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Looking at the luxury tax reset in 2024 while sifting through free agents for 2023

I decided to embark on an exercise of finding the best fits for 2023 by doing some time travel to next off season - A likely tax reset year. The lowest luxury tax figure currently sits at $230M, so every decision going forward will have to rely on the Yankees falling below that figure next year while still staying competitive. I'm going to rely pretty heavily on fangraphs and spotrac for most of the financial figures here, to figure out as close as possible, how much money we can spend on multi year contracts that will count against the "cap" next year. I'll use past history as a guide when determining the Yankees will be willing to cross any tier they need to in 2023 as long as they still can reset in 2024, although I'll try to stay below the 3rd and 4th tiers if possible because the financial penalties are a little more severe at that point.

For anyone unaware, the current luxury tax tiers are:

Tier 1 $230-$250M - 20% penalty on overage. This computes to a penalty of $4M(Chump change)

Tier 2 $250-$270M - 32% penalty on overage above Tier 1, plus the $4M Tier 1 penalty. This computes to a penalty of just over $10M(Not a burden at all)

Tier 3 $270-$290M - 62.5% penalty on 1st offense, adding $12.5M penalty to the $10M Tier 1 and Tier 2 penalties, to max out at $22.5M. 65% on additional offenses, resulting in a max tax penalty of $23-24M(This computes to roughly an 8% tax on the entire payroll)

Tier 4 $290M+ - 80% penalty on anything over $290M in addition to the $23.2M penalty for passing lower tiers.

These penalties will increase 10% for the Yankees in 2023 due to being a repeat offender by eclipsing the tax in 2022. I believe they will try to stay below the third tier as much as possible, but as long as they're able to reset next season, they'll be willing to eclipse it for the right players.

In this exercise, I will be assuming Judge re-signs and use a luxury tax figure of $35M/yr. I believe that's a reasonable average expectation, with any variance being relatively small. I'll also take into consideration the likely scenario they try to continue their trend and reset the tax again in 2027 and 2030. The only reason I'll look that far into the future is to give slight priority to a four year deal for a player as opposed to a five year deal.

Where payroll stands right now for 2023 - Spotrac currently projects the Yankees to carry a tax figure of roughly $218M. Fangraphs projects a slightly higher total of $222M. We'll average the two and say the Yankees already have $220M on the books for 2023 without Judge or any other upgrades. Re-signing Judge certainly puts the Yankees into the second tax penalty tier at around $255M. Assuming they initially try to stay below the third tier, there's only about $15M for other acquisitions without any subtractions. If they bump up against the top of the third tier, they'll have about $35M available.

Theoretically, if the Yankees re-sign Judge, they could go into the 2023 season with the existing roster without making any other moves. They have players to man every position, along with possibly a little too much depth in the infield and bullpen(although bullpen depth is not of the back end variety). But, if we were to look for areas they should try to improve, I'd rank them as follows:

1) An impact bat - preferably LH - Someone needs to help Judge in this lineup consistently

2) LF - could combine #1 and #2 into one player, but not necessary

3) Starting pitcher - There are still some question marks in the rotation, and Cole and Cortes are the only locks for 2024.

4) 3B - Donaldson may have to stay for a little longer because of the contract, but ideally they find more offensive production out of 3B.

5) SS - We all know Volpe and Peraza loom, but this has to be listed because until they officially produce consistently in a MLB lineup, it's an area the Yankees need to upgrade.

You can argue with the ranking order or point to another area like backup catcher or bullpen, but any upgrades in those areas should not be significant hits to the budget and would result in a matching payroll deduction for the player being removed.

2024 Yankee salary projections -

Neither site has included arbitration or other payment estimates into their 2024 salary models yet, so they currently show a much lower than expected payroll figure of roughly $120M. When we add Judge at $35M and $50M for the arbitration/other payments we've already eclipsed $205M for the 2024 season. This only leaves $25M to fill the roster within those limitations and some significant roster spots to fill. They'll be losing Montas, Severino, Bader, Donaldson, Peralta, and the seemingly irreplaceable IKF to free agency potentially opening a vacancy at 3B, CF, and 2 or 3 rotation slots. Sure, the Yankees can extend any of these players (who doesn't want to see IKF on a long term deal?), but they will be counted against the $25M available. The Yankees will have some internal options that may fill some of these holes, like DJL or any of the graduating prospects. With the tight budget, the in house options will need to step up. We're going to use this information to target some specific players the Yankees might go after this off season.

What assumptions can we make knowing they only have about $25M to fill the roster in 2024?

1) They will be looking to move contracts that effect the 2024 payroll.

Obvious(but difficult to move) candidates - Hicks($10M), Donaldson($6M buyout)-easier said than done.

Less obvious candidate - DJ Lemahieu

Least likely candidate - Stanton

Most likely candidate - Gleyber Torres - He's going to earn close to $10M this season, and will be slated to make even more in his last year of arbitration next year. It's reasonable to expect him to be awarded $15M in 2024. That's a lot of money for a player that the Yankees could have at least three in house youngsters to replace at 2B. This is a necessary move for a team that insists on resetting payroll every three years. His trade value will be much lower next off season due to one less year control and his escalating cost. Now is the time to trade Gleyber. Removing Gleyber's $15M arbitration salary from the 2024 payroll would drop the $50M "Other" category above into the $40M range. That single move shifts the available budget from $25M-$35M next year.

There aren't any other significant moves the Yankees can make to save money after that. Rizzo, DJ, and Hicks are the only other players making significant enough money to make a dent in the figures. Rizzo isn't going anywhere and who'll take the full contract of Hicks or DJ? Some players being denied arbitration, traded, or replaced with cheaper alternatives might save another $5M(Trivino, German, Higgy). So, we've freed up a total of $40M to spend in 2024.

2) Any multi year additions this off season, should at least indirectly fill one of the already defined needs in 2024. In other words, 3B, CF, and a couple of starting pitchers should take priority her. It doesn't have to be a direct one for one positional placement, but a plan for moving a player around will need to be in place if it isn't. I'm thinking about a potential LF fill in for 2023 that might be able to move to CF in 2024 type situation.

Looking at the top 50 free agent list on mlbtraderumors.com, there are 23 players that could conceivably be looked at as possible Yankee targets. I eliminated catchers, any players expected to be signed long term at $30M+/year, DH only players, Clayton Kershaw(Dodgers or retire), and Andrew Heaney(obviously) to narrow the list to the 23 conceivable options on the top 50. I added a couple other options that didn't make the list as possibilities as well.

PLAYER POSITION EXPECTED CONTRACT AVG./YEAR
XANDER BOGAERTS SS 7/$189 $27
DANSBY SWANSON SS 7/$154 $22




CARLOS RODON SP 5/$140 $28
KODAI SENGA SP 5/$75 $15
CHRIS BASSITT SP 3/$60 $20
JAMESON TAILLON SP 4/$56 $14
TAIJUAN WALKER SP 4/$52 $13
SEAN MANAEA SP 4/$52 $13
NOAH SYNDEGAARD SP 3/$36 $12
NATHAN EOVALDI SP 2/$34 $17
JOSE QUINTANA SP 2/$24 $12
ROSS STRIPLING SP 2/$18 $9
MICHAEL WACHA SP 2/$16 $8
CORY KLUBER SP 1/$12 $12
DREW RUCINSKI SP 2/$9 $5




BRANDON DRURY 3B 2/$18 $9
JUSTIN TURNER 3B 1/$14 $14




JURICKSON PROFAR UTIL 2/$20 $10




BRANDON NIMMO OF 5/$110 $22
ANDREW BENINTENDI OF 4/$54 $14
MITCH HANIGER OF 3/$39 $13
MICHAEL BRANTLEY OF/DH 1/$15 $15
MICHAEL CONFORTO OF 1/$15 $15




OTHER


MASATAKA YOSHIDA OF

CODY BELLINGER OF

There's a few names that should easily be removed from consideration due to various issues concerning age, injury history, insignificant upgrade, or past relationships. The names I'd drop off without hesitation would be: Drury, Profar, Justin Turner, Wacha, Stripling, Quintana, Eovaldi, Syndegaard, Walker. So, we're left with 16 players the Yankees should at least be looking into, if they plan to continue their pattern of resetting the tax every three years.

PLAYER POSITION EXPECTED CONTRACT AVG./YEAR
XANDER BOGAERTS SS 7/$189 $27
DANSBY SWANSON SS 7/$154 $22




CARLOS RODON SP 5/$140 $28
KODAI SENGA SP 5/$75 $15
CHRIS BASSITT SP 3/$60 $20
JAMESON TAILLON SP 4/$56 $14
SEAN MANAEA SP 4/$52 $13
CORY KLUBER SP 1/$12 $12
DREW RUCINSKI SP 2/$9 $5




BRANDON NIMMO OF 5/$110 $22
ANDREW BENINTENDI OF 4/$54 $14
MITCH HANIGER OF 3/$39 $13
MICHAEL BRANTLEY OF/DH 1/$15 $15
MICHAEL CONFORTO OF 1/$15 $15




OTHER


MASATAKA YOSHIDA OF

CODY BELLINGER OF

The reason I started this exercise, was to see what players the Yankees could reasonably acquire while also looking forward to their inevitable resetting of the tax next year. There's a bunch of combinations of the above players that many of us Yankee fans would be more than happy to see on their roster. I have to believe a trade would be needed to finish the puzzle and still think they could sign one of the $30+M players and make it work. It just becomes more difficult financially, the easier it becomes on the field.

How would you fill the current holes from this list?

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