The Yankees have tried to spin the team's dreadful offseason by emphasizing that they still have a high payroll. For example, here are the words of Brian Cashman:
"We have more committed than anybody on a yearly basis, and have for
quite some time, and that hasn’t changed. We’re still running a
significant payroll that is or will be maybe second to the Dodgers this
year."
This is merely an attempt to distract Yankee fans. The question is not how much the Yankees are spending in a given year; no one cares which team spends the most. What Yankee fans - and fans of any team - care about is that the team is trying to put the best team that it can on the field. The Yankees just cannot make that claim.
Cashman's own words reveal what a lie he is telling. In the very same article, he made the following claim:
"We get aggressive when there’s a vacancy. We’re not aggressive when
there’s not a vacancy. That’s the true story. Not the daily, 'What The
Boss would have done, or 'The Boss would have done that.' "
The Yankees clearly have vacancies at catcher and right field, but of course have just sat on their ever-fattening wallets. This would never have happened when the Yankees had good ownership. George would never have let the New York Yankees be outbid by the Pittsburgh Pirates for Russell Martin, and would not have let Nick Swisher leave while also ignoring Josh Hamilton - unless George had handled the outfield last offseason by signing Yoenis Cespedes.
To put this into perspective, let's look at some revenue stats. According to data published by Forbes Magazine, the 2011 Yankees brought in $439 million in stadium revenue - $129 million more than the Red Sox, who were next-highest with $310 million. (I could not find 2012 data on Forbes; but the numbers should be similar.)
This is in addition to TV revenue. Forbes does not specify the 2011 numbers; but in 2010 Forbes documented that YES led MLB in local television revenue, bringing in over $400 million.
Earlier this year, No Maas explored Yankee finances using the 2010 numbers in great depth, and here is the takeaway:
"Under the 2013 luxury tax regime, the Yankees could comfortably afford
to spend about $350 million on players and still net a profit margin
that is the same as the Tigers in terms of rate, and much bigger in
absolute terms"
So, whenever Brian Cashman or any other minion tries to tell you that the Yankees are not being cheap and greedy, or that they "need" to cut payroll by 2014, they merely are lying in a way that disrespects your intelligence.
Wednesday, December 26, 2012
Saturday, December 8, 2012
Cutting through the Payroll Tax Crap
Much of what you have been hearing and reading about the Yankees' reason for reducing the payroll by 2014 is misleading, because much of the commentary merely regurgitates the Yankees' talking points. A typical example is the following:
"If a team exceeds the luxury tax for their fourth straight year, it will pay a 50 percent tax on any overage, a huge figure that has clearly contributed to the decision-making of the team’s brain trust."
The Yankees want you to think that they are victims of onerous tax increases imposed by MLB's Collective Bargaining Agreement. But that is nonsense. The truth is that they are trying to cash in on a scheme straight out of The Producers.
Here's the deal. Suppose the Yankee payroll in 2014 is what it has been in recent years, around $210 million. Yankee Analysts did the math on that; in this scenario the Yankees luxury tax bill in 2014 would actually be lower than it has ever been.
This is because while the Yankees' tax rate will indeed increase to 50%, the salary cap will also increase. The rate alone does not determine how much tax a team has to cough up; the tax is paid only on the portion of team salary that exceeds that year's cap.
To illustrate how the Yankees' luxury tax is calculated, the following table shows the Yankees salary and luxury tax for 2009 and 2011:
Now let's look at 2014, when the Yankees' tax rate would increase to 50% and the cap to 189 million. If the Yankees were to have the same payroll in 2014 that they did in 2011, their tax bill would decrease by $2 million, from $13.9 million to $11.9 million:
The 50% tax rate increase is clearly irrelevant to the Yankees business model.
This instead is merely about another revenue opportunity for Hal Steinbrenner. The new Collective Bargaining Agreement adjusts how revenue is shared so that teams in large market but with poor revenues no longer get a share. The amount these teams would have gotten is instead refunded to the contributing teams, with one restriction that impacts the Yankees: if a contributing team has been over the salary cap 2 straight years, it does not get the refund.
The exact amount the Yankees would get out of this scheme depends upon various variables and details, but it has been estimated that they could get as much as $40 million in 2014, if they are under the cap.
So, in non-BS language, what is going on here is this: the Yankees found a way where they can make more money in 2014 by making their product - the team on the field - worse.
That is so messed up that it is worth repeating again: the Yankees found a way where they can make more money in 2014 by making their product - the team on the field - worse.
Note: I gathered salary and tax information from:
"If a team exceeds the luxury tax for their fourth straight year, it will pay a 50 percent tax on any overage, a huge figure that has clearly contributed to the decision-making of the team’s brain trust."
The Yankees want you to think that they are victims of onerous tax increases imposed by MLB's Collective Bargaining Agreement. But that is nonsense. The truth is that they are trying to cash in on a scheme straight out of The Producers.
Here's the deal. Suppose the Yankee payroll in 2014 is what it has been in recent years, around $210 million. Yankee Analysts did the math on that; in this scenario the Yankees luxury tax bill in 2014 would actually be lower than it has ever been.
This is because while the Yankees' tax rate will indeed increase to 50%, the salary cap will also increase. The rate alone does not determine how much tax a team has to cough up; the tax is paid only on the portion of team salary that exceeds that year's cap.
To illustrate how the Yankees' luxury tax is calculated, the following table shows the Yankees salary and luxury tax for 2009 and 2011:
| Season | Team Salary | Salary Cap | Taxable Portion (Team Salary - Salary Cap) | Tax Rate | Tax (Taxable Portion * Tax Rate) |
|---|---|---|---|---|---|
| 2009 | $226.2 | $162 | $64.2 | 40% | $25.7 |
| 2011 | $212.7 | $178 | $34.7 | 40% | $13.9 |
Now let's look at 2014, when the Yankees' tax rate would increase to 50% and the cap to 189 million. If the Yankees were to have the same payroll in 2014 that they did in 2011, their tax bill would decrease by $2 million, from $13.9 million to $11.9 million:
| Season | Team Salary | Salary Cap | Taxable Portion (Team Salary - Salary Cap) | Tax Rate | Tax (Taxable Portion * Tax Rate) |
|---|---|---|---|---|---|
| 2014 | $212.7 | $189 | $23.7 | 50% | $11.9 |
The 50% tax rate increase is clearly irrelevant to the Yankees business model.
This instead is merely about another revenue opportunity for Hal Steinbrenner. The new Collective Bargaining Agreement adjusts how revenue is shared so that teams in large market but with poor revenues no longer get a share. The amount these teams would have gotten is instead refunded to the contributing teams, with one restriction that impacts the Yankees: if a contributing team has been over the salary cap 2 straight years, it does not get the refund.
The exact amount the Yankees would get out of this scheme depends upon various variables and details, but it has been estimated that they could get as much as $40 million in 2014, if they are under the cap.
So, in non-BS language, what is going on here is this: the Yankees found a way where they can make more money in 2014 by making their product - the team on the field - worse.
That is so messed up that it is worth repeating again: the Yankees found a way where they can make more money in 2014 by making their product - the team on the field - worse.
Note: I gathered salary and tax information from:
- 2014: A Payroll Odyssey; A Closer Look at the Yankees’ Cost Cutting Ambitions. This Yankee Analysts article provides a great, detailed explanation of the considerations.
- http://en.wikipedia.org/wiki/Luxury_tax_%28sports%29#Major_League_Baseball_.28MLB.29
- http://espn.go.com/mlb/story/_/id/7381414/new-york-yankees-boston-red-sox-only-teams-hit-luxury-tax
- http://articles.nydailynews.com/2010-12-22/sports/27085081_1_luxury-tax-payroll-joba-chamberlain
Wednesday, December 5, 2012
A Yankee Paradox
Which of the following is worse?
- That the New York Yankees actually thought Nate Schierholtz was worth signing; or
- That the front office, having decided to pursue the immortal Schierholtz, got outbid for him by the Cubs for what amounts to tipping money for Hal Steinbrenner.
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