The Yankees received their $26.9 million 2008 luxury tax bill only last week, and they have already qualified for the 2009 tax, exceeding the tax threshold when they have signed less than half of their 40-man roster.
The Yankees have 14 players under contract for 2009, and the annual average values of their contracts total $186.35 million. The threshold over which tax must be paid will be $162 million next season. At 40 percent, the Yankees’ personal tax rate (for multiple excesses), they already owe $9.74 million.
Although it applies only to next year, the Yankees’ current payroll total also exceeds the thresholds for 2010 ($170 million) and 2011 ($178 million).
The Yankees insist that their 2009 payroll will be lower than the 2008 payroll, but I am skeptical, not that I care what their payroll is. I don’t have to pay it.
The problem with computing payrolls is there are so many different ways of doing it. The original, old-fashioned way bases payroll on 25-man rosters and disabled lists as of Aug. 31. On that basis, the Yankees’ payroll this year was $218 million.
(The figure most widely used by reporters for the Yankees’ payroll is $209 million because that was the opening-day figure computed by Ron Blum of the Associated Press, who quickly and accurately reports contract figures as soon as clubs report them to the commissioner’s office. Once Blum has done their work for them in calculating all opening-day payrolls, baseball reporters for the most part are too lazy to update them for the teams they cover, adding each arrival and subtracting each departure, so they are now nine months behind.)
Until the past couple of seasons, the commissioner’s office used the old-fashioned method to determine payrolls. Now it bases payrolls on 40-man rosters. On that basis, the Yankees’ payroll this year was $222 million.
It was also, coincidentally, $222 million in payrolls calculated for luxury tax purposes. In that method, players’ contracts are averaged, and the average annual values are added to determine which teams are above the threshold as stated in the collective bargaining agreement. In the other methods, the salary for that particular season is used, and a pro-rated share of a signing bonus, if any, is added to the salary.
No matter which payroll the Yankees want to lower, they will have to do some tricky calculations. Their luxury tax payroll was $222 million; it’s now $186.35. The Aug. 31-based payroll was $218 million. It’s now $192.85 million.
On the other hand, with virtually every starting position player and nearly every significant pitcher signed, the Yankees apparently have only one player left to sign for a double-digit salary. That’s Andy Pettitte, who has not responded to the Yankees’ $10 million offer.
He hasn’t responded because he doesn’t want to take a $6 million cut in pay, but there’s no suggestion out there that says someone else is willing to give him more. Pettitte actually is a pivotal figure in a puzzling claim the Yankees have made. The claim has been bought and repeated by so many people, reporters and fans alike, that they recite it like a mantra: 88.5, 88.5, 88.5. Baseball writers use the number so automatically it must be a key on their computer keyboards: 88.5, 88.5, 88.5.
What is it? Put a dollar sign in front and million after it, and it becomes $88.5 million, the amount of money that has supposedly come off the Yankees’ payroll since last season and supports the tale the Yankees tell routinely, that their 2009 payroll will be lower than their 2008 payroll.
But the Yankees base their projection on that 88.5 figure, and it doesn’t exist, at least not that my mathematical gymnastics can find. Let me attempt to get to that total.
First some ground rules. For players who will not be back with the Yankees next season, I have used their base 2008 salaries and pro-rated shares of signing bonuses because that’s the traditional method of calculation used by the commissioner’s office and the Players Association. For players who were traded to or from the Yankees during the season, I have allotted to the Yankees only the portions of their salaries they earned while they were with the Yankees.
Those salaries add to a rounded off $62 million. Now add Pettitte’s $16 million salary, although he may yet re-sign with the Yankees.
Wilson Betemit is gone with his $1,165,000 salary, and so is Ivan Rodriguez, whose salary last season was $13 million but only about a third of it with the Yankees, who paid him $4,262,294.
The Yankees didn’t exercise Damaso Marte’s $6 million option for next season, but they bought it out for $250,000 and they signed him to a new three-year, $12 million contract with a first-year salary of $3.75 million. The Yankees paid the relief pitcher $751,912 for the two months he played for them last season, but next season they will pay him five times the amount that was taken off the payroll.
Two other pitchers won’t be back with the Yankees, but the Yankees won’t be saving a load of money as a result of their departures: Darrell Rasner’s $409,000 and the $200,328 they paid Sidney Ponson as a pro-rated share of the minimum salary ($390,000) contract they gave him after Texas released him from a guaranteed contract.
The Yankees would put Kyle Farnsworth and Latroy Hawkins in the departed column, but both pitchers were traded last July, just before the non-waiver trading deadline and don’t figure in the payrolls based on Aug. 31 rosters and disabled lists. In other words, Farnsworth was traded for Rodriguez, and you can’t count both of their salaries.
So let’s see what we have. With the initial $62 million and assuming Pettitte won’t be back, the total off the payroll is $78 million. Throw in Rodriguez, Betemit, Rasner and Ponson but not Marte, Hawkins and Farnsworth, and the total off the 2008 payroll becomes $84 million and change.
That’s close to 88.5, but it’s not 88.5. And if Pettitte should sign, it becomes $74 million. There are other deductions to make from the off-the-payroll total. Like Marte, teammates Pavano and Giambi had options that the Yankees opted not to pick up. Their buyouts were more expensive — $1.95 million for Pavano, $5 million for Giambi, making a total of $7.2 million in buyouts, which reduces the off-the-payroll savings to $76.8 million.
Now let’s see what the Yankees will spend next season that they didn’t spend this season. Right off the bat they have $23 million for CC Sabathia, $22.5 million for Mark Teixeira and $16.5 million for A.J. Burnett.
Alex Rodriguez’s salary will rise by $5 million, Robinson Cano’s by $3 million, Chien-Ming Wang’s by $1 million. Add $5.4 million for newcomer Nick Swisher and a net of $2.7 million for Marte. Those eight players will be paid $79 million that wasn’t on the payroll this year.
Add $79 million to the $7.2 million in buyouts, and we almost wipe out the $88.5 million the Yankee claim. If Pettitte signs for $10 million, the new money will exceed the departed money, even if it is $88.5 million.
But it’s all the Yankees’ money, and as far as I’m concerned, they can spend it any way they want.
|2009 Tax Threshold||