The Yankees as a franchise symbolize two overarching themes. The first is success on the field: They have the most championships and highest winning percentage in MLB history. The second is spending off it: Ever since the advent of free agency, the Steinbrenner–led franchise has held a deserved reputation for bestowing the richest contracts upon the sport’s most talented players.
Yet Bryce Harper won’t play for the Yankees next season. Nor will Manny Machado. Nor will Patrick Corbin. There’s a Ronald Torreyes–sized chance New York decided for baseball reasons it didn’t want to add any of three All-Stars at prime ages in its quest to unseat Boston in the AL East. Far more likely, the Yankees were scared off by money.
That’s an absurd notion on its face—the Yankees! scared by cost!—but maybe it won’t matter. After all, the Yankees won 100 games last season despite an Aaron Judge injury, regular rotation worries, and an unexpected crash from Gary Sánchez both at and behind the plate. They didn’t lose any key players from last year’s roster this winter, while they gave incumbent starter Luis Severino a co-ace in James Paxton via trade and added a bevy of useful veterans in free agency. Both FanGraphs’ and Baseball Prospectus’s projection systems predict the Yankees will win the division in 2019; the former has them finishing with the best record in baseball.
Yet something is different about these Yankees than previous versions predicted to lead the league. The Yankees are spending, but not like the Yankees of old. And they’re succeeding, but not like the Yankees of old, either. Sixteen different teams have won a division title since New York last claimed an AL East trophy, in 2012. The despised Red Sox have won two World Series. And in response to Boston’s latest triumph, which included a romp through the Bronx in the ALDS, the Yankees forwent the chance to acquire some of the best and youngest free agents in history.
Perhaps they harbored true concerns about those players—about Harper’s defensive decline and offensive inconsistency, about Machado’s overblown “hustle” comments, about Corbin’s limited track record as an ace. Perhaps they wanted to save their money for a run at Nolan Arenado in free agency next winter—if so, oops! Arenado just signed a lengthy extension with Colorado. It’s hard to commit to a nine-figure contract when not clearly convinced about a player’s worth.
It’s also hard when a team is as concerned about spending as New York has become. The Yankees spent more on payroll in 2005 than they did in 2018, and that’s before accounting for inflation or the rise in revenue across the rest of the sport. In that span, every other team increased its payroll, 19 teams doubled their costs, and the average non-Yankees team increased its spending by a whopping 150 percent. (Payroll figures in this piece refer to calculations for luxury-tax purposes, which use the average annual value of long-term player salaries.)
But not the Yankees, who have intentionally let their financial advantage over the rest of the league wither over the past decade and a half. From 2003 (the first year under the current luxury tax system) through 2013, the Yankees more than doubled the average payroll of the other 29 teams every year, but that gap has declined precipitously in the seasons since.
The 2018 season was the first on record in which New York’s payroll didn’t rank first or second. As the situation now stands, the Yankees won’t rank that high in 2019, either.
They’re admittedly not alone in their newfound reluctance to spend. The Dodgers ducked the luxury tax in 2018, just like the Yankees, and seem to want to stay under, now engaging in “baseball money-laundering” for several consecutive offseasons to achieve that goal. The Cubs have flat-out stated they don’t have any money to spend, and even the Red Sox reportedly flirted with trading players who just helped them win the World Series because they’re fairly paid instead of underpaid for their production. The luxury tax as a concept has fulfilled its destiny as a de facto salary cap, yielding a leaguewide plague—but it’s manifesting most conspicuously and most surprisingly with the Yankees, baseball’s biggest spenders for decades. If the likes of Harper and Machado couldn’t garner an offer from the franchise, who can?
The luxury, or competitive balance, tax dates back to 1997, after the owners and players union agreed on the idea amid larger, harsher disagreement about the institution of a stricter salary cap. Even then, players had expressed concerns about the ramifications of a tax. “The players would view the tax as having the same effect as a salary cap,” Murray Chass explained in The New York Times during the strike a few years earlier, noting that none other than the head of the owners’ negotiating team admitted that “a tax concept can look like a salary cap, and any tax plan is meant to put some controls on labor costs.”
Players “believe that those steep taxes would prompt teams to reduce their payrolls,” Chass added. (Disclosure: Chass is my grandfather.) “Why, baseball players ask, would the Yankees or any other team willingly spend enough in salaries to trigger a costly tax?”
Yet for years, the Yankees didn’t actually seem to care, but rather raised their spending level every season. The first version of the luxury tax was kind of a mess because the threshold after which teams paid a fine was unpredictable every year; the second, implemented for the 2003 season, simplified the process of punishing offenders, which at the time meant the Yankees and only the Yankees. And again, they didn’t care. Before the 2003 season, despite hinting that they might lighten their payroll to account for pending taxes, they splurged for international stars Hideki Matsui and José Contreras—the latter inspiring Red Sox president Larry Lucchino’s now-famous quote, “The evil empire extends its tentacles even into Latin America.”
From 2003 through 2011—before the Dodgers joined New York as big spenders—the Yankees alone contributed more than 90 percent of the whole league’s luxury-tax payments. The Evil Empire was past its dynastic phase at this point, winning only one World Series during that stretch, but the Yankees also won seven division titles and two wild-card berths from 2003 to 2012, and the team’s flaws resulted more from a barren farm system than overinvestment in high-contract players.
This stretch also brought a change with more long-term impact on the future of the franchise. Longtime owner George Steinbrenner ceded control of the franchise to his son, Hal, who assumed full operational authority after the 2008 season. George died two years later, in July 2010. Despite letting the club’s high-spending course continue unabated for a few years, Hal brought to the owner’s seat a different perspective on spending.
He wanted to maximize profits in addition to wins, and as such, as early as 2012, Hal began touting the idea of curtailing payroll. “I’m a finance geek,” he said at the time. “I guess I always have been. That’s my background. Budgets matter. Balance sheets matter. I just feel that if you do well on the player development side, and you have a good farm system, you don’t need a $220 million payroll. You don’t. You can field every bit as good a team with young talent.”
The original, optimistic plan involved New York slipping below the luxury tax line by 2014. But then a juicy free-agent class beckoned, and $438 million of long-term commitments later, Masahiro Tanaka, Jacoby Ellsbury, Brian McCann, and Carlos Beltrán were all wearing pinstripes, and the Yankees flew past the tax threshold once again.
Yet the overall goal to curb spending was merely delayed, not eliminated entirely. Steinbrenner emphasized the plan in 2015. He emphasized the plan in 2016. He emphasized the plan in 2017. The New York Times’ David Waldstein wrote, “This new, restrained strategy … is not a reflection of the team’s financial health,” but rather a reflection of Steinbrenner, who “seems intent on establishing a certain austerity because it makes financial sense to him.”
Before the 2016 season, as the Yankees came off a wild-card berth, they didn’t sign a single free agent to an MLB contract for the first time in club history. They also didn’t make the playoffs. Before the 2017 season, they lost hefty contracts belonging to Mark Teixeira (retirement), McCann (offseason trade), and Beltrán (previous-deadline trade), and the team’s total payroll experienced its largest year-over-year drop on record. Before the 2018 season, they traded a prospect to dump Chase Headley’s contract and let other contracts expire, and the team’s total payroll experienced its new largest year-over-year drop on record.
In just two seasons, their yearly spending for luxury-tax purposes dropped by more than $50 million. In 2013, writing about the new Steinbrenner plan to save money, Grantland’s Rany Jazayerli noted, “It would be almost impossible to drop $30 million worth of salaries in one offseason.” New York almost did it twice in a row. The 2018 team finally avoided the tax, accomplishing a feat no Yankees club had ever managed before. The finance geek had gotten his way.
The luxury tax, however, is less a legitimate reason not to spend than it is a crock, an easy cudgel to wield against players seeking fair compensation and a convenient excuse to offer fans for not re-investing their dollars in the team for which they cheer. And Yankees fans invest a whole lot of dollars: Yankee Stadium featured the second-highest attendance in the majors last season, despite charging the highest overall prices of any park.
The list of penalties for exceeding the luxury tax in the current CBA, which runs through the 2021 season, are technical and confusing, so here’s the three-part gist. First, teams pay fees on what they spend above the luxury-tax threshold. Second, those fees escalate the more teams spend—particularly for repeat offenders and after a second threshold that sits $40 million higher than the initial luxury-tax line. And third, teams suffer some player-acquisition costs when they spend more—like a loss of international pool money and changes to draft compensation for free agents—particularly after that $40 million mark, which pushes their first-round pick in the following year’s draft back 10 spots.
None of those penalties is overly arduous, however. Consider the first two, which involve fees. Based on their 2018 spending, the Red Sox had to surrender just $12 million extra—a small price to pay for a World Series trophy. And while the Yankees’ overall tax bill of $341 million since 2003 seems astonishingly large, it represents a mere fraction of the $3.4 billion the franchise has paid for players in that span. Or consider the third, which involves draft pick changes. As The Ringer noted in our Kyler Murray coverage, the median career WAR for the no. 9 pick in the MLB draft is 0.0; the whole thing is a crapshoot, so a 10-spot delay shouldn’t complicate the possible decision to add a superstar—and his contract—in the present.
Owners and executives contend that other factors come into play. In October, Yankees general manager Brian Cashman said the team hesitates to pay too much via the tax because it doesn’t want “to line the pockets of others to let them utilize that excess against us,” referring to the distribution of luxury-tax dollars to other teams. “It was mission accomplished in terms of the payroll this year, and taking away advantages that teams have been getting from us because we were exceeding those thresholds.”
It’s difficult to imagine a more disingenuous excuse for not spending money. The first $13 million a team pays to the tax goes toward player benefits, and half of the remaining payments go toward player retirement accounts; only then does the last bit of the pie split among teams that haven’t exceeded the threshold. Let’s imagine the Yankees were to pay $42 million toward the tax in 2019, which would require an overall payroll of nearly $300 million—meaning they could have signed Harper, Machado, and Corbin. In that extreme case, the “advantages” Cashman is so worried about other teams gaining from New York’s tax bill would amount to just $500,000 apiece, assuming no other team spent past the limit—not quite a worrying sum given that it would coincide with the Yankees spending about $100 million extra (!) on their own roster improvements.
For years, the Yankees defended themselves against accusations of “bought” titles by pointing to the high percentage of revenue they re-invested in the roster, as contrasted with clubs whose owners more often pocketed revenue-sharing dollars. (Last winter, the MLB Players Association filed a grievance that said the Marlins, Pirates, Athletics, and Rays were doing just that.) Even without access to the Yankees’ books, given that New York’s payroll hasn’t risen since 2005 while MLB’s revenues have nearly tripled, it seems like this trend has changed.
That’s not to say the Yankees never spend anymore, of course. They committed at least $60 million (or more, depending on future contract options) this offseason to bring back J.A. Happ and Zack Britton after trading for the two lefty rental pitchers last July, and promised $51 million to role players DJ LeMahieu and Adam Ottavino. Last winter, they traded for Giancarlo Stanton, owner of the largest contract in baseball history before Harper’s, and the winter before, they signed Aroldis Chapman to the sport’s highest-ever payout for a closer.
The Yankees aren’t frugal in an absolute sense, but as the richest team in baseball, they’re relatively frugal given their means. They spent just 31 percent of their 2017 revenues (as estimated by Forbes) on their 2018 payroll, placing them alongside the White Sox with the two lowest figures by far. The 29 non-Yankees teams averaged spending 49.7 percent of their revenue, which for New York would have dictated expenditures north of $300 million. The Red Sox spent more than half of their money on 2018 player salaries, and they won a World Series as a result.
Lowest Payrolls Relative to Profits
|Team||2017 Revenue (millions)||2018 Payroll (millions)||Percent Spent|
|Team||2017 Revenue (millions)||2018 Payroll (millions)||Percent Spent|
(The placement of the Dodgers and Cubs on that chart also helps explain those fan bases’ frustrations this winter. And the White Sox’s placement illustrates how damning their hardball negotiations with Machado look after he spurned their proposal for San Diego’s superior offer.)
Player salaries don’t encompass the Steinbrenners’ overall baseball expenses. They pay for the front office and a robust analytics staff and all manner of ballpark trappings; it’s (probably) not as if they’re fully pocketing hundreds of millions of dollars every year. But they’re making plenty of money regardless, and the franchise value continues to rise, and even as they’ve exceeded the luxury tax for 2019, they’ve kept close to the threshold lest they fall further into the penalty or—as Boston and the Cubs have feared doing—approach the dreaded second threshold that’s $40 million higher than the first.
It fits, again, with ownership’s long-stated goals, even if they were often presented as one-time strategic endeavors with future growth in mind. Dipping under the tax line once, Steinbrenner said in November 2017, would “give us more flexibility in the immediate years to come if we should decide to go over it again,” because it would allow the club to avoid the repeater penalties. But, Steinbrenner continued, “You can have a world championship-caliber team and not have a $200-plus million payroll, and I think we’re finally getting to a point where that’s coming true for us because we’ve got a lot of good young players on our team.”
He’s right about one thing: The Yankees have a lot of good young players. Not since 1970 had New York fielded a younger average lineup than it did last season, and come playoff time, 80 percent of the team’s plate appearances went to players in their 20s. That’s a positive for competitive purposes, as Aaron Judge, Gleyber Torres, and Co. look poised to anchor Yankees lineups for years to come.
Over the past half-decade, New York has vastly improved its ability to develop those good young players. In 2014, Baseball America ranked the Yankees’ minor league system 18th, writing in its yearly handbook, “It’s hard to find a system that had a worse 2013,” but thanks to shrewd trades and enhanced player instruction, especially for pitchers, the club’s minor league outlook underwent a rapid transformation. BA ranked the Yankees’ system third in 2017 and second in 2018—the farm’s best since it was no. 1 overall in 2000.
But why not both? Why can’t the Yankees excel on the player development side and amass a large payroll? Wouldn’t developmental success stories like Judge look even better supplemented by free-agent swings like Machado? It’s not as if high-priced additions would inhibit continued player growth at the lower levels. For years, New York’s brain trust had implied that Operation Luxury Tax was designed to reset the tax rates to make future splurges more palatable. Steinbrenner asked Yankee fans to trust him: Let us duck under one time, and we’ll have even more reason to spend like the Yankees of old.
Even if the 2018 free-agent class wasn’t as lustrous as it once looked, the opportunity to make an extravagant splash remained, but the Yankees barely dipped their toes in the deep end. The first miss was Corbin, a childhood Yankees fan who suggested last April that he’d be thrilled to don pinstripes, and whom Cashman deemed the offseason’s best free-agent pitcher. The Yankees didn’t match the Nationals’ offer, and Corbin signed with Washington in December.
The second miss was Machado, whom the Yankees reportedly “love” and who loved the Yankees in return, reportedly considering them his first choice for much of the winter. They never made him an offer, scared by his asking price, and when he signed with San Diego in February, Cashman remarked, “You can’t have them all.”
The third miss was Harper, whom New York apparently wouldn’t have either, even as he fit the winter’s pattern. He grew up a Yankees fan, telling Sports Illustrated in his introductory cover story back in 2009 that his goals were to “be in the Hall of Fame, definitely. Play in the pinstripes. Be considered the greatest baseball player who ever lived.” The Yankees never even talked to Harper or approached his agent, Scott Boras, about a meeting. He’s now a Phillie, probably for the rest of his career.
All of which brings to mind the aphorism from Andrew Friedman, Dodgers president of baseball operations: “If you’re always rational about every free agent, you will finish third on every free agent.” Or, in the Yankees’ apparent case this winter, you won’t even finish in the running at all.
Despite all of that tumultuous buildup, the Yankees enter the 2019 season in solid straits. The bullpen is a terror once again, with Britton and Ottavino joining Chad Green, Dellin Betances, and Aroldis Chapman to give manager Aaron Boone five All-Star-caliber relievers to call on. The offense that set the MLB record for home runs last season is back in almost full force, with shortstop Didi Gregorius (out until midseason due to Tommy John surgery) the only absentee. They hope to replace his production with a combination of Torres, LeMahieu, and minimum-contract signee Troy Tulowitzki in the middle infield. Even the much-derided rotation projects as the majors’ third best in 2019, per FanGraphs, just a tenth of a point of WAR away from Boston in second place.
All the Yankees’ offseason moves, in a vacuum, look logical and intelligent, from signing the likes of Happ and LeMahieu—sturdy veterans surrounding their younger, higher-ceiling teammates—to increase depth and raise the team’s floor, to extending Severino and Aaron Hicks with what appear to be owner-friendly deals.
It’s all very smart and proper. But the advantage of pinstripes, and the money the pinstripes symbolize, is not always having to be smart and proper because good players, period, matter more than good players with cost-efficient contracts. And so it’s the moves New York didn’t make that stand out most from this winter. Tulowitzki might bounce back after a year away from the majors—he’s already slugged two homers in spring training—but why not splurge to sign a 26-year-old shortstop who was an All-Star three of the past four years instead of penny-pinching to sign a 34-year-old shortstop who was last an All-Star four years and several debilitating injuries ago?
That sentiment will rise to a peak when any problem presents itself in 2019. And problems will come; they always do, over the course of any season, and the Yankees aren’t immune from concerns. In the infield alone, they have to hope second-year third baseman Miguel Andújar can improve defensively after a disastrous rookie year in the field. They have to hope Tulowitzki can stay on the field. They have to hope that Gregorius can recover swiftly and effectively from Tommy John surgery, that LeMahieu can hit outside Colorado’s Coors Field, that first baseman Luke Voit can maintain his late-season magic over a full campaign.
In the outfield, where Cashman said the Yankees were so full that they didn’t need to inquire about Harper, they return the same group they had in 2018. It looked good heading into that season, too, before injuries forced the team to use a combination of Shane Robinson, Jace Peterson, Billy McKinney, and an out-of-position Neil Walker in the outfield for a combined 33 starts before they traded in desperation for Andrew McCutchen, who’s now in Philly with Harper.
Those are mostly minor concerns in the grand scheme of spring-training worries—no position in the Bronx is as great a concern as, say, Boston’s bullpen or the Mets’ fifth-starter slot, and 20-something other fan bases would love to suffer such ills—but they glare especially bright because of how New York conducted its business this winter. In that same vein, the Yankees’ payroll shenanigans might seem minor next to other setups, and 20-something other fan bases would love for their owners to spend like the Yankees. But in a stagnant market that saw the average player salary decrease in 2018 for the first time since 2004, and which has only worsened this winter, it’s just as problematic for the top to resist upward movement as the bottom.
This is an organization that adopted the “Evil Empire” moniker with glee, at one point going so far as to argue in trademark court that they are baseball’s one true Evil Empire. Cashman continued the metaphor this winter when he called his current squad a “fully operational Death Star.” If that club can’t embrace its destiny and spend like the richest and most powerful team in the galaxy, where does that leave the rest of the sport?
And where does it leave the Yankees? They’re not spending like they can, as they raise ticket prices and see profits expand, and after letting Machado and Harper sign elsewhere mostly un-wooed by New York, it’s unclear which player can convince them to start spending like George Steinbrenner’s team again. And as the pinstriped players set out to win their first AL East banner since 2012 and their first World Series trophy in a decade, fans can only hope that change won’t prevent them from winning like George’s Yankees again, too.