As the Phillies have ramped up their spending in recent years, the question has become inevitable: will they cross the luxury tax line for the first time, and if so when? GM Matt Klentak and president Andy MacPhail discussed the subject in camp, as Scott Lauber and Matt Breen of the Philadelphia Inquirer report.
Even as Klentak downplayed the importance of the $208MM line in the team’s decisionmaking, he also seemed to acknowledge it as a rather prominent factor in the internal decisionmaking process. Klentak labeled the Competitive Balance Tax line a “guide” rather than a “barrier.”
The rubber meets the road when a stated principle is put to a real-world test. Klentak says that hasn’t quite happened just yet, explaining that the team “never got to the point of really asking ownership about [any moves] because we never lined up a baseball trade that we thought was right.” If and when an opportunity arises that would force the Phils to foot a luxury bill, Klentak says he “would expect to have a good, productive dialogue with our owners about” the matter.
MacPhail suggested a clearer desire to push into the luxury realm if circumstances warrant. “It’s my hope and frankly my expectation that we’re going to exceed it this year,” he said. Read one way, that’s a strong indication that the club intends to spend. Read another, it’s an acknowledgement that the organization will plunk down more cash if the team finds itself in a competitive enough position. That’ll mean waiting to find out how the already assembled roster can perform.
In comments of more general interest — to the MLBPA, if not the casual fan — MacPhail laid out rather clearly how teams — even those with revenues as great as the Phillies — view the function of the tax. “Nobody can live over it,” MacPhail says of the luxury line. “The penalties are too severe — not just economically, but it grabs you every different way.”
It probably won’t take much to force a decision on the luxury tax matter. The Phils are right up on it already. Cot’s on Contracts has the club sitting at $203MM in CBT payroll, which is also Lauber’s estimate. Roster Resource has that number over $2MM higher, which would mean even less breathing room.
Calculating payroll for CBT purposes is an evolving process, of course. Decisions taken during the season can move it up or down. And it isn’t as if there is any drastic penalty for going over (just 20% on the amount over the line). The actual financial hit only ramps up when you go into higher tax penalty levels and do so over multiple seasons.
So, what does this all mean from a practical perspective? Perhaps Klentak should be taken at his word when he says the team is pleased with the talent it has assembled, which includes a long list of notable veterans on non-roster deals. There’s obviously room to improve and deepen the pitching staff and/or to add an established performer at third base or center field. But that’ll require a higher level of ownership involvement to complete, unless Klentak can work something out that’s mostly cost-neutral.
Odds are, any movement past the line — should it occur — will happen during the season. MacPhail says the club intends to “evaluate what we have and make a determination in-season as if we are going to go over or not.” The front office has seemingly already committed most of the money it has been allocated, even if its spending is viewed as a guide rather than a “hard barrier.”