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An early look at Yankees payroll and luxury tax in 2015

We won't be seeing a sequel to the winter flop of last year: Plan-189


The Evil Empire isn't what it used to be. The team that as recently as 2007 was riding a streak of thirteen straight post-season appearances is now facing the very real possibility of missing back-to-back Octobers for the first time since 1994 strike. 2014 also represents the first time that the Yankees haven't had the highest payroll in baseball since 1998. While correlation does not imply causation it is easy to wonder that if the old Yankees, the George Steinbrenner Yankees, would have allowed Robinson Cano to move to Seattle. Perhaps the Bronx Bombers could have approached two straight off-seasons differently, without the desire to avoid the increasingly punitive luxury tax, and perhaps that would have been the difference between making and missing the post-season. Perhaps not.

Meaningless hypotheticals aside, the reality is that the modern day front office is conscious of the latest penalties imposed on expensive payrolls. The Yankees have lived north of the luxury tax - now called the Competitive Balance Tax - almost since its inception, and now pay the repeat offender rate of fifty cents on every dollar of payroll over $189 million. This was the motivating factor behind the ultimately doomed attempt to get player payroll under the tax line for 2014; it would have saved the Steinbrenners from cutting a large cheque to the league office, brought back a rebate on some of their revenue sharing payments, and would have allowed them to pay a much lower rate of 17.5% the next time they went over the line. While the front office couldn't get it done for 2014, will they look to get under $189 milion in the penultimate year of the current Collective Bargaining Agreement? Especially since the Competitive Balance Tax will likely remain a key component of the next CBA?

Well, as it turns out, almost certainly not. There is a reason we've not heard nearly as much chatter about Plan-189 in 2014 as we did in 2012 and 2013. The reason being its not realistic for the Yankees to maintain their payroll below the tax line. The New York Yankees already have over $168 million in guaranteed commitments in 2015 (courtesy of Baseball Prospectus)  for just 10 players. Another 7 players are up for arbitration, having made a combined $9.2 million in 2014; Ivan Nova's lost season should limit his likely raise but Michael Pineda and David Phelps alone should account for a significant bump. Add in the Yankee share of player benefits - $11 million in 2014 - and New York will find itself at the tax line even before Brian Cashman can find a starting shortstop.

In fact, with the same 10 players under contract for 2016 at the same Average Annual Value, the front office doesn't even have the option of using short team deals towards setting up a reduction in salary obligations for 2016, the final year of the current CBA. When the Steinbrenners made the decision to sanction the deals for Brian McCann, Jacoby Ellsbury and Masahiro Tanaka last winter, they did so knowing full well that not only would it doom the 2014 version of Plan-189, it would stop a sequel from even making it into production. When they chose to add future payroll at the trade deadline, after the Tanaka injury, in the form of Martin Prado, as opposed to selling off pieces like Hiroki Kuroda and David Robertson to try and drop under the tax line by the end of 2014, they doubled down on this decision.

With Alex Rodriguez's unmovable contract once again on the books from 2015, New York will need to make more than one crippling move to get payroll under the $189 million line, moves in the order of trading away Tanaka or Brett Gardner. End of the Evil Empire or not, these are not the sort of moves the New York Yankees make.

However, this isn't to say that the luxury tax line will have no effect on offseason spending. It could certainly be a factor when the front office looks to add talent to the squad, with the Yankees paying a 50% surcharge on any contracts they add this winter. It may play into the willingness of the franchise to spend on the marquee free agents like Max Scherzer, Jon Lester and Hanley Ramirez. Perhaps it will have a clearer effect when bidding on players without the type of star factor that will help bring fans to the stadium next season - the first in the post-Derek Jeter era.

It's difficult to predict exactly how the Yankees will approach offseason spending at this point, but it is worth remembering that ticket and stadium suite revenue alone fell from $353 million in 2012 to $295 million in 2013; the primary cause likely being the failure to make the postseason. If the Yankees miss out on October baseball again in 2014, we might well see the front office break out the cheque-book for a second straight winter. After all, there is no Jeter farewell tour to bring fans to the new Yankee Stadium in 2015.

The one thing we can say with certainty, however, is that if the New York Yankees don't commit significant amounts of money in future payroll this winter, it won't be because of plan-189.