Cubs impact with possible luxury tax changes
Ricketts has one of the higher payrolls in baseball (Dennis Wierzbicki - USA Today Sports)

Cubs impact with possible luxury tax changes

by - Senior Writer -

We have grown accustomed to the Cubs not opening the checkbook in recent free agencies as they have elected to go on the cheaper route instead of spending on big-time free agents. Despite how much the Cubs want to spend; the high payroll and luxury tax threshold has been the most significant reason as to why Chicago hasn’t gone after top-level talent in recent off-seasons.

Chicago will once again have a high payroll and will be up against the Luxury Tax in 2020 for a third straight season. Should the Cubs decide to spend something this free agency before unloading salary, then they would be exceeding the Luxury Tax threshold, which will have significant effects in penalties once the season finishes. With that being said, could there be help on the horizon in the next few years with possible changes to the Luxury Tax on the way?

The way the Cubs went about their business during the Winter meetings claiming they were focused more on trades than spending money got me thinking about the Luxury Tax issue once again. The reason I brought it into question was that there were so many big-name signings early on this season compared to the past two seasons, where the signings were dragged out until nearly spring training if not later. It makes me wonder if the teams focusing on the tax too much don’t even both to speak to these players while the ones willing to exceed the tax go all out when they can.

Another reason why these signings may have been more frequent this season could be the penalty may be significantly less for exceeding the threshold than what it was in the past since only 2-4 teams generally come close or exceed the mark anyway. Regardless of what the reason was for the big-name signings this season, it makes me wonder if teams, in particular, our Cubs have been focused too much on the penalty for exceeding the tax instead of just forking over the cash when they know they have money to spend regardless what they claim.

Looking at the money, the Nationals dished out to Stephen Strasburg knowing Max Scherzer and Patrick Corbin are already tied up for a ton of money, and the amount both Gerrit Cole and Anthony Rendon received on their deals, do teams know something we don’t regarding the future of the Luxury Tax. Are they just saying who cares about the penalty and going all-in now, or after the current CBA expires in two seasons, will the Luxury Tax penalties be changing in some sort of a fundamental way for the future?

If the tax is not changing for the better, than these teams have just taken a crippling blow to their future plans for the next decade, especially when you consider the obsession for most of these teams trying to avoid exceeding the tax threshold. I just don’t think any team would be dishing out that kind of money if they didn’t know something about the long-term effects of the Luxury Tax.

With more big-name free agents signing for record amounts this offseason, it makes wonder if there is a fundamental shift in tax penalties coming following the 2021 season. There is some talk going around the league because if you listened to Joel Sherman when the Yankees were pursuing Cole, he stated that “one official said the Yanks also know a new collective bargaining agreement is coming after 2021 with the players demanding to either eliminate the tax or make the thresholds substantially higher to allow the big markets to more comfortably spend.”

Diving deeper into that quote, it sure seems like the MLB is strongly considering removing the Luxury Tax penalty or raising what that tax limit is allowing bigger market teams to spend the money they have comfortably. Fair or not for small market teams, that is the reality of this business as teams with higher payrolls can spend way more money than those with smaller payrolls, and they shouldn’t be penalized for the money they dish out or spend. They earned the money they should be able to use it as they see fit.

While completely eliminating it may be out of the question, it is called the competitive balance tax for a reason, but adjusting it or slightly increasing it based on the market share would serve the players well in the future, especially when you pair it with early Free agency or arbitration wages. As the game continues to get younger every season, and when those young rising stars are not being paid like the impactful players they are, then all kinds of problems and inefficiencies arise where teams don’t spend aggressively on free agency as a way to back pay for younger players not getting paid.

That makes me wonder what is going on with the Cubs when the Yankees, Dodgers, and other high payroll teams continue to spend and exceed the current Tax Threshold. Are the Cubs just trying to get under the current tax mark to reset their penalties so they can focus on spending more aggressively next season, knowing it is the final year of the old CBA?

However, the Cubs may be looking at it as the Tax penalties may increase in recent years, so they want to stay cheap now in case team control of players changes also. That would allow the Cubs to hold on to more funds for a more extended period to put them in a better position should the free-agent market completely change in upcoming seasons.

This is all hypothetically speaking right now, and a lot of things can happen in the next two years, but the Cubs clearly view the future of the luxury tax differently than some other big market players do. Whether that is a good thing or a bad thing for this franchise at this point is yet to determine, but the Cubs need to figure out what they want to be before it is too late.

Do they want to continue to operate as a high market/high payroll team that can dish money out to whomever they want and deal with tax penalties later? Or, do they want to take more of a small market approach this season by trading players or cutting payroll in hopes of locking up some of their home-grown talent before they hit the open market. Whatever their thought process is, the Cubs need to find out how to remain competitive during this transition until they, along with everyone else, knows the future of the Tax threshold.

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