The Rangers spent lavishly in free agency following the opening of their new stadium, inking Corey Seager (10 years, $325MM), Marcus Semien (seven years, $175MM), Jacob deGrom (five years, $185MM) to mega contracts. They also took on notable salary in trades (Max Scherzer, Jordan Montgomery) and doled out more modest but nevertheless notable guarantees for Jon Gray (four years, $56MM), Nathan Eovaldi (two years, $34MM) and Andrew Heaney (two years, $28MM), among others. Generally speaking, they were rewarded. Texas won the 2023 World Series — the first in franchise history.
The sheer magnitude of those expenditures added up, however, resulting in the Rangers paying the luxury tax both in 2023 and 2024. Texas has spent aggressively at times in the past, but not to this extent. As they face the potential of a third straight season as a luxury tax payor, Evan Grant of the Dallas Morning News writes that one of owner Ray Davis’ top priorities this winter — perhaps even his No. 1 priority — is to duck under the $241MM luxury threshold in order to reset the team’s penalty level.
For those unfamiliar or simply in need of a refresher, the luxury tax is calculated based on the combined average annual salaries of the players on a team’s roster (plus player benefits and a mandatory payment into the league’s pre-arbitration bonus pool). The tax threshold climbs every season — at predetermined levels stipulated in the collective bargaining agreement — and carries escalating penalties for teams that cross the tax barrier in consecutive seasons.
First-time offenders pay a 20% tax on the first $20MM by which they exceed the threshold. They’re then taxed at a 32% rate for the next $20MM. If they cross into the third tier of penalty, that results in a 62.5% tax on the next $20MM and sees the team’s top pick in the following year’s draft dropped by 10 spots. Exceeding the tax threshold by more than $60MM results in being taxed at 80% or any dollars spent thereafter.
That’s just for first-time offenders, however. Each of those penalty levels increases by at least 10% for a team that crosses the tax line in a second season. For a club crossing the tax threshold in a third straight year, the penalties become more burdensome: 50% for the first $20MM, 62% for the next $20MM, 95% for the next $20MM (plus the same draft pick penalty) and 110% for any dollars thereafter. That’s the set of potential penalties the Rangers would be facing if they cross the tax line again in 2025.
To this point, the Rangers’ penalties they’ve paid have been light, relatively speaking. They paid just $1.8MM for their first year of penalty in 2023. This year’s total has not yet been determined, but RosterResource estimates they were a bit more than $13MM north of 2024’s first-tier threshold of $237MM. At a 30% tax hit as a second-time payor, they’d be looking at roughly $4MM in penalties based on that number.
In theory, the 50% tax isn’t all that daunting, so long as the club only modestly exceeds the threshold once again. But the Rangers have quite a bit of work to do this winter, with as many as 10 players reaching free agency — pending option decisions on Nathan Eovaldi ($20MM player option), David Robertson ($7MM mutual option) and Andrew Chafin ($6.5MM club option). Eovaldi is all but certain to decline his option, as he can command something close to (perhaps even above) that same salary on a multi-year deal. Robertson will turn down his end of that mutual option after a strong season. Chafin’s is a borderline call, but if Texas wants to be conscious about its spending levels, that will probably be bought out for $500K.
At present, RosterResource projects nearly $189MM of luxury commitments already in place for the 2025 season — $52MM shy of next year’s $241MM threshold. That ostensibly leaves a fair bit of wiggle room — at least until considering the fact that the Rangers are losing three starters (Eovaldi, Scherzer, Heaney), their three top relievers (Robertson, Kirby Yates, Jose Leclerc) and several role players. They’ll not only need to remake a significant portion of the pitching staff but also look for ways to augment an offense that was among the game’s best in ’23 before growing stagnant in ’24.
Young has already called re-signing Eovaldi and/or Heaney “a priority” this offseason. Eovaldi, in particular, would eat up a significant portion of the funds available to the club this offseason. In a separate mailbag column, Grant suggests that if another team were interested in taking on the remaining year and $13MM of Jon Gray’s contract, the Rangers would pursue such an opportunity and could conceivably reallocate some of those funds to a reunion with Eovaldi.
Gray has performed reasonably well since signing in Texas but has been injured each season and watched his strikeout rate drop in consecutive years. The 32-year-old righty (33 next month) made only 19 starts this season and pitched to a serviceable 4.47 ERA with a 19.6% strikeout rate, 6.4% walk rate and 40.1% ground-ball rate. In three seasons with Texas, the hard-throwing former No. 3 overall pick carries a 4.16 ERA in 387 1/3 innings. His contract is hardly an albatross, but there also isn’t much (if any) surplus value on the deal.
Speculatively speaking, the Rangers could look to free up money in other ways if they feel crunched. Righty Dane Dunning’s projected $4.4MM salary (via MLBTR contributor Matt Swartz) makes him a potential non-tender or trade candidate after a rough season. Leody Taveras ($4.3MM projection) also had a tough year and could be moved with younger outfielders Wyatt Langford and Evan Carter both in the majors now (and hopefully healthier in 2025). Nathaniel Lowe’s $10.7MM projection isn’t unreasonable, but Texas could hypothetically move him and turn first base over to a prospect like Justin Foscue or Dustin Harris (or a cheaper first base option in free agency, such as Carlos Santana). It’d be hard to sell low on Adolis Garcia coming off a down season, and Grant suggests such a scenario isn’t likely.
Any of those trades would only open further holes, though the Rangers have the type of MLB-ready young players (Langford, Carter, Foscue, Harris) to try to address them internally. They also have some young arms on which they could lean in the rotation — Kumar Rocker, Jack Leiter — but Leiter struggled in 2024 and Rocker will be on an innings limit in 2025 as he continues working back from Tommy John surgery. The need in the bullpen is arguably more acute, and the in-house options aren’t exactly plentiful.
It’ll be a challenging offseason for president of baseball operations Chris Young. The Rangers should have some money to spend, but the number of holes are as daunting as they are surprising for a team that’s just 12 months removed from hoisting a World Series trophy.
