room will go away rather quickly…..

 

QLE Posted: November 09, 2019 at 12:31 AM | 0 comment(s)
  Beats: free agency, giants, luxury tax

Thursday, October 03, 2019

Astros’ owner says Houston might ‘make a run at’ re-signing Gerrit Cole, but there’s a catch

The Houston Astros won’t know who they’re playing in the American League Divisional Series until after Wednesday night’s AL Wild Card Game between the Tampa Bay Rays and Oakland Athletics. Still, that didn’t stop Astros owner Jim Crane from looking into the future—as in, to the winter—on Monday by addressing right-handed starter Gerrit Cole’s impending free agency.

Crane even went so far as to concede the Astros might “make a run” at retaining Cole. Here’s more, courtesy of Chandler Rome of the Houston Chronicle:

“We’ll see where we end up after the year. We may make a run at it. We’re not sure yet,” Crane said. “We’re going to wait and see what else unfolds and who else is going to stay on the team.

Now, before Astros fans rush out to buy Cole shirseys, it’s worth noting that Crane’s proclamation came with a caveat: that he’d prefer to remain under the luxury tax threshold—or, to be straightforward, he’d prefer to avoid paying overage penalties.

Another entry to add to this pile- I hope you don’t mind work stoppages, because I have a bad feeling that’s what’s coming when the CBA is up next….

 

QLE Posted: October 03, 2019 at 12:06 AM | 36 comment(s)
  Beats: cheap owners, gerrit cole, luxury tax

Thursday, September 19, 2019

Reversal of Fortune: Rusney Castillo’s Megadeal With Red Sox Traps Him in Minors

Seven miles north of Fenway Park, Rusney Castillo slides into the driver’s seat of his rented black Maserati Ghibli. It’s 7 1/2 hours before first pitch, but Castillo has learned the rhythms of game days in the U.S. after the Red Sox signed him to a seven-year, $72.5 million deal in 2014. Playing for his hometown Ciego de Ávila Tigres of the Cuban league, the outfielder would show up an hour before the game. Now he tries to beat his teammates to the park.

Dressed head to toe in Nike gear and wearing a gold chain with his diamond-encrusted initials, he wheels from the garage of his apartment building onto Route 1 toward Boston. Then, 10 minutes later, he drives past the exit for Fenway Park.

If he made less money, perhaps Castillo would turn off there. But due to a rule that confuses even Castillo, the Red Sox are paying him so much that he can’t play for them. So he continues along I-93 and then I-95 on his 50-mile commute to Pawtucket, R.I., home of the Triple A Red Sox. The highest-paid player in the minor leagues has made this drive more than 200 times, over five years. He knows he will make it another 70 or so in 2020, the final year of his contract. But he keeps his three-bedroom apartment in Boston because he believes that he belongs there—and that someday he will play there.

In August, Castillo won his second straight PawSox MVP award. In the four seasons since his last demotion, he has batted .294 and slugged .429. Manager Billy McMillon regularly advocates for the 32-year-old Castillo when he speaks to the player development officials. But no matter how well he performs, he will remain at McCoy Stadium, ensnared by a tax loophole no one could have foreseen. Through an interpreter Castillo explains matter-of-factly, “Anybody can [hope to] be called up but me.”

The more and more I hear about the current CBA and its details, the more and more I suspect that things won’t go well the next time it comes up for renewal….

QLE Posted: September 19, 2019 at 12:37 AM | 0 comment(s)
  Beats: cba, luxury tax, red sox, rusney castillo

Sunday, September 15, 2019

Red Sox on track for $13M luxury tax despite mediocre record

NEW YORK (AP) — The Boston Red Sox are on track to pay a $13.05 million luxury tax for a season in which they are likely to miss the playoffs.

The World Series champions’ payroll for purposes of the tax increased from $239.7 million on opening day to $242.8 million on Aug. 31, according to calculations by the commissioner’s office obtained by The Associated Press. That is well over the $206 million threshold where the tax begins.

As of opening day, the Red Sox were projected for an $11.76 million tax.

Boston entered Saturday with a 77-70 record, 8½ games out for the second AL wild card with 15 games remaining. The Red Sox fired president of baseball operations Dave Dombrowski last weekend.

Sometimes, it’s nice to have a reminder that one can’t always buy one’s way to a pennant…..

 

QLE Posted: September 15, 2019 at 12:28 AM | 16 comment(s)
  Beats: luxury tax, red sox

 

 

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