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Everybody is looking ahead to the colossal free-agent class after the 2018 season. Manny Machado Jerseys, Bryce Harper Jerseys and Clayton Kershaw Jerseys seem likely to receive a billion dollars in guarantees between them — more than the 20 largest guarantees combined in this past offseason. The class of 2018 is heavy on top and has a ton of depth. Preparing for it will take considerable planning. But baseball’s new collective bargaining agreement will have a big impact on that planning, one that teams could start feeling now because of its influence on this season’s trade deadline. We could see a big shift in which teams can afford to add expensive veterans to their payroll, and which teams might have to limit their shopping for help to players in their price range.
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In many ways, the new CBA maintained the industry’s status quo, but one area that changed is the competitive balance tax, often called the luxury tax. The tax is still around, but the penalties for going over have gotten stronger, with even higher taxes as payroll goes higher. Those taxes are applied to salary levels that have failed to keep pace with MLB salaries. During the past decade, player salaries have increased by around 5 percent per season, but the salary level where the tax starts has grown at half that rate.
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Andrew Benintendi? He’s in Boston. Dansby Swanson? He’s in the majors too. We’ve revised our top 50, and there’s a new budding star atop our list.
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SunTrust Park makes its regular-season debut on Friday. How much will it help Atlanta’s sluggers reach the fences more frequently?
Take the Yankees as an example. Ten years ago, their payroll was $220 million cheap jereys, and the competitive balance tax added another $26 million. If the Yankees wanted their dollars to go just as far in 2017, they would need to pay $341 million in salaries and another $117 million in tax payments, essentially doubling what the Yankees are expected to pay this season.
As a result, teams have tended to curb spending once they get close to paying tax — except the Dodgers in recent years. And more teams are reaching payrolls at that level. When you look at the value of this season’s $195 million threshold for the competitive balance tax in MLB’s 2008 dollars, we are talking about the equivalent of a $123 million payroll back then, which would have affected roughly a third of MLB’s teams in 2008.
The competitive balance tax isn’t just hampering the Red Sox and Yankees — all of the teams in the upper-middle class have payrolls approaching the tax level.
With next year’s tax level set at $197 million and with the penalties for going over in consecutive years going higher still, we could see teams like the Red Sox and Yankees try to stay under the cap in 2018 so that when the big free-agent class after the 2018 season hits, they can go over the competitive balance tax level while minimizing the extra payments they would have to make to cover their tax penalties wholesale jerseys. Staying under the cap in 2018 and then going moderately over cheap jerseys in 2019 is likely to save a team like the Yankees around $20 million over two years.
That’s the long game. But how will this situation affect this year’s pennant races and teams trying to add players — and the cost of employing them — by this year’s trade deadline?