NEWSLETTER
It 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.
