The Cubs saved an additional $2.5 million in 2020 with no luxury tax

Back in October, I posted here about Major League Baseball claiming $3 billion less revenue in 2020. (The headline says “losses” — that refers to lost revenue, not actual “losses.”)

Those revenue losses were largely due to teams not having fans in the stands for the 60-game pandemic season.

The Associated Press reported Sunday that MLB payrolls also dropped significantly for that shortened season:

Major League Baseball payrolls plunged to $1.75 billion during the pandemic-shortened season from $4.22 billion, and the World Series champion Los Angeles Dodgers led with $98.6 million — the smallest for the top spender in 20 years.

This was, of course, due to the agreement between MLB and the MLB Players Association that players would get paid 37 percent of their salaries for 2020, the same proportion as the number of games played.

The numbers imply that owners saved about $2.47 billion in player salaries while suffering a loss of $3 billion in revenue. Thus their overall “losses” — and I am not an accountant so this is just doing simple math — would have been around $530 million, based on those figures.

The article goes on to detail payrolls for various teams for the 2020 season and notes that the Cubs paid out $80.6 million in salaries. That ranked fifth among all teams; the Cubs had ranked third in total player payroll in 2019.

The Cubs, AP says, would have been one of three teams to go over the first luxury-tax level ($208 million) for 2020 had there been a full season. Their payroll figure for luxury-tax purposes would have been $216.3 million, and since 2020 would thus have been their second consecutive season going into the tax, the tax bill would have been 30 percent of the overage (up to $228 million, the second level, which the Cubs didn’t cross). I’ll save you the math — AP calculates the Cubs’ payment would have been $2,480,775. That’s money Cubs Chairman Tom Ricketts once said on a 670 The Score interview was “dead-weight loss.”

Even though the luxury-tax payment was suspended for 2020, teams who would have paid it (Yankees, Cubs, Astros) will be treated for 2021 as if they’re going into a third consecutive year of payment, with penalties assessed accordingly:

Still, each of those teams will have the compensation rate of a luxury tax-paying club if it signs a free agent who turned down a qualifying offer from another team: Each would forfeit its second- and fifth-highest picks in the 2021 amateur draft and lose $1 million of international amateur signing bonus pool allotment.

I’m pretty sure you can see why the Cubs wouldn’t want to do that, especially with the farm system in the shape it currently stands. The team can’t afford to lose chances to bolster the system, and those penalties would hurt. Thus I’m pretty sure you can cross off any Cubs wish list for 2021 the four free agents who turned down qualifying offers this fall: Trevor Bauer, George Springer, J.T. Realmuto and DJ LeMahieu.

Lastly, I found this note in the AP article quite interesting:

If full salaries had been paid and a complete schedule played with the usual average of callups from the minors, payrolls likely would have increased by 4% from 2019.

Clearly, MLB teams aren’t going to want to see payrolls increase in 2021, not with the lost revenue of 2020 and potentially having to play games in empty ballparks again. And I think you can be pretty well assured that Cubs payroll will not come anywhere near $216.3 million in 2021.

As always, we await developments.