REPORT: Cubs on Track to Avoid the Luxury Tax This Year

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REPORT: Cubs on Track to Avoid the Luxury Tax This Year

Chicago Cubs News, Chicago Cubs Rumors

Despite a relative spending spree in the offseason, which accompanied significant raises across the roster for arbitration-eligible players (and other guys on longer-term deals), the Cubs were very careful to keep themselves far enough below the luxury tax cap so that they could make in-season moves.

And make moves they did, adding – among others – Cole Hamels, Daniel Murphy, and Jesse Chavez. Surely the Cubs were still cautious enough to make those additions without imperiling their luxury tax status, right?

Right!

Per the AP, only the Red Sox and Nationals are tracking this year (as of August 31) to exceed the $197 million luxury tax cap. Only accumulated bonuses could push a team over the limit at this point, and the Cubs are apparently not – according to the AP – in a realistic spot to bump over. That sounds about right, given that the Cubs would have been pretty meticulous in making sure their in-season additions still left them enough room to account for likely bonuses.

Being under the luxury tax cap this year is notable for reasons that go behind money, though that is certainly a factor, since that’s what the luxury tax is (every dollar you spend above the limit is subject to a tax). The more consecutive years you’re over the tax limit, the higher your tax rate goes – so stay under the tax limit this year, if you were thinking of going over next year, could save you a whole lot of money.

Setting that aside, there are other reasons to want to stay under the luxury tax cap. For one thing, the compensation you get for departing free agents shrinks when you’re over the cap (not necessarily a consideration for the Cubs this offseason). For another, the cost to sign qualified free agents is higher if you’re over the cap in the preceding year.

So, that is to say, if the Cubs expected lots of arbitration bumps and still wanted the ability to go after a generational free agent in his mid-20s eh hem, and thought they might go over the luxury tax cap next year, they were wise to stay under it this year.

The luxury tax cap increases to $206 million next year, by the way, and the field of aggressive spenders could be enormous. The Phillies and Braves have young teams and tons of extra money to play with. The Yankees and Dodgers stayed under the luxury tax cap to reset their penalties specifically for this offseason. The Cubs will have the ability to spend big if they want, but there will be plenty of competition, too.


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Author: Brett Taylor

Brett Taylor is the Editor and Lead Writer at Bleacher Nation, and you can find him on Twitter at @BleacherNation and @Brett_A_Taylor.