Will the Yankees lift their self-imposed salary cap?

In 2018, the Yankees ducked under the Competitive Balance Tax threshold for the first time since its creation. Although they talked about it for years, they finally did it. It wasn’t really a surprise, since they announced this as their number one goal last winter, and GM Brian Cashman observed this mandate as he made moves to build the roster.

By reaching this long-sought target, the Yankees avoided paying a luxury tax for this past season, whereas they previously paid a 50% surcharge on payroll exceeding the threshold. They also reset their tax rate, should they exceed the $206 million limit in 2019. Since they would now be considered first-time offenders, the Yankees would only pay a 20% surcharge on overages not exceeding $20 million. The rate jumps to 32.5% if they go over by $20-40 million, and 42.5% if they go past that.

Clubs which exceed the CBT threshold by more than $40 million also have their highest selection in the next Amateur Draft moved back 10 places, unless the pick falls within the top six. In that case, the team’s second-highest selection is moved back 10 places instead.

The Yankees clearly have an incentive to stay below the CBT threshold. They also have good reason for not forfeiting the significant advantage that their financial clout provides over other teams competing for the same talent in the marketplace. So what are their plans?

Cashman may or may not have given us some insight. Speaking at the GM meetings in California, he stated that going over the threshold “would not be the preference.”

Because of the market we’re in and the ownership we have I know that we’re capable of and it’s a decision they ultimately will make when they’re forced to make it -- if they have to make it. It’s my job to collect as much talent as I possibly can in a very cost-effective matter and hopefully I can do all of that not have to go through luxury taxes. - Yankees GM Brian Cashman

When asked whether the Yankees would go outside the organization to replace Didi Gregorius, who is expected to miss a substantial portion of the 2019 campaign as he recovers from Tommy John surgery, Cashman specifically listed payroll impact as one of the considerations. He also said that he prefers “to not line the pockets of opponents to use that (revenue) against us,” referring to the distribution of luxury tax revenue to smaller market clubs.

I think it’s smart that Cashman continues to toe the “fiscal restraint” party line in public. If the plan was to blow past the CBT threshold, and sign all of the top talent to win at all costs, then it would be dumb to broadcast it. Doing so would just jack up salary demands.

It’s imperative that once the dealing is over, the Yankees can demonstrate that they’ve done everything possible to put the best team on the field. Fans don’t want to hear later, “we really wanted to sign so-and-so, but we just couldn’t fit it in the budget”. The Red Sox are not using the luxury tax as an excuse to field an inferior team, and the Yankees shouldn’t either.

I’m not one of those who feel the Yankees need to sign every top free agent to demonstrate a commitment to winning. They have to evaluate whether a possible signing fits the team’s goals now and in the future. We’ve seen plenty of deals show negative value in the back end. Some even prove to be disasters almost immediately, like the Jacoby Ellsbury and Carl Pavano contracts.

The Yankees have rightly prioritized upgrading the starting rotation this winter, while simultaneously ensuring that the bullpen remains dominant. Tapping the free agent market is only one way to accomplish these goals.

For example, the Cleveland Indians recently emerged as sellers as they aim to shed salary. Two-time Cy Young Award winner Corey Kluber is on the trading block, along with his very reasonable $17 million salary. As reported on MLB.com, Cleveland would also like to dump designated hitter Edwin Encarnacion, who is slated to make $21.67 million in the final year of his contract.

There are few teams that can afford to take on the salaries of both players, with the Yankees among them. If Cashman needs to take Encarnacion in order to get Kluber, he should absolutely do it, regardless of luxury tax implications. This is one way the Yankees can use their considerable financial capabilities to instantly add one of the top arms in the game to their rotation.

The overall talent disparity between the Yankees and Red Sox this year wasn’t all that great. The Bombers were really only a couple of clutch hits away from winning the Division Series, while better starting pitching may have even rendered those clutch hits unnecessary. The Yankees are a few key acquisitions away from potentially tipping the balance of power in the AL East, and the front office shouldn’t let payroll stand in the way.