The Yankees have wanted us to believe for several months now that their goal is to sneak under the $189 million luxury-tax threshold in 2014 and potentially saves millions of dollars down the line. The common refrain has been that if the club can work to avoid the fees now -- saving up to $100 million over the next two years, per Joel Sherman of the NY Post -- then they'll have more freedom to spend more later.
It is a solid plan in theory, but it's not one that the Yankees have actually employed. Sure, the club made a show of (very) relative thriftiness by not offering Robinson Cano more than $175 million, but just about everything else they've done points to having little to no concern for that $189 million marker.
Perhaps the adding of roughly $69 million in 2014 salary for Jacoby Ellsbury, Brian McCann, Carlos Beltran and Hiroki Kuroda doesn't convince you that the club values contention far more than any end-of-the-year fine, but the news that the Yankees offered Shin-Soo Choo a seven-year, $140 million contract should. The Bombers' current payroll commitments -- which do not include arbitration raises and several other components -- are already somewhere between $172-$177 million for next season, leaving no room for an offer like Choo's.
The luxury tax is calculated by summing what MLB refers to as a club's Actual Payroll, which applies to all players who make an appearance on a team's 40-man roster in a given season. While most player salaries are simply added to the overall total, all calculations for players with multi-year deals are derived from the contract's average annual value -- e.g. Alex Rodriguez is set to earn $25 million in 2014, but for tax purposes his salary is $27.5 million because that's 275 divided by 10 ($/years). There is also a flat Player Benefits Cost of roughly $11 million that is added to each team's total for the yearly medical costs and other overhead.
If you add those extra costs and the combined estimated salaries (~$14.8 million) for the club's five arbitration-eligible players, the Yankees' taxed payroll for 2014 comes in at a little over $200 million. Even if Alex Rodriguez's hefty salary is removed from the equation -- which it shouldn't be yet, at least not by the club's front office -- offering $20 million a year to Choo still smacks of a team who could not care less about payroll. If Choo is added, where do they come up with the money to find more starting pitching? It's simply not there unless $189 million isn't a real cap.
New York has paid out roughly $253 million in luxury-tax penalties since its inception in 2003, accounting for more than 90 percent of the league's total. They've gone over the mark every single season. The only other club to eclipse it more than once is the Red Sox ('04-'07, '10-'11).
If Hal Steinbrenner and company really are worried about the luxury tax, they haven't done a good job demonstrating it this winter. It's possible that coming in under the threshold was a real goal at some point, but it's fairly evident that it's no longer a big issue. Like everyone else in the league, the Yankees have taken the opportunity created by record revenues and expanding TV deals to spend freely in the open market, luxury tax be damned.