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The Luxury Tax Boogeyman

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The competitive balance tax has been an insidious force against the players.  Back in 1996, in the wake of the ’94 strike, a new collective bargaining agreement was reached and healing between the teams and players could begin.  As Jon Pessah wrote in his book The Game, “[Union head Donald] Fehr finally said yes to a luxury tax — the first time the union agreed to any form of payroll restraint since free agency changed everything in 1976.”  I don’t think anyone anticipated what the luxury tax would become.

In that CBA, which covered 1997-2001, the luxury tax was to cover only the 1997-1999 seasons, sort of an experiment.  Opening the door to the luxury tax in that 1996 deal wasn’t perceived as a major hit to the players.  Pessah wrote, “This labor war was a huge victory for Fehr and the union…The owners never got their salary cap or any changes to free agency or salary arbitration.”

Fast forward to 2021, and it’s clear that most major market teams use the base tax threshold of $210MM as something of a soft salary cap.  It’s a limitation MLB likes having in place, as it helps keep free agent salaries down.  If MLB wanted the luxury tax removed, they could do so easily, as they did when it was decided the tax would not be collected in 2020.

Here’s the chart for tax rates (link for app users):

The tax brackets for 2021 are $210-$230MM, $230-250MM, and $250MM and beyond.

In their extrapolated 2020 payrolls, the Yankees, Astros, and Cubs exceeded that year’s $208MM base tax threshold.  It’s notable that while MLB did not make these three teams actually pay tax in 2020, they still didn’t give them a free reset.  That’s why the Yankees sit around $200MM right now – they’re in that third column of the chart, and they want to move back into the first for 2022.  It’s all about the reset, not the actual tax amount if they slightly exceed $210MM in 2021.

The Cubs are trying to avoid the third-time CBT payor column as well, and they’ve accomplished that goal and then some in getting Yu Darvish, Jon Lester, Tyler Chatwood, Jose Quintana, and Kyle Schwarber off the books.  They’re only around $170MM for 2021, a full $40MM shy of the threshold.  The Astros are sitting around $196MM, so they have wiggle room as well.  The machinations of these three teams, particularly the Yankees, assume that the luxury tax system will remain similar in a new CBA, and there actually is a reason to reset in 2021.  If the union succeeds in drastically increasing the thresholds, which should be a major priority for them, all three clubs could have easily reset in 2022 anyway.

The one club that didn’t get the memo about treating $210MM as a soft cap is the Dodgers.  The Dodgers pulled off their reset in 2018 and have stayed below the base tax threshold since, putting them in the first-time payor column for 2021 after the signings of Trevor Bauer, Justin Turner, and Blake Treinen.  With a projected CBT payroll of $254.4MM currently, they’re looking at a tax penalty of about $13MM for 2021.  If a third-time payor spent $254.4MM, their tax penalty would be over $26MM.  In any case, exceeding $250MM places another tax: the club’s highest available pick moves back 10 spots in the next draft.  That’s why the Dodgers will likely find a way to get below $250MM this year.

It’s worth asking: if you’re not the Yankees, Astros, or Cubs, why are you so scared of the $210MM boogeyman?  None of the other 27 teams need to reset – they’re already in the first-time CBT payor column.  That includes the Red Sox, sitting around $204MM and letting the Blue Jays pass them up.  The Angels are around $191MM.  The Mets are around $187MM.  The Phillies are around $196MM.  The Nationals are around $194MM.  That makes five teams this winter that seem to have some deference to the $210MM base tax threshold.  What would be so bad about spending, say, $220MM?  The tax penalty would be $2MM, exactly the price of one year of Hansel Robles.

So the Reset Club includes the Yankees, Astros, and Cubs.  And then five additional teams – the Red Sox, Angels, Mets, Phillies, and Nationals – belong to the Soft Cap Club.  For the other 22 teams, the luxury tax simply has no bearing, which will only be underlined if the thresholds go up significantly in the next CBA.  It’s possible the eight luxury tax avoiders have grand plans for the 2021-22 free agent class – check it out – and want to be first-time payors after they go big next winter.  Otherwise, it’s hard to understand why a Soft Cap Club forms every offseason.

Pitching Notes: Odorizzi, Paxton, Mets, Red Sox, Tigers

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Jake Odorizzi is the top name left from MLBTR’s Top 50 free agent rankings, and it’s still not clear which (if any) team will meet the right-hander’s reported multi-year asking price. Derrick Goold of the St. Louis Post-Dispatch writes in his latest Q&A with readers that the Cardinals’ interest in Odorizzi is legitimate but not aggressive. Goold likens the Cards’ interest to their interest in Kyle Lohse more than a decade ago, when Lohse signed a one-year deal during Spring Training 2008 at a much lower rate than he’d initially sought in free agency. Of course, other teams would surely jump into the mix were Odorizzi to eventually settle for a one-year pact, and there’s no indication yet he plans to do so.

  • James Paxton is headed back to the Mariners on a one-year deal worth $8.5MM, but he drew interest from numerous other clubs before landing that deal. The Mets offered Paxton $6MM in guarantees, tweets Mike Puma of the New York Post, and Ryan Divish of the Seattle Times writes that the M’s at one point expected the lefty to be out of their price range because of how impressive he looked during an offseason showcase. However, Divish adds that Paxton also had a desire to return to a Seattle setting where he’d previously felt comfortable and had success.
  • The Red Sox were among the teams in attendance for free-agent righty Chaz Roe’s bullpen session over the weekend, Chris Cotillo of MassLive.com tweets. The 34-year-old reliever spent the previous three-plus seasons in Tampa Bay and is familiar with Red Sox chief baseball officer Chaim Bloom, who used to be a Rays executive. Roe threw only 9 1/3 innings in 2020, but he was overall a solid bullpen option as a member of the Rays, with whom he pitched to a 3.54 ERA/3.73 SIERA in 119 1/3 frames.
  • The Tigers added Jose Urena to their rotation mix earlier in the offseason, but they might not be done yet. “We’re definitely looking for more pitching as we speak. I think at least one more starter would be ideal,” general manager Al Avila said Tuesday (via Evan Woodbery of MLive.com).The right-handed Urena was mostly a starter as a Marlin from 2015-20, but he could wind up in a bullpen role with the Tigers, Avila noted. For now, Urena’s a candidate to join Matthew Boyd, Spencer Turnbull and Michael Fulmer in Detroit’s starting staff. Tarik Skubal, Casey Mize, Matt Manning, Daniel Norris and Tyler Alexander are also among in-house possibilities to rack up starts this year.

Giants Sign Nick Tropeano

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9:02pm: The Giants have announced the move, Maria Guardado of MLB.com was among those to report.

8:17pm: It’s a minor league deal that features a $1.1MM base salary, and it could end up around $2MM if Tropeano reaches the incentives included, per Susan Slusser of the San Francisco Chronicle.

8:03pm: The Giants are signing free-agent right-hander Nick Tropeano, Chris Cotillo of MassLive.com tweets. Details of the contract are unknown as of now.

Tropeano began his career with the Astros in 2014 and then went to the division-rival Angels in a trade before 2015, though he dealt with several injuries in his time with the Halos. As an Angel, Tropeano logged a 4.51 ERA/4.48 SIERA in 195 2/3 innings, most of which came as a starter.

Tropeano, 30, joined the Pirates before last season and held his own as a reliever, recording a 1.15 ERA/3.32 SIERA with his best-ever strikeout and walk percentages (28.8 and 6.1, respectively) in 15 2/3 innings and seven appearances. But the Pirates let Tropeano go on waivers in October to the Mets, who later non-tendered him. He’s not eligible to become a free agent again until after 2022, so whether as a starter or reliever, Tropeano could help the Giants for more than one season if he’s able to carry over his 2020 success going forward.

Brewers To Sign Travis Shaw

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8:02pm: Shaw will make $1.5MM with another potential $1.5MM in incentives if he earns a roster spot, Mark Feinsand of MLB.com relays. There’s a March 15 opt-out date in the pact.

7:14pm: Shaw will get a non-guaranteed deal, per Bradford.

6:48pm: A Shaw signing “is imminent” for the Brewers, Rob Bradford of WEEI.com tweets.

6:19pm: Free-agent corner infielder Travis Shaw and the Brewers are “in serious talks” on a contract, Robert Murray of FanSided tweets. It’s “likely” they’ll reach a deal, per Jon Heyman of MLB Network. Chris Cotillo of MassLive.com reported earlier Tuesday that Shaw could come off the board soon.

There is plenty of familiarity between the Brewers and Shaw, who spent 2017-19 with the team after it acquired him from the Red Sox in December 2016. Shaw was an offensive standout as a Brewer in his first two years, in which he hit .258/.347/.497 with 63 home runs in 1,193 plate appearances, but his numbers have dropped off significantly since then. He batted a horrific .157/.281/.270 with seven homers over 270 PA in his final year with the team, and the Brewers non-tendered him after that.

Shaw joined the Blue Jays on a $4MM guarantee heading into last season, and though he did post better numbers, he still wasn’t a major threat. The 30-year-old slashed .239/.306/.411 with six HRs across 180 PA. If he goes back to Milwaukee, though, Shaw could compete for at-bats at both first and third. The Brewers are slated to start Keston Hiura and Luis Urias at those two positions, while Daniel Vogelbach and Daniel Robertson are on their 40-man roster as potential bench options.

Dodgers, Matt Davidson Agree To Minor League Deal

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6:55pm: First baseman/outfielder Rangel Ravelo is also among the Dodgers’ non-roster invitees to camp, Kyle Glaser of Baseball America tweets. The 28-year-old batted .189/.250/.351 in 84 PA as a Cardinal from 2019-20. Ravelo has hit a much more productive .293/.369/.452 over 1,652 trips to the plate at the Triple-A level.

6:41pm: The Dodgers have reached a minor league agreement with corner infielder Matt Davidson, according to J.P. Hoornstra of the Southern California News Group. The deal includes an invitation to major league spring training.

Davidson, the 35th overall pick of the Diamondbacks in 2009 and a well-regarded prospect in the ensuing years, debuted in the bigs with the club in 2013. The Diamondbacks traded Davidson to the White Sox prior to 2014 for reliever Addison Reed, however. Davidson didn’t make his White Sox debut until 2016, but the now-29-year-old owns a lifetime .223/.292/.433 line with 52 home runs in 1,075 plate appearances. He was a 20-home run hitter in both 2017 and ’18.

Davidson spent last year as a member of the Reds, with whom he struggled to a .163/.264/.395 mark at the plate with three HRs in 47 PA. He also appeared in three games as a pitcher, tossing 3 1/3 innings of two-earned run ball. Davidson threw three scoreless innings while with the White Sox in 2018.

In all likelihood, Davidson won’t help the Dodgers’ pitching staff. But he’ll at least try to earn a backup role as an infielder behind third baseman Justin Turner, whom the Dodgers just agreed to re-sign, and first baseman Max Muncy.

Nationals To Sign T.J. McFarland To Minors Deal

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The Nationals are signing free-agent reliever T.J. McFarland to a minor league contract, Chris Cotillo of MassLive.com tweets.

The 31-year-old McFarland spent last season as a member of the Athletics, with whom he logged a 4.35 ERA/4.56 SIERA in 20 2/3 innings. McFarland didn’t have control problems, as he issued walks to just 5.4 percent of batters, but he struck out a mere 9.8 percent of hitters. That’s not atypical for McFarland, who has combined for a 13.6 percent strikeout rate and a 7.6 percent walk rate in 401 innings divided among the Orioles, Diamondbacks and A’s. He owns a 4.08 ERA/3.83 SIERA since his career started in 2013, and has thrown 50-plus innings in five seasons.

McFarland will now compete for a spot in the Washington bullpen, which lost fellow lefty Sean Doolittle to the Reds in free agency. Before signing McFarland, though, the Nationals added southpaw Brad Hand on a guaranteed contract and LHP Luis Avilan on a minor league pact. It’s worth noting that McFarland has been much better versus lefties (.295 weighted on-base average) than righties (.352).

Braves Win Arbitration Case Against Dansby Swanson

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The Braves have won their arbitration case against shortstop Dansby Swanson, Jon Heyman of MLB Network reports. Swanson will earn $6MM, not the $6.7MM he requested, according to Heyman.

The 2021 campaign will be the penultimate season of arbitration control for Swanson, whom the Braves acquired from the Diamondbacks in a December 2015 blockbuster. Swanson was the first overall pick in the draft during the previous summer, but he never played for the D-backs. Since debuting with Atlanta in 2016, Swanson has put together a .249/.321/.396 line with 50 home runs and 31 stolen bases in 2,038 plate appearances. The 27-year-old has been a mixed bag at short, where he has totaled 18 Defensive Runs Saved and recorded a minus-4.4 Ultimate Zone Rating.

Last season was likely the best yet for Swanson, who batted .274/.345/.464 with 10 homers and five steals in 264 PA. He complemented his above-average offensive performance with 10 DRS and a 0.2 UZR.

Dodgers Trade Josh Sborz To Rangers

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The Dodgers have traded recently designated-for-assignment righty Josh Sborz to the Rangers, reports Jorge Castillo of the Los Angeles Times (Twitter link). The Rangers announced the move quickly after that initial report, revealing that they’ll send minor league righty Jhan Zambrano to L.A. in return. Fellow right-hander Jimmy Herget was designated for assignment by the Rangers in order to create roster space for Sborz.

Sborz, 27, lost his roster spot when the Dodgers made their three-year deal with reigning NL Cy Young winner Trevor Bauer official. He’s seen action in the Majors in both 2019 and 2020, pitching to a combined 6.08 ERA and 5.14 SIERA in a tiny sample of 13 1/3 innings.

On the minor league side, Sborz has had a bit more success, logging a 4.55 ERA in 87 Triple-A frames. That mark still isn’t especially eye-catching, but it’s come in a decisively hitter-friendly Pacific Coast League setting. Furthermore, Sborz’s 30.5 percent strikeout rate and 7.7 percent walk rate in Triple-A both give a bit more reason for optimism.

Sborz, a 2015 Competitive Balance draft selection (Round B), has a mid-90s heater with an average or better slider and, perhaps most importantly, a minor league option remaining. He’ll compete for a job in the Texas bullpen this spring and will head to Triple-A to serve as a depth piece if he can’t crack the Opening Day roster.

Texas will have a week to trade the 27-year-old Herget, attempt to run him through outright waivers or simply release him. The right-hander posted a 3.20 ERA in 19 2/3 innings with Texas last year, though the fact that he walked 14 of the 87 batters he faced and plunked another two suggests that he’s not likely to repeat that level of success over a larger sample of work.

Zambrano, 19, tossed 60 innings with the Rangers’ affiliates in the Dominican Summer League in 2019, notching a 2.55 ERA with 52 punchouts and 16 walks. He didn’t pitch in 2020 due to the lack of a minor league season and doesn’t rank among the organization’s top prospects.

Reds Sign Cam Bedrosian To Minor League Deal

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The Reds announced Tuesday that they’ve signed right-handed reliever Cam Bedrosian to a minor league contract and invited him to Major League Spring Training.

Bedrosian, 29, becomes the latest non-roster addition for a Reds club that has largely sat out the market for Major League free agents. The longtime Angels righty was non-tendered earlier this winter as he entered his final year of arbitration eligiblity.

Bedrosian, whose father Steve saved 184 games in a 14-year MLB career, looked like he might be prepared to go down a similar path not long ago. The former No. 29 overall pick notched a 1.12 ERA with a 31.5 percent strikeout rate in 40 1/3 innings back in 2016 and saved six games for the Halos a year later.

From 2016-20, Bedrosian totaled 225 innings with a 3.20 ERA and a 3.74 SIERA — including a solid 2.45 ERA in 14 2/3 frames in 2020. However, while that ERA looked to be one of the righty’s strongest marks yet, there were some underlying causes for concern. Bedrosian’s strikeout rate fell to a career-low 19.0 percent — a good ways south of the league average — while his 10.3 percent walk rate was his highest since 2015.

Bedrosian’s average fastball, meanwhile dipped to a career-low 92.3 mph, which is a full three miles per hour slower than that peak 2016 campaign; his velocity has ticked downward steadily each year since that ’16 campaign. For a pitcher who has recently spent time on the IL due to forearm and adductor strains, that trend was surely a cause for some concern.

All that said, adding Bedrosian is a perfectly sensible move for the Reds — particularly on a no-risk, non-guaranteed deal of the minor league variety. If his velocity rebounds in camp or he looks able to miss bats at his previous levels with slightly reduced heat, he’d make a fine addition to a relatively unsettled bullpen mix. Bedrosian has a track record of success in the Majors, a fair bit of late-inning experience (nine saves, 44 holds) and has yet to turn 30. He’ll join Shane Carle, Josh Osich, Brandon Finnegan, Jesse Biddle and R.J. Alaniz as non-roster bullpen options invited to Spring Training.

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