Nationals Ownership Hesitant To Pass Luxury Tax Threshold

Recent reports have hinted at a possible connection between the Nationals and free agent closer Craig Kimbrel, though luxury tax concerns could prevent a signing from taking place.  According to both MASNsports.com’s Pete Kerzel and MLB.com’s Jamal Collier, the team’s ownership isn’t at this point willing to exceed the $206MM luxury tax threshold, in an attempt to reset the Nats’ tax penalty to zero after paying the Competitive Balance Tax in each of the previous two seasons.

As per Roster Resource, the Nats’ projected luxury tax payroll sits at just under $201.5MM for 2019.  This leaves the club with a bit of breathing room for a potential trade deadline addition, as Collier notes, but not much else.  Barring a trade of another high-salaried player, there certainly isn’t room to fit Kimbrel into the mix.

It’s hard to accuse the Nationals of being unwilling to spend when the team has already been one of the offseason’s bigger spenders.  Patrick Corbin’s six-year, $140MM deal was the headline piece, though the Nats also doled out significant shorter-term expenditures on Brian Dozier, Anibal Sanchez, Kurt Suzuki, and Trevor Rosenthal, while also adding Yan Gomes in a trade from Cleveland.  Some of these moves were afforded due to money coming off the books, of course, most notably the expiring contracts of Bryce Harper and Matt Wieters, plus Tanner Roark was traded to the Reds.  Plus, the Nats have doled out plenty of large deals in the past, and may do so again if the club is able to extend Anthony Rendon.

Going forward, Washington has at least $110MM in luxury tax payroll accounted for in 2020.  Ryan Zimmerman, Adam Eaton, Sean Doolittle, and Gomes can all be retained through club options, and Zimmerman is the only one that looks like a solid bet to be declined.  Rosenthal has a vesting option for 2020, while Rendon and Dozier will be free agents outright.  Since some more roster needs will surely emerge over the coming year and into next season, Nationals ownership is surely wary of committing to another big deal for Kimbrel that would make it hard for the team to get under the tax threshold again (which will slightly rise to $208MM next season).

This all being said, it should be noted that even in adding Kimbrel, the Nationals would still very likely be in the first bracket of luxury tax overage, meaning they’d stay under the $226MM mark.  This means Washington would avoid a further surtax and only be charged a tax rate of 50% for every dollar they spend over $206MM.

As both Collier and Kerzel observe, the actual amount of money the Nationals would have to surrender in tax payments isn’t unreasonable.  Let’s suppose the Nats ended the season with a $225MM luxury tax payroll to barely stay within that first tax bracket.  For that $19MM in overages, they would then owe $9.5MM in taxes — not an insignificant amount of money, but hardly onerous for a big-market team with World Series aspirations.  As Collier puts it in a rhetorical question, “Would you rather win 93 games, the division and have paid the penalty or win 88, miss the postseason and avoid it? To me, it’s a no-brainer, but it’s a hurdle they [the Nationals] have not been willing to clear.”

It isn’t a guarantee, of course, that Kimbrel’s addition would automatically put Washington over the top in a very competitive division.  But this hesitation on the part of team ownership is particularly odd considering that the Nats have already topped the tax level in both 2017 and 2018.  It also calls into question of why, if a third straight season in excess of the tax was such a big issue for ownership, the Nationals didn’t make a bigger push to unload salary last summer.  D.C. waited until they were entirely out of the race in late August to begin trading players (i.e. Daniel Murphy, Gio Gonzalez, Ryan Madson, and Matt Adams), though it already looked like they had little shot at either the NL East title or even a wild-card slot.  The Nats ended up topping last year’s CBT threshold by only $8MM, even dealing some of those same players earlier would’ve saved the team a few more weeks’ of salaries.