Post by wcsoxfan on Nov 10, 2013 9:21:34 GMT -5
This is intended to be a list of the ways a team could potentially manipulate their payroll to work around the luxury tax - please add feedback:
1. Buyouts On Team Options: If a player has an option year(s) at the end of their contract then the buyout portion is averaged along with the rest of the contract to determine the AAV of the contract in relation to the luxury tax. This would grant short-term luxury tax relief to teams who are at/over the tax line. (e.g. 1 yr at 15 mil + 15 mil option w/5 mil buyout = 10 mil AAV) - example: Adrian Beltre 2010
2. Front-Loading Contracts: A luxury tax candidate (large market team) can front load a player's contract in order to lower the financial burden in later years while making the contract more enticing to small market teams. This may be useful for older players who are still serviceable at the end of their careers but aren't worth the luxury tax penalties to the large market team. The small market team, assuming they are not up against the luxury tax, would have little to no concern over the AAV of the contract. (e.g. 3yr at 15 mil, 10 mil, 5 mil = 10 mil AAV; if traded after year two the large market team has only been counting 10 mil AAV against their previous two years' payrolls as they pertain to the luxury tax while the small market team only has to pay 5 mil for the one season)
3. Back-Loading Contracts: A non-luxury tax team (small market) could place a large portion of the financial burden of their contract(s)on the later years with a plan to possibly trade the player(s) before their contract(s) expire. This would keep the payroll of the small market team reasonable while not affecting the large market team with a contract which could place them over, or further over, the luxury tax line. (e.g. 3 yr at 5 mil, 10 mil, 15 mil = 10 mil AAV; if traded after year two the small market team spends only 7.5 mil per year while the large market team has a 10 mil AAV contract) - example: Aramis Ramirez 2012-2014
4. Posting Systems: A player posted from another league does not have their posting fee incorporated into the player's contract/cost for luxury tax purposes. Therefore a luxury tax candidate (large market team) could send a large posting fee to the player's current international team to obtain his exclusive negotiating rights and then sign the player to a deflated contract due to the player's lack of leverage in negotiations - with only the contract counting towards the luxury tax. (e.g. 50 mil posting fee + 5 yr 50 mil contract = 10 mil AAV; the 50 mil posting fee has no bearing against the luxury tax) - example: Daisuke Matsusaka 2007-2012
5. Contract Extensions: A team can extend a player's contract before the player's current contract has ended. This would lead to the salary, for luxury tax purposes, being the average of the remaining years left on the previous contract and the new years added onto the contract. This will often lead to a salary which counts less harshly against the luxury tax in the new years. (e.g. 2 yr and 20 mil on old contract + 4 yr 100 mil extension = 20 mil AAV; the player's contract counts 10 mil extra against the luxury tax for the two remaining years of the previous contract but 5 mil less on the four proceeding years of the new contract) - example: Dustin Pedroia 2014-2021
6. Signing Bonuses to Non-Drafted Players: A team can grant signing bonuses to international and domestic players who aren't, or are no longer, subject to the draft. These bonuses have no bearing on the luxury tax but are subject to certain restrictions - 2014 Bonus Pool per Baseball America. A team may trade for bonus pool money in exchange for players and/or money allowing said team to spend more on players without affecting the payroll for luxury tax purposes. (e.g. 2 mil bonus = 0 AAV; only the player's salary is counted toward the luxury tax and only if said player is on the major league 40-man roster) - example: Chicago Cubs 2013
7. Rule 4 Draft: Teams can sign first year players to bonuses and contracts which do not counts against their luxury tax but these bonuses are subject to separate restrictions and penalties. Their major league contracts count against the luxury tax once the player reaches the 40-man major league roster.
8. Rule 5 Draft: A team can draft a player from another team in the rule 5 draft while offering $50,000 to the source team, with $25,000 and the player each being returned if the player does not remain on the drafting teams 25-man roster (or disabled list) for the entirety of the season. This $50,000 fee does not count toward the luxury tax.
1. Buyouts On Team Options: If a player has an option year(s) at the end of their contract then the buyout portion is averaged along with the rest of the contract to determine the AAV of the contract in relation to the luxury tax. This would grant short-term luxury tax relief to teams who are at/over the tax line. (e.g. 1 yr at 15 mil + 15 mil option w/5 mil buyout = 10 mil AAV) - example: Adrian Beltre 2010
2. Front-Loading Contracts: A luxury tax candidate (large market team) can front load a player's contract in order to lower the financial burden in later years while making the contract more enticing to small market teams. This may be useful for older players who are still serviceable at the end of their careers but aren't worth the luxury tax penalties to the large market team. The small market team, assuming they are not up against the luxury tax, would have little to no concern over the AAV of the contract. (e.g. 3yr at 15 mil, 10 mil, 5 mil = 10 mil AAV; if traded after year two the large market team has only been counting 10 mil AAV against their previous two years' payrolls as they pertain to the luxury tax while the small market team only has to pay 5 mil for the one season)
3. Back-Loading Contracts: A non-luxury tax team (small market) could place a large portion of the financial burden of their contract(s)on the later years with a plan to possibly trade the player(s) before their contract(s) expire. This would keep the payroll of the small market team reasonable while not affecting the large market team with a contract which could place them over, or further over, the luxury tax line. (e.g. 3 yr at 5 mil, 10 mil, 15 mil = 10 mil AAV; if traded after year two the small market team spends only 7.5 mil per year while the large market team has a 10 mil AAV contract) - example: Aramis Ramirez 2012-2014
4. Posting Systems: A player posted from another league does not have their posting fee incorporated into the player's contract/cost for luxury tax purposes. Therefore a luxury tax candidate (large market team) could send a large posting fee to the player's current international team to obtain his exclusive negotiating rights and then sign the player to a deflated contract due to the player's lack of leverage in negotiations - with only the contract counting towards the luxury tax. (e.g. 50 mil posting fee + 5 yr 50 mil contract = 10 mil AAV; the 50 mil posting fee has no bearing against the luxury tax) - example: Daisuke Matsusaka 2007-2012
5. Contract Extensions: A team can extend a player's contract before the player's current contract has ended. This would lead to the salary, for luxury tax purposes, being the average of the remaining years left on the previous contract and the new years added onto the contract. This will often lead to a salary which counts less harshly against the luxury tax in the new years. (e.g. 2 yr and 20 mil on old contract + 4 yr 100 mil extension = 20 mil AAV; the player's contract counts 10 mil extra against the luxury tax for the two remaining years of the previous contract but 5 mil less on the four proceeding years of the new contract) - example: Dustin Pedroia 2014-2021
6. Signing Bonuses to Non-Drafted Players: A team can grant signing bonuses to international and domestic players who aren't, or are no longer, subject to the draft. These bonuses have no bearing on the luxury tax but are subject to certain restrictions - 2014 Bonus Pool per Baseball America. A team may trade for bonus pool money in exchange for players and/or money allowing said team to spend more on players without affecting the payroll for luxury tax purposes. (e.g. 2 mil bonus = 0 AAV; only the player's salary is counted toward the luxury tax and only if said player is on the major league 40-man roster) - example: Chicago Cubs 2013
7. Rule 4 Draft: Teams can sign first year players to bonuses and contracts which do not counts against their luxury tax but these bonuses are subject to separate restrictions and penalties. Their major league contracts count against the luxury tax once the player reaches the 40-man major league roster.
8. Rule 5 Draft: A team can draft a player from another team in the rule 5 draft while offering $50,000 to the source team, with $25,000 and the player each being returned if the player does not remain on the drafting teams 25-man roster (or disabled list) for the entirety of the season. This $50,000 fee does not count toward the luxury tax.
