clock menu more-arrow no yes

Filed under:

The Giants shouldn’t benefit too much from the new CBA, luxury tax this offseason

New, comments

At least the Dodgers will be less inclined to do that $300 million payroll thing again.

Los Angeles Dodgers v San Francisco Giants
Picture carefully selected to troll Dodgers fans.
Photo by Ezra Shaw/Getty Images

There will not be a lockout. There probably never was going to be a lockout, considering that baseball is healthy and financially strong, and that the owners weren’t exactly trying to shove a salary cap down the players’ throats. But the new Collective Bargaining Agreement is here, and it means five years of labor peace in baseball.

It doesn’t necessarily mean good things for the Giants, though. Not at first.

Reuben explained last month how the Giants were on hold in the offseason because of the CBA. They don’t want to go into a luxury-tax penalty for a third straight year, when the penalties really start to get draconian. We don’t know exactly what the penalties will be until all the details trickle out, and I’ll update that later. (Until then, it looks like ESPN is rounding up the news as it comes in.)

What we know is that the luxury-tax threshold is increasing from $189 million to $195 million next year. That’s ... not a lot. According to a program I fired up on my computer, it’s a $6 million difference. Big deal, right? The Giants aren’t even going to sniff a $195 million payroll.

Except the luxury tax isn’t just about raw salary in a given season. It has to do with a) the average annual value of a contract, including bonuses, and b) medical benefits and other perks that we usually don’t hear about.

The Giants went over the luxury tax last year with an effective payroll of $170 million or so. So we should assume that they’re in danger of going over next year as is. They have about $163 million currently committed to the players on the roster, so unless they get a closer for roughly $12 million in annual salary — way below the going rate — they’ll be paying the tax.

The last penalty for a third-time offender was 40 percent of every dollar paid over the threshold. So if, for example, a $14 million annual salary to Mark Melancon put the Giants $2 million over the threshold, that would mean they would essentially pay him $14.8 million. Not a huge deal.

If the Giants make a trade for, oh, Ryan Braun, and he puts them $20 million over the threshold, the Giants would essentially pay him $28 million. That’s a much bigger deal. So while the $6 million increase gives them a little wiggle room this offseason, it can certainly affect deadline trades.

The new CBA also won’t help the Giants much this offseason when it comes to draft-pick compensation. On the surface, it sounds like a much better plan ...

The catch is this provision starts next offseason. So if the Giants want Kenley Jansen, they’ll still cough up a first-rounder.

You have to go to the fourth and fifth rounds to find the Brandons, anyway.

Too long, don’t feel like reading? The Giants can still get a closer this offseason, but they’ll probably be over the luxury tax, which means they won’t want to go way over. If you read about a pitcher like Jansen looking for an average $17 million salary, mentally adjust it upward for the Giants to something closer to $20 million, if not more. Then ask yourself if the Giants would really want to pay that for a pitcher who throws 70 to 80 innings every season.

Maybe? Don’t know! But if you were hoping the new CBA would allow the Giants to blow the offseason away, it doesn’t look like that’s the case. The threshold will increase to $210 million by the fifth year of the agreement, which will help the Giants a little more, especially considering they’ll have Bryan Reynolds making pre-arbitration money the season he wins the MVP. Not so much this offseason, though.

It’s the status quo, in other words. And the status quo suggests the Giants have a little to spend, but not a whole bunch. As you were.

Edit: This would also apply to the Giants ...

That is, the escalating penalties that I talked about up there. The penalties have to do with how much the team is over, not how many years they’ve done it. That’s a good thing as far as the Giants are concerned.

Edit to the edit: Nope, I was being a dummy. MLB Trade Rumors has a better explanation:

Additionally, the CBA imposes new penalties for spending over the tax line that figure to serve as a rather notable deterrent to big-market spending. Going past the threshold for the first time comes with a 20% tax, which increase to 30% for a second year and 50% for a third. There’s an additional 12% added on top when teams exceed the mark by between $20MM to $40MM, while going past $40MM triggers the maximum penalty — which can reach a 90% tax on overages. (That information comes via Bob Nightengale of USA Today, via Twitter; Sherman and Stark previously sketched the parameters.) Teams that go $40MM over the luxury tax line will see their top draft pick fall by ten spots, the AP adds.