Sunday, July 25, 2021
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Yankees owner Hal Steinbrenner says team will ‘absolutely consider’ going over luxury tax at trade deadline

Yankees owner Hal Steinbrenner held a press conference on Thursday, just 12 hours after a meltdown loss dropped fourth-place New York to 1-4 in its last five games. Steinbrenner declared manager Aaron Boone’s job to be safe. What’s more is that Steinbrenner spent his afternoon signaling that the Yankees, now 41-39 and 8 1/2 games back in the AL East, will not be sellers in the lead-up to the July 30 trade deadline.

Instead, Steinbrenner said that he will “absolutely consider” allowing general manager Brian Cashman to exceed the luxury-tax threshold if an addition is deemed necessary for the Yankees to make the playoffs. What, precisely, might that entail for the Yankees and their deadline plans? Let’s dig in.

First, a quick refresher. The Competitive Balance Tax is calculated differently than a team’s payroll; whereas the latter is formed based on the value of contracts in any given year, the former is based on the average annual value. (Player benefits are also included in the luxury tax calculations.) A player can theoretically count for more or less toward the CBT number than they do the actual payroll; this is especially true for players on front or backloaded deals.

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Teams who exceed the CBT threshold, which is set at $210 million for the 2021 season, have to pay a tax on the amount they go over. The penalties steepen the more frequently a team exceeds the limit, and teams who go more than $40 million over are subject to having their first-round draft pick dropped 10 spots. The CBT is, for all intents and purposes, an unofficial salary cap.

Now, back to the Yankees. The truth about Steinbrenner’s comment is that he isn’t being generous or putting wins above profits so much as he’s recognizing the reality of the situation. The Yankees’ CBT payroll is estimated by Cot’s Contracts to sit around $207 million. In more precise terms, the Yankees have less than $2.4 million separating them from the luxury-tax line.

The Yankees could upgrade their roster without exceeding the $210 threshold, but it would be difficult and it would require creativity. To wit, Cashman traded multiple prospects to the Rangers earlier this year for Rougned Odor with the condition that Texas foot the bill on Odor’s contract. That stipulation means Odor doesn’t count for a dime against the Yankees’ CBT calculations. 

Considering that other teams are generally willing to eat a player’s contract under only two conditions —  1) they’re getting a great prospect return, and/or 2) they deem the player they’re trading away to be undesirable and their contract a sunk cost. The Yankees are wise to broaden their sights and value players for their contributions on the field rather than on the ledger.

The real matter Steinbrenner must decide on is how far over the luxury-tax line he’ll allow the Yankees to soar. 

The Yankees have $22.4 million separating themselves from the next penalty line ($20-plus million over). If Cashman is allowed to use all of that wiggle room, then he’d be free to make a bold move. As an example, consider Colorado Rockies shortstop Trevor Story, whose market is yet to take shape. If the Yankees have the ability to add more than $20 million in CBT money, then absorbing Story’s $7 million (or so) would be no big deal. If Steinbrenner is allowing them less breathing room, then the math gets difficult.

Of course, there’s no guarantee the Yankees would have their sights set on Story, just as there’s no promise they’ll be in position to make big additions. The Yankees are nearing a stretch in their schedule that will go a long way toward informing their level of aggression. Beginning on July 15, the Yankees will play 11 of their 13 games against either the Boston Red Sox or Tampa Bay Rays, two of the teams they’re chasing in the East. 

Poetically, the trade deadline will pass the afternoon after that stretch ends.

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