Cubs stay just under luxury tax limit for 2018

The Cubs spent all of 2018 carefully guarding their spending so they would stay under the $197 luxury tax limit for last season.

According to this Associated Press article, they succeeded. AP reports that Cubs expenditures subject to the luxury tax (which include things like benefits as well as salaries) totaled $193.3 million, just under the ceiling.

The Red Sox, at $239.5 million, and the Nationals, at $205 million, are the only teams that will pay luxury tax for 2018. Boston’s tax bill is $11,951,091 and Washington’s is $2,386,097. The Red Sox have further penalties:

Because Boston was more than $40 million over the tax threshold, it became the first team to incur a new penalty put in place for the 2018 season: the top Red Sox selection in next June’s amateur draft will be dropped 10 places. Boston’s top pick had been projected to be No. 33 overall before the penalty.

Those higher penalties are what the Cubs will apparently try to avoid in 2019. The three luxury tax levels for 2019 are $206 million, $226 million and $246 million. The Cubs will go over the first level easily, with arbitration raises being the primary mover behind that. Based on this analysis I did last month, they’re likely to be close to the second level, so the only question remaining is whether the Cubs want to spend up to close to the $246 million level.

Let’s be clear on this. Cubs revenues clearly allow them to spend well over that level, if they wanted to. If they wanted to sign Bryce Harper, they could financially do so. You can see above what the penalties are for going over the highest tax threshold, and the Cubs have apparently chosen to avoid doing that.

Given that only two teams went over the tax threshold at all in 2018, other teams have clearly chosen to do the same thing. The Dodgers came in at $195 million — and that wasn’t even third behind the Nats and Red Sox, it was fourth, behind the Giants at $195.7 million. The Yankees came in just behind the Cubs at $192.98 million:

... the first time the Yankees finished under the threshold after 15 consecutive years over that resulted in taxes totaling $341.1 million.

And why did they do that?

By dropping under the threshold, the Yankees and Dodgers reset their tax rates for 2019 and put themselves in better position to pursue a talented free-agent class that includes Bryce Harper and Manny Machado.

So far, Harper and Machado remain unsigned. The Cubs, too, reset their tax rates for 2019. But there doesn’t seem to be any real action to spend a lot of money by any of these teams. There were reports during the Winter Meetings that the Red Sox were looking to cut payroll, but team president of baseball operations Dave Dombrowski dismissed those reports.

So — could the Cubs spend? Sure they could. But they, along with other teams, have chosen not to, operating as the last CBA allows them to operate.

This doesn’t bode well for the next owners/players labor negotiations, unfortunately. Such is the state of baseball as we head into 2019.