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Why the Luxury Tax Really Doesn't Matter


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Good article that I learned quite a bit from about the luxury tax.  There's even a section on a Mike Trout extension. The Angels could literally add 35 million dollars in payroll for next season's salary and pay a penalty of only 1.75 million.  That's it.  Why was anyone afraid of this in the first place?

 

http://www.monkeywithahalo.com/2013-articles/november/the-angels-the-luxury-tax-and-mike-trout-s-contract-extension.html

Edited by ScottyA_MWAH
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It isn't about getting underneath it, it's about not being over it for consecutive years.  If you read the article, you'd know that.  The rule only severely punishes repeat offenders who go over the luxury tax line by a significant amount.  The Angels have 20 million to spend this offseason before reaching the limit and have another 30 million coming off the books next season. 

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The luxury tax is a compounding penalty. Every year a team goes over it the higher the tax gets. Moreno shouldn't be concerned with going over it for a year or so because the penalties are minimal. In the case of the Yankees they have been over it several years in a row, and getting under it will allow them to reset the tax.

 

The Angels have a lot of long term commitments and going over the tax this year would seem to imply that they will continue to go over it year to year. But that fear is likely unfounded. This is because the tax threshold goes up every year, and with teams getting huge new TV deals when the new CBA is ratified it is likely to include a huge increase in the luxury tax threshold.

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It isn't about getting underneath it, it's about not being over it for consecutive years.  If you read the article, you'd know that.  The rule only severely punishes repeat offenders who go over the luxury tax line by a significant amount.  The Angels have 20 million to spend this offseason before reaching the limit and have another 30 million coming off the books next season. 

 

 

i'm already aware of the penalties. i was trying to not be longwinded, while making the point that the richest team in baseball has had enough of the luxury tax and is actively operating to get under the threshhold.

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From what little I already knew about it, I've wondered the same thing. We shouldn't (imo) sweat going over it this year, especially with the holes we have.

Then again its not my money :P

I still think we're doing the same thing though. Pretending to be broke when we really plan to spend. At least that's what I'm hoping.

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nice article.  with vernon, burnett, blanton coming off after 2014 and the fact that the only way they are going to get cost controlled pitching is to trade for it makes it seem fairly reasonable to go over for this season only.  Kendrick and Aybar could easily be traded this year or next and if things don't turn around in 2014 then a guy like CJ Wilson could be moved as well.  Getting that pre arb year of Trout's salary in there to decrease the AAV is a good idea although his example contract is a bit shorter than I'd hope trout's extension would be. 

 

F it

 

i'm all in. 

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Maybe Arte has decided to stick to a $140M+ budget which is higher than any other AL West team. That's not considered a low budget in MLB. There's some well paid players on the current roster that need to step it up. I think Arte has done his share. 

 

 

  • New York Yankees $228,995,945
  • Los Angeles Dodgers $216,302,909
  • Philadelphia $159,578,214
  • Boston $158,967,286
  • Detroit $149,046,844
  • San Francisco $142,180,333
  • Los Angeles Angels $142,165,250
  • Texas $127,197,575
  • Chicago White Sox $124,065,277
  • Toronto $118,244,039
  • St. Louis $116,702,085
  • Washington $112,431,770
  • Cincinnati $110,565,728
  • Chicago Cubs $104,150,726
  • Baltimore $91,793,333
  • Milwaukee $91,003,366
  • Arizona $90,158,500
  • Atlanta $89,288,193
  • New York Mets $88,877,033
  • Seattle $84,295,952
  • Cleveland $82,517,300
  • Kansas City $80,491,725
  • Minnesota $75,562,500
  • Colorado $75,449,071
  • San Diego $71,689,900
  • Oakland $68,577,000
  • Pittsburgh $66,289,524
  • Tampa Bay $57,030,272
  • Miami $39,621,900
  • Houston $24,328,538
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hell, we need to at least crack the top 5. 

 

Sign Tanaka (6/72) (+12)

Extend Trout (10/200) (+20)

Trade for Sherzer (Trumbo, Bourjos and Richards) (about even)

Sign Nathan (2/20) (+10)

Sign Joe Smith (3/15) (+5)

Trade Ianetta for controlled pen arm (-5)

Trade Aybar for Joe Kelly and a pen arm.  (-8)

 

+34 mil for 2014

2mil in luxury tax.

 

AWWWWWWYEAAAAAAAHHHHH!!!!!!

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The luxury tax takes the average value of each contract and uses that as the club's official salary, not what they are actually paying that year.  The Angels might have a 140 million dollar payroll, but for luxury tax purposes they're looking in the mid to 160's.  

 

But then again, in order to get the young, cost controlled pitching they need, the Angels will be forced to part ways with at least one of Trumbo, Bourjos and Kendrick, which likely means that the Angels could be operating with anywhere from 2 to 16 million to more to spend on top of the 22 million they're under it.  

 

That doesn't mean the Angels need to go add 40 million in payroll for next season.  But with 30 million coming off the books next season, the Angels shouldn't have a problem spending 20-25 million.  Which means signing a couple of late inning relievers and making a serious run at Tanaka wouldn't hurt the ball club.

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From what little I already knew about it, I've wondered the same thing. We shouldn't (imo) sweat going over it this year, especially with the holes we have.

Then again its not my money :P

I still think we're doing the same thing though. Pretending to be broke when we really plan to spend. At least that's what I'm hoping.

 

 

 

Dipoto really doesn't tip his hand when it comes to free agency and trades.  The only player I can recall Dipoto saying he was making a priority, being up-front about everything and signing was C.J. Wilson.  And so far that looks like it may have been his best acquisition because Wilson's actually worth the money he's being paid and isn't showing any signs of slowing down.  

 

I think the Angels are acting like the luxury tax is their ceiling, but there's no doubt Arte has a flair for the dramatic and would love to stick it to the Dodgers by winning a championship, which could be a motivating factor in his decisions. 

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I think the Angels are acting like the luxury tax is their ceiling, but there's no doubt Arte has a flair for the dramatic and would love to stick it to the Dodgers by winning a championship, which could be a motivating factor in his decisions. 

 

 

That would be fine if he allowed his baseball people, rather than personal emotion, to decide how the money is spent. Bringing in a name alone isn't going to pack the park over the long term.

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hell, we need to at least crack the top 5. 

 

Sign Tanaka (6/72) (+12)

Extend Trout (10/200) (+20)

Trade for Sherzer (Trumbo, Bourjos and Richards) (about even)

Sign Nathan (2/20) (+10)

Sign Joe Smith (3/15) (+5)

Trade Ianetta for controlled pen arm (-5)

Trade Aybar for Joe Kelly and a pen arm.  (-8)

 

+34 mil for 2014

2mil in luxury tax.

 

AWWWWWWYEAAAAAAAHHHHH!!!!!!

 

Doc for GM!

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I hope we can get a lot more than joe kelly for aybar

that's right, I forgot we were all in. 

 

Aybar and a prospect for Shelby Miller

 

Scherzer

Weaver

Tanaka

Wilson

Miller

 

I would wear Jerry Dipoto's lettermans jacket and ride next to him in his convertible Mustang giving him handys upon request. 

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That rotation would be amazing, for about a year.  Then Scherzer will reach free agency, Weaver will have fallen off a cliff and CJ Wilson will be 35.  But if that mean the Angels winning the World Series it'd all be worth it. 

 

But I think Dipoto's goal is to bring in a couple mid/early-20's SP to go with Garrett Richards and then in a couple years start working guys like Sappington and potentially Roth into the rotation. 

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hell, we need to at least crack the top 5. 

 

Sign Tanaka (6/72) (+12)

Extend Trout (10/200) (+20)

Trade for Sherzer (Trumbo, Bourjos and Richards) (about even)

Sign Nathan (2/20) (+10)

Sign Joe Smith (3/15) (+5)

Trade Ianetta for controlled pen arm (-5)

Trade Aybar for Joe Kelly and a pen arm.  (-8)

 

+34 mil for 2014

2mil in luxury tax.

 

AWWWWWWYEAAAAAAAHHHHH!!!!!!

 

I know this thread is specifically regarding the luxury tax, but Tanaka sure sounds a look better without the expected outrageous posting fee.

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It is cheaper to pay the luxury tax on a 40 million payroll overage than a $50+ million dollar posting fee. You cannot justify Tanaka by selling it as keeping under the luxury tax. Either the guy is a $120 million dollar pitcher (posting fee plus salary) or you're pissing money away.

Edited by Eric Notti
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It is cheaper to pay the luxury tax on a 40 million payroll overage than a $50+ million dollar posting fee. You cannot justify Tanaka by selling it as keeping under the luxury tax. Either the guy is a $120 million dollar pitcher (posting fee plus salary) or you're pissing money away.

but if you are going to pay 110mil for Garza and go over the CBT or 130mil for Tanaka and not go over the tax, which would you rather do?  The overall investment may be cheaper but you have to consider the actual player you are getting.  An additional 15-20 mil spread over 6 years isn't much in baseball money, it gives you more payroll flex for the 2015 season if you don't go over the cap in 2014, and you potentially get a better player. 

 

I do agree that the player has to be worth the entire investment and not just what counts toward the cap, and that will be up to halo brass to determine. 

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