by Cary Greene
November 6, 2022
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What is the 2022 Yankees Offseason Budget?
I’ve written that $38 to $43 million is how much is likely left in the pot after the Yankees GM Brian Cashman very hopefully signs Aaron Judge, who is obviously now a free-agent and will soon be fielding offers from numerous suitors - many of whom have a ton of payroll space. Once the AAV of Judge’s contract is added to the Yankees current Active Payroll of $150,985,714 - per Sportac which factors in the Yankees Active Payroll and adds Estimated Arbitration salaries and also factors in Pre-Arbitration salaries, the Yankees will be closing in on the 2023 Luxury Tax threshold wich has gone up $3-million and is to be set at $233-million.
If you’re on a game show and the question is: How much can a 2023 baseball team spend in payroll BEFORE being taxed an additional 20-percent on every dollar spent over this amount? The answer, my friends, is $233-million and thus we begin today’s article!
We still don’t know whether the Yankees owner Hal Steinbrenner intends to firmly not exceed the Luxury Tax Threshold. Will he view $233-million as a defacto and therefore, self-inflicted “salary-cap” that therefore limits Brian Cashman’s ability to improve the team, or will he be willing like he was this season, to exceed the First-Tier and the Second Tier of the Luxury Tax Threshold?
The CBA specifies four “tiers” which, for 2023 are as follows:
Tier One: $233m to $253m = +20% Tax
Tier Two: $253m to $273m = +32% Tax
Tier Three $273m to $293m = +62.5% Tax for first year and then +65% every season after that
Tier 4 $293m or more = 80% Tax
Now here’s the part that applies to the Yankees. Our own Andy Singer, the sultan of swat and master of all things pertaining to the Evil-Empire asked last week if since Cashman spent $264,934,200 last season, does that affect the my calculation that there’s going to $38m to $43m left in the pot IF Cashman can sign Judge?
My answer was, “Nope” and while it’s the correct answer, there is one more thing to consider because there is one catch pertaining to how much Hal Steinbrenner will be willing to spend THIS year.
Here’s why. Because the Yankees were a first-time Luxury-Tax offender last season and because they not only violated the then $230-million threshold, but they did so by between $20-million and $40-million, in what was year-one of the new agreement, the Yankees are subject to an additional 12% Tax if they so much as go over the Threshold of…you know the answer - $233-million.
The “Catch” Is…
However, the CBA also stipulates that “if” a club dips below the Threshold for a season, the penalty level is reset to the original 20 percent the next time it exceeds the threshold.
Therefore, “if” Stienbrenner wishes for a reset, then we can assume my calculation is correct, but what if he’s okay with once again funding a payroll that winds up over the Threshold and therefore subject to an additional 12-percent tax?
The 2023 Threshold-Table actually looks like the below for the Yankees. If Cashman exceeds the Threshold, 12-percent extra tax will be assessed.
Tier One: $233m to $253m = +32% Tax
Tier Two: $253m to $273m = +44% Tax
Tier Three $273m to $293m = +74.5% Tax for first year and then +77% every season after that
Tier 4 $293m or more = 92% Tax
Crunching the Numbers While the Yankees as a franchise are worth smidge over $7-billion and seemingly in position of significant financial might, it’s kind of surprising that they only made around $100-million in actual profit last year. That means Steinbrenner “only” pocketed 1.4-percent of the value of his franchise last season in income, which is of course taxed heavily by Federal, State and Local municipalities.
What I’m getting at here is that based on how much the Yankees are worth, they don’t actually produce that much profit. I’m guessing that Steinbrenner wouldn’t mind paying 32% in Luxury Taxes again this season and therefore, why wouldn’t he let Cashman spend up to $253-million? There’s really no sound reason why this would be a problem for Steinbrenner. It’s the same tax rate as he paid last year.
I doubt he’d let Cashman go above $253 million and into the Second-Tier though, because with the extra 12-percent surcharge tacked on for being a “repeat offender,” he’d be looking at a pretty stiff 44-percent tax but wow, what if was reluctant but okay with that? It would give Cashman up to $273-million to spend.
The Right Questions to Ask Are…
Yankees fans will soon learn what Steinbrenner’s decree is and the budget will be somewhat revealed by reading between the lines if necessary. Hopefully, the right reporter asks the right question like, “Hal, which Tier of the Luxury Tax are you okay with Brian Cashman placing the Active Payroll at for next-season –or– “Hal, will the Yankees payroll need to be under the Threshold this year, in order to reset the surcharge penalty?”
Those are really the two magic questions. Depending upon how Hal Steinbrenner answers him, we’ll know more about his true desire to win. Pointedly and you read it first here on SSTN from C-Dog, if Hal Steinbrenner chooses to come in UNDER the Threshold – OMG! It’s a total cop out. It would signal that he wants Aaron Judge back for marketing reasons but little else. It would mean that Steinbrenner plans to market the heck out of Judge but fail again to win the World Series. In fact, it would signal what I’ll characterize as the beginning of the end folks.
The Yankees True Needs
No doubt, the Yankees have many other fish to fry as well. Anthony Rizzo is likely to opt-out of his contract and Andrew Benintendi and Jameson Taillon are both now free agents. Additionally, Harrison Bader, Luis Severino and Frankie Montas are in the final year of their contracts as well.
Not to mention, Brian Cashman needs to upgrade the Starting Rotation and make it more left-handed in the process and he’ll probably need to stabilize the back end of the Yankees bullpen with a closer and at least one additional high-leverage reliever.
This offseason, if Brian Cashman doesn’t truly focus on building a long term plan with the Yankees starting rotation, the future will be sadly sacrificed. Also, as constructed, the Yankees Starting Rotation just isn’t quite good enough to win a World Series and the 2022 playoffs proved this to be true.
The Yankees need to gain ground here and Cashman really doesn’t have a ton of options this offseason. In fact, with reliable lefty Jordan Montgomery now traded away and the aforementioned Jameson Taillon now a free agent, two-thirds of the Yankees rotation is now gone. The Yankees pitching is no longer a team strength. The Yankees aren’t deep either, like they were last season.
In addition, the Yankees rotation isn’t balanced enough, Nestor Cortes is the team’s only left-handed starting pitcher. Cashman needs to do something about the rotation. He’s failed for a long time now at accomplishing this. He hasn’t done what’s necessary for the Yankees to win a championship.
The cost of adding Carlos Rodon, per MLB's Joel Rueter is going to be in the neighborhood of 3-years and $75m, with an AAV of $25m. Adding Tyler Anderson will run 2-years and a very reasonable $22-million, with an AAV of only $11m.
What the 2023 Plan Should Be
I’m lobbying that Cashman should add $36-million to put a rotation in place that is capable of winning a world series. What are the chances that Cashman is shrewd enough to do this? Equally important, is doing this feasible.
I wrote a piece that ran this past monday here on SSTN entitled, The Moves the Yankees Will Make and in this piece, I determined that after signing Judge - which we all hope can be accomplished, that Cashman will have between $38m and $43m left before the Yankees exceed the Luxury Tax threshold.
I also projected that signing Benintedi and Rizzo would also add $20m per player. There is a good chance that Hal Steinbrenner might actually approve the Active Payroll to land over Tier One ($233m this coming season) and potentially that means Cashman might be authorized to spend up to about $253-million.
If he were to spend any more than that, the Yankees would be taxed at 44-percent which I think is enough of a deterrent for Steinbrenner not wanting to go there.
With $253 to spend, Cashman would have between $53 to $58-million left over, AFTER he hopefully signs Judge. If Cashman spends $36m of that on Rodon and Anderson, to revamp and reinvigorate the rotation, he’d still have $17m to $22m left to spend.
It might be enough to bring back Rizzo, but signing Benintendi and bringing back Matt Carpenter are both likely off the table because it would increase the Yankees Active Payroll to to the point where it lands in the Second-Tier of the Threshold.
I think the Yankees SHOULD resign both Benintendi and Carpenter and I don’t think being in the Second Tier is a big deal if Stienbrenner wants a championship, but I doubt he’d do that. I doubt he’d agree to a 44-percent Luxury Tax.
We shall find out soon enough. Steinbrenner has yet to do his season ending state of the Yankees address to the media. Hopefully, we’ll get some kind of idea what Steinbrenner’s position is on the 2023 budget.
