Looking At The Blue Jays And The Competitive Balance Tax

This isn’t the Blue Jays’ year. Though they played at roughly a 90-win pace over the 2020-23 seasons, things have fallen apart here in 2024. They are 44-52, putting them 9.5 games out of a playoff spot and with several teams blocking their path. Unless they crack off an 11-game winning streak between now and the deadline, they’ll be looking to do some selling in the coming weeks.

Crazier things have happened but the odds are against them. The Playoff Odds at FanGraphs give them just a 2% chance of a miracle postseason berth while the PECOTA Standings at Baseball Prospectus are only slightly more optimistic at 3.9%.

Recent reporting has suggested the Jays are willing to deal rental players but may stop there. Some have floated players like Bo Bichette and Vladimir Guerrero Jr. as potential trade candidates, with each controllable through the 2025 season, but general manager Ross Atkins seemed to shoot down that possibility. Last month, he said that trading those guys “just doesn’t make any sense for us.”

In general, it seems the club is hoping to contend again in 2025. That leaves them with six rental players they could trade between now and the July 30 deadline, as each of Justin Turner, Kevin Kiermaier, Danny Jansen, Yusei Kikuchi, Yimi García and Trevor Richards are slated for the open market at season’s end. Naturally, each player will have different trade value based on his skill level but also his contract.

One question that the front office will need to answer is whether they will prioritize shedding salaries and getting under the competitive balance tax or focus more on prospect returns, eating some money in order to tip the scales that way. The Mets demonstrated the latter path last year, as they swallowed significant portions of the money owed to both Max Scherzer and Justin Verlander in order to bring back larger prospect hauls.

Both Roster Resource and Cot’s Baseball Contracts are pretty close in estimating Toronto’s current CBT number. RR has them just over $247MM with Cot’s a tad higher at $250MM. Those are just estimates but they’re likely pretty close, so the Jays would have to subtract $10-15MM in order to limbo under the lowest tax threshold of $237MM.

They won’t be able to shed any player’s full salary from their CBT number as the season is already more than half over, but they could shed portions. For example, if a player has a CBT hit of $20MM and is traded at the midway point of the season, $10MM of that would stay on the trading club’s books and the other half would transfer to the acquiring club. That’s assuming no cash considerations were involved in the deal.

It’s also worth pointing out that a player’s CBT hit is based on the average annual value of his contract, not the salary. The baseball season is 187 days long and there are 73 left to go, roughly 39%. By the deadline, that will be down to 61 days or 32.6%. Let’s take a rough outline of where those six rental players stand:

• Turner: $13MM CBT hit for the year, $5.07MM remaining today, $4.24MM at deadline
• Kikuchi: $12MM, $4.68MM, $3.91MM
• Kiermaier: $10.5MM, $4.1MM, $3.42MM
• Garcia: $6MM, $2.34MM, $1.96MM
• Jansen, $5.2MM, $2.03MM, $1.7MM
• Richards: $2.15MM, $839K, $700K

As of today, those six players combine for a CBT hit of roughly $19.06MM, with that number set to drop to $15.93MM by the deadline. Though it would be tight, it’s certainly possible they could duck under the tax this year.

Doing so would come with certain benefits, though the tax savings would be minimal. The Jays paid the tax for the first time last year and are currently on pace to be a second-time payor. That only comes with a 30% tax rate, meaning they’re currently slated to pay in the range of $3-4MM in taxes.

That’s a drop in the bucket for a major league team but there would be other arguments for ducking under. If the Jays did pay the tax this year and again in 2025, they would be a third-time payor next year, which would bump their tax rate to 50%. Whereas ducking under the line this year would reset their status and allow them to go into 2025 as a “first-time” payor and have a base rate of just 20%. That feels significant but still leads to fairly modest tax savings. For example, going $30MM over next year’s base threshold would lead to either a $6MM or $15MM tax bill, depending on whether they are paying a 20% or 50% rate.

Perhaps more importantly, if they signed a player in the offseason that had rejected a qualifying offer, they would face a lesser penalty by avoiding the tax. A tax-paying club surrenders $1MM in international bonus pool space as well as its second- and fifth-highest picks in the next draft when signing a QO player. Avoiding the tax changes that to just $500K in bonus money and just the second-highest pick.

They would also increase what they receive if a player rejects a QO and signs elsewhere. Tax payors receive a pick after the fourth round if a QO player signs elsewhere, whereas it’s the start of the third if they avoid the tax. The Jays have a couple of potential QO candidates in Jansen and Kikuchi but the QO consideration would be moot if they get traded.

But as mentioned, the Jays could just forget about the tax and focus on getting the best prospects they can. The Cubs are reportedly interested in Jansen but they would probably rather give up a better return while having the Jays keep their money on their books. The Cubs seemingly want to avoid the tax themselves and Roster Resource currently has them just under $234MM. They have a well-regarded farm system and might lean towards subtracting from that, as opposed to taking on money at the deadline. It may be similar with other teams, such as the Padres. Roster Resource has them at $225MM and they seem to want to stay under the tax as well. They need pitching and may be interested in someone like Kikuchi, but they may not want to take on his money/CBT hit.

Other teams will be in the opposite position. A team such as the Tigers, as an example, might be looking for more offense. If they were to inquire about Turner, they would probably prefer to take on the money and not give up prospect talent. They are nowhere near the tax line and their real payroll is well below their past spending levels. Since they are seven games out of the playoffs, they might be willing to take on a bit of cash in order to bolster their club for a long-shot postseason push, as opposed to surrendering young players and hurting themselves in future seasons.

What the Jays are able to do will ultimately depend on what kind of offers are coming their way, as they don’t operate in a vacuum. They already know that no club is willing to take on all of Kiermaier’s contract, as they made him freely available on waivers recently and didn’t get any takers. Perhaps someone would be interested in him as a speed-and-defense fourth outfielder if the Jays ate some of his deal, but getting all of the remainder of his contract off the books doesn’t appear to be an option.

Depending on the circumstances of their trading partners, they may have to strike a balance, with some deals focused on cost savings and others on maximizing the return in terms of talent. If that leaves them still a hair over the tax line, they could consider moving non-rental players, with Chad Green arguably the best option there. He is under contract through 2025 but has a $10.5MM CBT hit, same as Kiermaier, giving the Jays a chance to scrub another few million from their CBT number. Doing so would hurt their 2025 bullpen but they might feel they could easily replace Green’s production via an offseason signing. With bullpen help generally in demand at the deadline, Green should garner interest.

Guys like George Springer, Chris Bassitt and Kevin Gausman all have CBT hits of $21MM or more. The Jays could try to find takers for those but Springer is 34 years old and having a rough season, which would tamp down interest. Dealing either Bassitt or Gausman would hurt next year’s rotation, which is perhaps the club’s best argument for trying to compete again in 2025, as they could go into the offseason with a front four of Gausman, Bassitt, José Berríos and Yariel Rodríguez on paper.

Isiah Kiner-Falefa could be another option as he is under contract through 2025 and has a $7.5MM CBT hit. He is having the best season of his career but has been on the injured list since the start of this month with a left knee sprain. He can still be traded while on the IL but his health status will impact his trade value.

Ultimately, there are many moving parts here, part of the reason why the Jays will be an interesting club to watch in the weeks to come. Most of the sellers at this year’s deadline will be focused on the long term, as clubs like the White Sox and Marlins are in really rough shape in the present. That will make their deadline priorities rather straightforward, as they will be simply looking to acquire as much future talent as possible.

But the Blue Jays will likely be balancing several different concerns. They will be looking to give up some talent, but not in a way that significantly harms their chances of competing again next year. They could focus on acquiring as much talent as they can right now or they could limbo under the tax line, giving them more freedom to acquire talent in the offseason. One way or another, Atkins and his crew will be looking to turn a lost season into something that can help them down the line, though there are many different ways they could try to accomplish that.