The Cubs’ trade of Tommy La Stella to the Angels wiped about $1 million worth (based on the MLB Trade Rumors arbitration estimates) of dollar figures off of the Cubs’ projected salaries and luxury tax hits for 2019.
So with that, let’s have another look at the numbers:
Cubs payroll and luxury tax estimates for 2019
|Carl Edwards Jr.||$1,700,000||$1,700,000|
|Albert Almora Jr.||$620,000||$620,000|
|40-man minor leaguers (estimate)||$2,250,000|
|Player benefits & misc (estimate)||$14,500,000|
|LUXURY TAX THRESHOLD 1||$206,000,000|
|LUXURY TAX THRESHOLD 2||$226,000,000|
|LUXURY TAX THRESHOLD 3||$246,000,000|
As you can see, the 25 players on the table have an estimated total salary of $203 million, and the luxury tax hit is approximately $223 million after adding in the required amounts for minor-league salaries, benefits and other miscellaneous expenditures that count against the tax.
So the Cubs are going to be well over the first luxury tax level no matter what they do for 2019, and are pushing up very close to the second level. Given that Theo & Co. generally like holding out about $10 million for possible mid-season acquisitions, it seems likely they’ll go over that even if they don’t sign any free agents at all.
As I wrote last week, that does seem to be within the realm of possibility — that the Cubs go into 2019 with essentially the 25 players listed above. They will, of course, have to replace Brandon Morrow on the 25-man roster until he’s ready, which hopefully will be before the end of April. They’ll also have to have a sub for Addison Russell until he completes his 29-game suspension — unless they trade him before Opening Day, which I suppose is still a possibility. If that happens you can knock about $4 million off both the numbers listed in the table.
But let’s presume the Cubs are willing to go right up to that third level of $246 million but not over. The article I posted here over the weekend on the Cubs staying just under the luxury tax in 2018 details the penalties for going over that third level, which only the Red Sox did in 2018. Here are those penalties:
A club exceeding the Competitive Balance Tax threshold for the first time must pay a 20 percent tax on all overages. A club exceeding the threshold for a second consecutive season will see that figure rise to 30 percent, and three or more straight seasons of exceeding the threshold comes with a 50 percent luxury tax. If a club dips below the luxury tax threshold for a season, the penalty level is reset. So, a club that exceeds the threshold for two straight seasons but then drops below that level would be back at 20 percent the next time it exceeds the threshold.
Clubs that exceed the threshold by $20 million to $40 million are also subject to a 12 percent surtax. Meanwhile, those who exceed it by more than $40 million are taxed at a 42.5 percent rate the first time and a 45 percent rate if they exceed it by more than $40 million again the following year(s).
Beginning in 2018, clubs that are $40 million or more above the threshold shall have their highest selection in the next Rule 4 Draft moved back 10 places unless the pick falls in the top six. In that case, the team will have its second-highest selection moved back 10 places instead.
Since the Cubs are at about the $223 million level in luxury tax now, and presumably want to save about $10 million for mid-season acquisitions, that would leave about $12 million, more or less, for any acquisitions now. That could buy a decent reliever, I suppose, if Theo & Co. wanted to go that way. If the Cubs, say, went to $243 million in spending in 2019, the tax, based on what’s above, would be $7.4 million. The 12 percent surtax would be (if I’m calculating this correctly) approximately $4.44 million. So that would be a tax of $11.84 million on a $243 million tax number. The Cubs can certainly afford that, but as you can see, going over the third level of $246 million increases the penalties substantially.
You can argue whether or not this is a good thing for the game, and the way I see it, it probably isn’t. But since this is the deal between owners and players that’s in place, it seems clear the owners are going to try to use it to benefit them as much as possible.
And thus it’s still entirely possible the Cubs will do nothing the remainder of the offseason, and what you see now is what you’ll get March 28 in Arlington, Texas.