With the set to become sellers at this year’s trade deadline, there has been a lot of speculation about the and its desire to get underneath the luxury tax. The Jays are one of nine big-league teams that project to exceed the $237-million (U.S.
) competitive balance tax threshold. It would mark the second consecutive year the Jays have been taxpayers and, unless their situation changes, the penalties for doing so are set to increase this off-season. Teams that spend above the tax for the first time are taxed 20 per cent on their overages.
That number jumps to 30 per cent the second year and increases to 50 per cent in the third year and beyond. Once a team gets underneath the threshold again, the penalties are reset and the tax goes back to 20 per cent for the next offence. The financial ramifications are relatively minor.
According to FanGraphs’ Roster Resource, the Jays currently have an estimated payroll of $247.4 million, which means they have a projected tax bill of $3.12 million.
For context, that’s less than $4.21 million the Jays were expected to pay this season to have Cavan Biggio come off the bench. However, there are other penalties that must be factored in.
Taxpaying teams that lose a qualifying free agent to another club receive a compensatory pick after Round 4 of the MLB draft instead of after Round 2. Nontaxpaying teams that sign a qualified free agent lose their second-highest pick and $500,000 from their international bonus pool. Taxpayers lose their second- fifth-highest selections plus $1 million of their international pool.
The competitive balance tax is calculated by using a player’s average annual salary. This year’s season includes 187 days and the Jays can’t get back what has already been paid out. That means if , the Jays would be off the hook for $3.
9 million, not his $12-million average annual value. , , Justin Turner, Trevor Richards, and Kikuchi are the Jays’ pending free agents and by deadline day they will have a combined $15.92 million remaining on their CBT salaries.
Dealing all six without chipping in cash, would get the Jays underneath the tax but, considering Kiermaier recently went unclaimed when put in waivers, that might not be possible. Even if it was, an argument could be made it wouldn’t be worth the effort. Kikuchi is the only pending free agent that has enough value to receive a qualifying offer, which was set at $20.
325 million for 2024. Trading him would be essential to getting under the tax, yet if he’s playing for another team in August the compensation rules no longer apply. That means the only benefit for getting under the tax, beyond shedding the small overage fee, would come if they signed someone who received a qualifying offer.
Instead of losing their second- and fifth-highest selections, they would lose just their second. This year, their fifth-rounder was the 158th pick and came with a slot value of $414,600. If the Jays insist opposing teams pick up the remaining salaries, it will limit the return.
It seems hard to believe another club would give up anything of value for Turner and his remaining $4.24 million, but it might be different if the Jays covered the majority of his contract. The same logic applies to just about every other pending free agent.
The Padres are in desperate need of pitching but have limited financial flexibility. The Astros, Yankees, Phillies, Braves and Dodgers are among the contenders who are already deep into the tax and at least a couple of those clubs figure to be strapped for cash. Ditto for the Twins, who have been linked to Kikuchi and reportedly can’t increase payroll.
Assuming the Jays are faced with the choice of getting underneath the tax or maximizing the return, this should be an easy decision. The Jays have one of the worst minor-league systems in baseball and they’re desperate for an injection of prospects. Upgrading the farm must take priority over financial savings and a fifth-round pick they might not even lose.
Think about it this way: The Jays were able to trade Francisco Liriano to the Astros for Teoscar Hernandez in 2017 because they also agreed to take on the remainder of Nori Aoki’s $5.5-million contract. Without Aoki, that deal never happens.
The Jays flexed their financial muscle by prioritizing the return over salary. The Jays should take a similar stance at this year’s deadline: Ignore the tax and draft pick compensation rules in favour of acquiring the best possible players. The focus on deadline day must be about prospects, not payroll.
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