Baseball doesn’t have a salary cap. That means teams like the Yankees and Dodgers are allowed to increase payroll as much as they want. The control mechanism is the luxury tax, which means a penalty is paid for going over the limit. For 2018, that limit is $197 million.
There’s also not a salary floor, which means teams like the Marlins can deal, say, the reigning NL MVP for nothing more than salary relief.
As first reported by FanRag Sports’ Jon Heyman, the Yankees have acquired Stanton from the Marlins. The most prominent name going to Miami in exchange is infielder Starlin Castro, who would presumably fill the second base spot opened up when the Marlins traded Dee Gordon to the Seattle Mariners earlier this week.
What’s notable here is that the Yankees didn’t have to give up any of their top prospects in a blockbuster trade. But that’s the advantageous position they enjoyed by Stanton exercising his no-trade rights to force a deal to a team he wanted to play for, rather than going to the St. Louis Cardinals or San Francisco Giants, both of whom surely had better prospects to offer the Marlins.
The Marlins are sending $30 million, too, which might not sound like a lot relative to the hundreds of millions remaining on Stanton’s deal.
Source: #Yankees taking $265M of $295M owed Stanton.
— Ken Rosenthal (@Ken_Rosenthal) December 9, 2017
But for the Yankees, it’s very important, as MLB’s luxury tax rule uses the average annual value of contracts, as opposed to the yearly payroll. That prevents teams from hiding backloaded deals, or at least it’s supposed to. But in this case, the Yankees are going to get quite the savings:
Source: Stanton’s annual luxury-tax number with #Yankees will be approximately $22 million. #Marlins’ $30 million contribution if he does not opt out after 2020 reduces luxury-tax burden of 13-year, $325M deal. Luxury-tax number based on average annual value.
— Ken Rosenthal (@Ken_Rosenthal) December 9, 2017
Breaking it down further, and you can see how it’s a big deal for teams at the top of the market:
Just did some math:
The AAV of Stanton's deal is $25M. But since the Yankees are getting $30M from the Marlins, and taking only 10 years, they get to spread that evenly, dropping *their* AAV on the deal to just $22 million for luxury tax purposes. That's a freaking steal.
— Bleacher Nation (@BleacherNation) December 9, 2017
Compare that to the team that signs Bryce Harper after next season. Let's say he gets 10 years and $350 million (plausible). That's $35M AAV for luxury tax purposes, or more than 50% higher than Stanton for the Yankees.
— Bleacher Nation (@BleacherNation) December 9, 2017
Because high-payroll teams are only restrained by the tax (the Yankees, Dodgers, and others can afford to spend whatever they wanted, regardless of what their ownership would say), this is a massive deal, akin to how NBA teams can offer more for their own free agents relative to the salary cap. All because the Marlins are cheap.
Ironically, the Marlins are really hurting other small-market teams, at least the ones that want to be competitive; a sizable portion of the tax payments are allocated to teams that don’t cross the tax threshold, and it’s difficult enough to compete when the rich teams are paying full-freight, much less when they’re getting what amounts to a discount on MVP-caliber talent.
