SHOP TILL YOU DROP
New draft rule may affect ’18 spending spree
THE way the Yankees are going with their player development, they might not feel inclined to spend huge in the monster free-agent class of 2018-19, anyway.
But just in case they don’t become Major League Baseball’s true equivalent of the Golden State Warriors, it turns out there’s another disincentive to go after, say, both Bryce Harper and Manny Machado: How much do they want to hurt their future draft position?
Baseball’s collective bargaining agreement for 2017-21 finally became public last week, nearly eight months after MLB and the Players Association settled on terms to avoid a lockout or work stoppage, and kudos to Baseball America’s J.J. Cooper for getting the jump on a very interesting, previously undisclosed detail in the agreement:
If a team exceeds what is termed the “Second Surcharge Threshold” in its payroll, then in addition to paying taxes on that overage, it also would drop 10 spots in the subsequent amateur draft (unless it has a top-six selection in that draft, in which case the club’s second selection would drop 10 spots).
So let’s say, for argument’s sake, the Yankees succeed in getting their 2018 payroll below the $197 million threshold, their long-desired goal. Then, after de- feating the Mets and their player-manager Yoenis Cespedes in the World Series, they celebrate by going nuts and signing Harper to a 12year, $420 million package and Machado for 10 years and $320 million.
Factoring in their other moves, the Yankees’ payroll jumps all the way to $250 million. Their penalty would be:
1) A 20 percent tax on the dollars from $206 million (the threshold) to $226 million. That’s $4 million.
2) A 32 percent tax on the dollars from $226 million to $246 million (the second surcharge threshold). That’s $6.4 million.
3) A 62.5 percent tax on the dollars from $246 million to $250 million. That’s $2.5 million.
4) A 10-slot drop in their first draft selection.
5) If both players are “qualified” free agents — if they receive qualifying offers and reject them, which will happen unless they get traded midseason, which is a distinct possibility for Machado — then the Yankees also would have to give up their second- and thirdhighest draft picks as well as have their international signing bonus pool reduced by $1 million ($500,000 each) in the subsequent full signing bonus period. If only Harper is qualified, then it would be the secondhighest pick and $500,000.
That adds up to $12.9 million plus the dropped draft pick and the chance of losing another two picks altogether and the international penalty. Just to give you an idea why the Yankees consider it so essential to get below the threshold in ’17, if they don’t do so, they would pay the highest possible tax rates (50 percent, 62 percent and 95 percent), which adds up to $26.2 million, and they’d also lose their fifth- and sixth-highest pick and a total of $2 million in international money. Whew!
Given how large a role their savvy drafting has played in their resurrection, the draft penalty would give them further disincentive to pursue a Harper-Machado future. And keep in mind Hal Steinbrenner has said repeatedly he doesn’t think he needs to spend as much as he has to win a championship, and this year’s Baby Bombers boom is supporting that theory.
I’m betting heavily against this sort of spending spree. One of Harper and Machado? For sure. Not both, though. Now there’s another reason why.