How Acquiring Alfonso Soriano Could Actually Help the Yankees Get Under the Luxury Tax Cap

MoneyIt has been reported for months that, thanks to a number of complicated CBA provisions involving revenue-sharing, the New York Yankees would love to get under the $189 million luxury tax cap in 2014. The short version is that, once you get under the cap for a year, the penalties that have been imposed “re-set,” and the Yankees’ penalties have been building up for years – to the point where even a financial monolith like the Yankees would consider it worth making some cuts.

To that end, the Yankees largely sat out the free agent bonanza this offseason. Then, they surprised everyone by acquiring one of the most financially unsound investments in all of baseball in the Spring: Vernon Wells.

Folks scratched their collective head at how the Yankees could take on a guy whose average annual value salary – that’s the salary that used for luxury tax purposes – is $18 million, if they were trying to cut salary by next year. That’s when Mark Feinsand offered an underreported (at least outside of the Yankee sphere) explanation:

Wells’ seven-year, $126 million contract carries an average annual value of $18 million, which is the figure used by MLB for luxury tax purposes. That figure decreases based on the money being paid by another team, so if the Yankees were to split the $29 million [they are receiving from the Angels in the trade] evenly, it would leave them with a $3.5 million tax figure on Wells’ deal in each of the two seasons.

But according to a league source, the Yankees are expected to pay Wells between $10 million and $12 million in 2013, leaving the Angels to pick up the other $9 million-$11 million.

That means that the Angels would pay somewhere between $18 million and $20 million of Wells’ $21 million salary next year, not only erasing the entire $18 million luxury tax figure for the Yankees, but adding a credit of as much as $2 million.

See where I’m going with this?

If the Cubs trade Alfonso Soriano to the Yankees – the teams are reportedly in talks – let’s imagine a hypothetical, assuming Feinsand’s report about the Wells deal is accurate. Soriano is owed approximately $25 million from now through next season. If the Cubs were willing to eat $18 million, the teams could agree that all of it would go toward Soriano’s $18 million salary in 2014, and the Yankees would actually get a $1 million credit for luxury tax purposes, since the average annual value in Soriano’s contract (8 years, $136 million) is just $17 million. You’re welcome, Yankees.

The Cubs assuredly know about this financial approach, and know that only a player with Soriano’s contract, and a team like the Cubs who can eat a bunch of salary, can offer the Yankees this bonus. That should make the prospect return even better.

Brett Taylor is the editor and lead writer at Bleacher Nation, and can also be found as Bleacher Nation on Twitter and on Facebook.

18 responses to “How Acquiring Alfonso Soriano Could Actually Help the Yankees Get Under the Luxury Tax Cap”

  1. Report: Yankees “Close” to a Deal for Alfonso Soriano (UPDATES: Not *That* Close) | Bleacher Nation | Chicago Cubs News, Rumors, and Commentary

    [...] actually help the Yankees in their quest to get under the $189 million luxury tax cap next year. Here’s how. Tweet googletag.cmd.push(function() { googletag.display('div-gpt-ad-1366682148103-0'); [...]

  2. Chris H.

    Any idea of names of Yankees prospects that could be in the deal?

  3. SenorGato

    JR Murphy and Nik Turley would be nice amongst guys who aren’t Williams, Banuelos, or Sanchez.

  4. jbb

    Interesting deep dive into how luxury cap works. Wow! Thank you for the daily insight. The site can be a degree of mental gymnastics but a great source of information.

  5. jacob w

    Bret, you’re awesome most places just report a Deal is close and end it there u report a Deal is “close” then follow it up until there is no more reporting to do then you write up another post of why the yankees would want to do the deal to save money. the best cubs coverage on the net thats why u and luke have such a great fanbase. Thank you.

  6. Good Captain

    So getting Soriano is a potential two-fer and the alue back should hypothetically reflect that in the return back to the Cubs. If so, I think a strong B or B+ player (or two) could come back our way, at least one can hope. In any event, the early reports hinting at little or next to nothing coming back appears questionable.

  7. Rafael Rodgers

    Not a bad deal for the Yankees then. Thanks for the insight Brett!e

  8. SirCub

    The Cubs are in such a good negotiating position on this one. That extra million dollars in salary savings is huge for the Yank’s. In terms of resigning Cano, that’s an extra 1 million in average annual value. Meaning, it could allow them to take a contract from something like 7/112 to 7/119 (completely random ballpark guess at Cano extension). That might be just enough to retain him.

  9. 1060Ivy

    Anyone know if ARod is suspended without pay would that affect the cap according to the CBA?

    1. MichiganGoat

      ARod is a the great pink elephant in the room in this discussion. He has couple of options that directly impact what the Yankees can/will do with salary.

      1-He retires and forfeits the remainder of his contract – This what the Yankee’s want and that should impact their luxury cap next year… dramatically.

      2-He accepts a suspension like Braun. It really is the smartest decision for him because he gets out of the media and is already recovering from an injury, but this will not help the Yankees at all because they are looking to save money next year not this year.

      3-He gets suspended fights through the appeals and ends up serving 50+ games next year. Not sure if that saves the Yankees any money on the luxury cap or not but it is something to be researched and considered

      4-Nothing – by some Tidrowian magic he walks out of this with not a single scratch- completely unlikely now that Braun has accepted a suspension.

      1. MoneyBoy

        No comment on A-Crud would be complete without a reference to The Dirt !!! (apologies to The Brett & Company

        Scratching head … or is it The Ace & Company?

  10. CubFan Paul

    I’ve had that Feinsand article bookmarked waiting for today. Hopefully it works out

  11. Jed Hoyer: Slow Your Roll on that Soriano-Yankees Rumor (UPDATE) | Bleacher Nation | Chicago Cubs News, Rumors, and Commentary

    [...] not the kind of guy you make the focus of a trade involving Soriano and a ton of cash (especially given how advantageous this deal could be for the Yankees, financially). Sherman concedes that he’s not sure if Adams would be involved in this deal. Tweet [...]

  12. Evening Alfonso Soriano Update: “Large Gap” Exists in Talks, Soriano Would Need Time to Consider Trade | Bleacher Nation | Chicago Cubs News, Rumors, and Commentary

    [...] And then you get into the financial side of things, and it gets downright crazy. Soriano makes $18 million this and next year, and, although he’s a useful starter, we can all agree that he’s probably no longer worth that level of compensation. So, to acquire any kind of value, the Cubs will have to chip in some cash. How much, however, is going to take a while to mete out – especially when you consider that, if the Cubs chip in enough, they could actually help the Yankees’ luxury tax situation in 2014. [...]

  13. Alfonso Soriano Gave Cubs a List of Approved Trade Partners and the Yankees Are on It (UPDATE) | Bleacher Nation | Chicago Cubs News, Rumors, and Commentary

    [...] We know, for now, only about the Yankees. And, let’s be frank, trading Soriano to the Yankees makes sense for so many reasons that they are probably the strong [...]

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