The Cubs went over levels one and two of MLB’s Competitive Balance Tax (commonly called the “luxury tax”) for the 2019 season. The other two teams — and this should not surprise you — were the Red Sox and Yankees.
MLB Trade Rumors posted an article Monday confirming that these three were the only teams that went over the $206 million first level of tax. The luxury tax calculations include, beyond basic payroll figures, payments for minor leaguers and player benefits, among other things.
Here’s what MLBTR said about the Cubs, based on figures at Cot’s Contracts:
The Cubs also ran up a tab that came in just shy of the $240MM mark by Cot’s reckoning. They are not a repeat luxury level team and therefore pay the base rate of 20% for the first $20MM and 32% for the next $20MM in salary over the threshold. That would result in a liability of a little under $8.5MM.
This is why the Cubs tried so hard to get under the tax level in 2018, an effort at which they succeeded. They’d have owed considerably more if they had not done so.
Obviously, for a business that makes as much money as the Cubs do, $8.5 million isn’t a huge amount of dollars. But the Cubs seem determined to stay under the tax levels and might do so again in 2020. The levels for 2020 are $208 million, $228 million and $248 million. Going over the third luxury tax threshold involves larger financial penalties and having a draft pick moved down 10 places.
This is why you hear Cubs chairman Tom Ricketts say things like this:
“It’s not about how much you spend,” Ricketts said on The Score’s Mully & Haugh Show. “It’s about how much you win. And the correlation between spending and winning is not nearly as strong as we’d like it to be, in a sense. Obviously, the top couple teams in the league (this year in terms of payroll didn’t) make the playoffs.
“We spent more than every team that made the playoffs, and probably a couple of them combined. But even if you really thought that spending was the answer, the free-agent market is always fraught. I don’t think anyone is any better than anyone else in the free-agent market. It’s always a high-risk thing.”
Reading between the lines, I would not be at all surprised if the Cubs’ 2020 payroll is lower than the 2019 figure. And that means no big free-agent spending, as well as potential trades of players like Kris Bryant, who is likely due for a fairly large increase in salary through arbitration.
These are the baseball times in which we live. And it doesn’t seem as if they will be changing anytime soon.