Payroll has been a hot button issue for the Yankees for roughly a decade now. It’s amazing to write that sentence, but it’s true. For far too long we as fans have had to wonder whether or not the Yankees, the richest organization in the sport, would flex its financial might. We probably shouldn’t get our hopes up anymore.
Hal Steinbrenner’s mantra is that the Yankees should be able to win with payrolls below the luxury tax threshold, of course. I think everyone reading this knows how we here at the blog feel about that at this point, so no need to beat a dead horse. All I’ll say is that the team’s payroll is largely unchanged since 2005 while revenues have skyrocketed. The club has decided to treat the luxury tax as a de facto salary cap, but in what I’ll illustrate below, you’ll see that it will be difficult for the team to avoid the tax in 2022 (pending CBA negotiations).
It’s important to note that there is no new collective bargaining agreement in place yet for 2022 and beyond, so the luxury tax system as we know it is likely to change (I sure hope so). The minimum threshold (currently $210 million) should go up significantly, though I’m not going to hold my breath. With all that in mind, let’s take a look at where the team’s payroll stands ahead of this winter’s activity.
|Player||Salary ($M)||AAV ($M)|
Brett Gardner: The 38 year-old outfielder has a player option worth $2.3 million, but if he declines, the Yankees can exercise a $7.15 million club option to retain him. I anticipate both Gardner and the Yankees declining those options, which will result in the Yankees paying a $1.15 million buyout. I think Gardner could get something a bit closer to his 2020 salary ($5.15 million) and will try to negotiate a new deal with the Yankees.
Joely Rodríguez: The Yankees hold a $3 million team option on the lefty reliever. Should the team decline, a $500,000 buyout is due to Rodríguez.
Darren O’Day: Odds are that O’Day will exercise his $1.4 million player option after missing most of the season due to injury. In the off chance that he declines, the Yankees can either exercise a $3.15 million club option or pay a $700,000 buyout. Again, bet on the player option being picked up.
MLB Trade Rumors published Matt Swartz’ projected 2022 arbitration salaries yesterday. The Yankees have 19 arbitration eligible players. Here are their projected salaries for 2022:
Keep in mind that not all of these players will actually be on the team next season. Guys like Voit, Andújar, and Frazier could be dealt before the non-tender deadline. The Yankees almost certainly will DFA Locastro once he comes off the injured list after the World Series. Other guys could go too.
Assuming the Yankees move Voit, Andújar, and Frazier via trade and DFA Locastro, the total salary estimate for arbitration eligible players decreases to $70.4 million.
Marlins payment: The Marlins owe the Yankees $30 million to be paid in installments. Those installments don’t actually start until 2026. From a luxury tax standpoint, this reduces the Yankees’ Competitive Balance Tax payroll by $3 million annually. So Stanton’s net CBT hit is really $22 million.
Rangers payment: Texas is covering the entirety of Odor’s contract, so those guaranteed amounts I cited above are effectively reduced to zero at the end of the day.
Player benefit costs: Cot’s estimates $16.0 million in player benefits for the 2022 season, which covers things like health and pension benefits. This counts toward the CBT payroll under the current CBA, but that could change depending on this winter’s negotiations.
Pre-arbitration 40-man roster: Entering 2021, the league minimum salary was $570,500. The figure will go up in 2022, but how much depends on the new CBA negotiations. For the purpose of this exercise, let’s assume a $600,000 minimum. Let’s also assume that the Yankees carry 10 pre-arb players on the roster for the majority of the season. That’s approximately another $6 million tacked on to the payroll.
40-man players in the minors: These players salaries count too while down in Scranton or Somerset (or elsewhere). Cot’s puts this figure at $2.25 million.
Let’s put all of this together now with a few assumptions.
First, the buyouts. I think Gardner and Rodríguez will receive buyouts, whereas O’Day sticks around on his own volition. This adds $3.05 million to the team’s payroll. Let’s also assume that the Yankees dump Locastro and trade Voit, Andújar, and Frazier.
With all that in mind, here’s the projection of the Yankees’ payroll going into the offseason:
|Category||Salary ($M)||AAV ($M)|
|40-man in minors||$2.250||$2.250|
Again, who knows what the new luxury tax system will look like in 2022, but clearly, the Yankees will be above the first tranche ($210 million) if the same system is carried over. Since the team got under the tax threshold this season, they would be treated as a first time offender and pay a 20 percent tax on amounts above $210 million. The luxury tax could look very different next year and beyond.
Regardless of what system a new CBA implements, the Yankees will have no choice but to increase payroll next season. All of the arbitration eligible players are the drivers of the increase. This season, Cot’s estimated the Yankees’ Opening Day 2021 payroll at $197.625 million, with the luxury tax figure just under $208 million. So, the total dollar baseline increase is a bit over $30 million, whereas the luxury tax payroll is up around $14 million.