Yankees reportedly halt new signings fearing CBT penalty

Saturday January 21, 2023

The offseason witnessed frantic efforts by the Yankees to build a team capable to win the title next season. However, Jon Heyman of the New York Post has reported that the Yankees are not eager to go over the $293-million payroll mark that makes them subject to the highest level of CBT penalty. If they stick to their current payroll, it rules out any other notable additions unless the club can find a way to save money.

The Yankees brought back Aaron Judge on a record free agent deal and signed Carlos Rodon to a six-year deal. These additions, along with Anthony Rizzo’s new two-year contract, completed the majority of the club’s heavy lifting.

However, it also put the organization on track to surpass last year’s franchise-record spending level. According to Roster Resource, the Yankees have roughly $272 million in player payroll commitments, which is significantly more than last year’s figure of $254.7 million. The club’s luxury tax figure is right up against the $293 million line, which represents the highest level of CBT penalty. Roster Resource currently values their payroll at $292.3 million.

The Yankees’ roster appears to be strong, with Rodon replacing Jameson Taillon in the rotation for a team that won 99 games during the regular season and advanced to the AL Championship Series. Left field appears to be their biggest unknown, as Andrew Benintendi has already left for Chicago. The Yankees’ top left-field options right now are Aaron Hicks and emerging-star Oswaldo Cabrera. For the past two seasons, Hicks has had below-average offensive numbers. Cabrera performed admirably as a rookie, but he has only 44 games of MLB experience.

Heyman claims that the Yankees are still interested in Jurickson Profar, who is a free agent and plays on the left. But their payroll situation makes it unlikely that they will be able to sign him. New York is in a similar position on utility player Josh Harrison. He could also play in left field, but even a low base salary for Harrison would likely put them over the $293 million CBT mark.

During the last round of collective bargaining, the fourth tax level was added. Set at $60 million more than the season’s base figure, it taxes every dollar spent after the fourth tier by at least 80%. Teams that pay the luxury tax for a second year in a row, like the Yankees, are taxed 90% of any extra money they spend.

Fans may not accept that a team like the Yankees, who earned $500 million last year and are desperate to break the jinx of not winning a World Series since 2009, to treat $293 million as a strict limit. Their cross-town rivals the Mets have no fear from having the CBT penalty, as their payroll is well over $360 million.

The Yankees have to pay CBT fees of around $29 million even on the current payroll. Their first 2024 draft pick is already 10 spots down because they spent more than $273 million. Crossing the fourth threshold means they can’t have more draft penalties, but there will be financial penalties. The Yankees haven’t been cheap this winter, guaranteeing more than $570 million and moving up to second in spending for 2023.

The competitive balance tax number for a club isn’t worked out until the end of the season. The Yankees could spend more than $293 million during the offseason and then spend less than that before the end of the year. Alternatively, they can trade to get rid of some of the $25 million CBT hit on Josh Donaldson’s deal or the $10 million number on Aaron Hicks’ contract. If required, they may trade Gleyber Torres or IKF. But this can hurt their infield depth. Frankie Montas, a starter who makes $7.5 million, might have been a trade target after the team added Rodon. But it is ruled out since he is out of the opening roster due to resurfacing shoulder injury.

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