The Cubs, Red Sox and Yankees all owe luxury tax for 2019

Before you read the facts and figures about the Cubs’ payment of luxury tax for the 2019 season, please keep this in mind. The primary reason the Cubs are among just three teams paying this tax is that their 2019 payroll increased by $22 million over 2018.

So whatever else you wish to call Cubs ownership, you cannot call them “cheap.” It’s true that some of that money was not spent wisely, one of the reasons the Cubs are in the payroll bind they claim to be in at the present time. It is true that the Cubs could get out of that bind by crashing through the top level of luxury tax, but they have apparently chosen not to do so.

But they are not “cheap.”

Now, on to the luxury tax facts, via the Associated Press:

Boston will pay a Red Sox record $13.4 million luxury tax after failing to make the playoffs and the New York Yankees finished with a $6.7 million bill, likely a fraction of what they will pay next year.

Three teams owe tax, according to end-of-year figures sent to clubs Wednesday and obtained by The Associated Press. The Chicago Cubs must pay $7.6 million following a season that ended with a September fade and no postseason berth.

$7.6 million, for reference, is about what Steve Cishek made in 2019.

The AP article linked above says the Cubs’ total payroll, including salaries, prorated shares of signing bonuses and incentives, was $220 million. This spreadsheet at Cot’s says the 2019 payroll for luxury tax purposes was $239,987,998, which accounts for the $7.6 million in tax. That number is right in between the second tax level for 2019 ($226 million) and the third level ($246 million).

For teams that go over the tax level in consecutive seasons, the AP article gives this example (for the Yankees) of how the tax rates go up:

Next year’s tax starts at $208 million, and New York’s rate will rise from 20% to 30% on the first $20 million over, 32% to 42% on the next $20 million and 62.5% to 75% on any amount above $248 million. If the Yankees exceed $248 million, which now appears likely, their top selection in the June 2021 amateur draft would be dropped 10 places.

This is apparently what the Cubs are trying to avoid. Per this spreadsheet at Cot’s, the Yankees are over the $248 million third tax level at about $256 million after their signing of Gerrit Cole. It should be noted that number includes Jacoby Ellsbury’s contract, which the Yankees are trying to void. If they are successful, they’d wind up under that figure.

In case you’ve wondered where the luxury tax money goes, the AP article explains:

The first $13 million of tax money is used to fund player benefits and 50% of the remainder will be used to fund player Individual Retirement Accounts. The other 50% of the remainder will be given to teams not over the tax threshold.

It’s been speculated that the Cubs are trying to get under the first level of luxury tax for 2020, which is $208 million. I have seen no evidence of that at this time. The team’s luxury-tax figure for 2019 was at $240 million, as noted above, and I can’t see them dropping that figure by more than $30 million. Even trading Kris Bryant would not move the Cubs under that bottom figure. If I had to guess right now, I’d say the Cubs will enter the 2020 season in just about the same luxury-tax boat they were in for 2019, somewhere above the second level but below the third level.