The (Luxury) Tax Man

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We begin with a quick visit to Theo Epstein’s comments from earlier this week, as the Winter Meetings began…

With the Chicago Cubs having left the Winter Meetings with a couple of prior signings in the form of Brandon Morrow, Drew Smyly, and the still-biggest-free agent contract so far of Tyler Chatwood, it seems they are content with just leaving Orlando with Steve Cishek and piecing together an under-the-radar solid bullpen.  Many of the big fish have not signed yet, including free agents Jake Arrieta and Wade Davis, who might return to the Cubs on the right deal, but are more than likely leaving for parts as yet unknown.

Which brings us back to those plans Theo was talking about, and the financial flexibility he needs to execute them.  I am of the mind, as are probably most of you, that he is talking about a certain elite outfielder named Bryce Harper, who has been linked at least tangentially to his buddy Kris Bryant.  There is talk about Harper and his agent, Scott Boras, opening extension talks with his current team, but he would probably want to test free agency assuming that he remains healthy and productive.  Even if Harper becomes sadly unavailable after the 2018 season, there are plenty of very intriguing free agents that could be added with the “cap” space the Cubs have available.  Just perusing the list, I could be happy with any of the following at the right price:

So you can see why the Cubs would want to be careful this offseason, in order to save some money for the next class of free agents.  Although looking at the tax tracker, the Cubs just need to stay under $197MM in total commitments for 2018 to avoid triggering the luxury tax.  Without Hector Rondon‘s arbitration contract after his non-tender, and Leonys Martin having left the team, the Cubs have about $24MM in projected arbitration commitments coming up.  Along with Cishek’s contract, if the reports are accurate, the 2018 payroll looks to be around $160MM if there are no more signings to be made.

That, of course, is not likely, since it seems at least a backup catcher and another starting pitcher is needed.  But with around $37MM to play with, the Cubs could potentially go after someone like Yu Darvish, or even decide to finally seal the deal with Alex Cobb if both parties are still interested.  Even with hefty signings, there would be room to spare to stay under the tax threshold, and possibly leave room to wiggle with to fit a Harper-sized megadeal into the payroll.  Since the Cubs did not cross the luxury tax in 2017, their penalties reset and they will also most likely be fine in 2018, so if they splurged to trigger the tax in 2019, it will only be the first time penalty of 20% again, plus some potential draft pick forfeiture(s).  With rolling expiring contracts and any number of unknowns, this could be very quickly dealt with, so I do not see the Cubs being precluded from going after who they want.  It’s also important to note that the luxury tax threshold rises in each subsequent season, so that also creates some buffer.

The Cubs are still in a very enviable position.  They could spend a bunch still, and it would be nice if they could bring in extra help via free agency.  But they don’t need to feel desperate with their core in place and the strong chance of a bounceback from their many incumbent contributors.  They can afford to wait it out, but if they did decide to spend, it won’t cripple their future moves.


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About Rice Cube

Rice Cube is the executive vice president of snark at World Series Dreaming. He loves all things Cubs, with notable exceptions (specifically, the part of Cubs fandom that pisses him off). Follow on Twitter at cubicsnarkonia

One Reply to “The (Luxury) Tax Man”

  1. Pingback: Baseball Blogs Weigh In: Machado, Yelich, Cole, Ozuna, Harper, Red Sox - MLB Trade Rumors

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