On Thursday, Detroit Tigers general manager Al Avila told Anthony Fenech of the Detroit Free Press that the club fully intends to bring their payroll under the luxury tax threshold for the 2018 season. While this should come as no surprise to those who have been taking in Avila’s comments this offseason, the team should still be able to field a contender with over $47 million in salaries coming off the books due to expiring contracts after the 2017 season.
For tax purposes, the Tigers have a payroll of almost $215 million for the 2017 season, or $20 million above the $195 million luxury tax threshold. That threshold will increase to $197 million in 2018. Detroit will pay a 30 percent tax on every dollar above the threshold, and an additional six percent tax in 2017 on any amount above $215 million. Should the club exceed the threshold again in 2018, the tax would be 40 percent, and the Tigers obviously don’t want to go there.
Calculating payroll for tax purposes is not as simple as adding up all the salaries of the players on the roster for that season. The most accurate calculation for tax purposes, other than reading BYB, can be found on Cot’s Contracts “tax tracker.”
For tax purposes, use the average annual value (AAV) of salaries for players who are under multi year contracts. For example, Justin Verlander will earn a $30 million salary in 2018, but the AAV of his contract is $25.714 million. Add the salaries of all players on the 40 man roster (not just the 25 man major league roster) and then add in about $13 million in player benefits.
The Tigers have several players with expiring contracts after 2017, including J.D. Martinez, Mike Pelfrey, Francisco Rodriguez, Mark Lowe, and Alex Avila. We will assume that the Tigers pay the $5 million buyout for Anibal Sanchez, rather than a $16 million salary in 2018. That’s $47.25 million off the books. Outfielder Justin Upton can opt out of the final four years on his contract, which has an AAV of $22.125 million. That would leave another big vacancy, but also free up more cash to spend on replacements.
Here are the Tigers payrolls for luxury tax purposes in 2017 and 2018.
|Players||2017 AAV||2018 AAV|
|Players||2017 AAV||2018 AAV|
|Multi-year contracts||$176.289 million||$126.039 million|
|Arbitration eligible||$13.125 million||$22.7 million|
|Pre-arbitration||$4.4 million||$5.5 million|
|Minor leaguers (40-man)||$2.25 million||$2.25 million|
|Prince Fielder||$6 million||$6 million|
|Player benefits||$13 million||$13 million|
|Tax payroll||$215.064 million||$175.5 million|
|Luxury tax threshold||$195 million||$197 million|
|"Cap" Room||-$20.064 million||$21.5 million|
Detroit has five players under multi-year contracts with a total AAV of $116 million. Miguel Cabrera, Justin Verlander, Justin Upton, Jordan Zimmermann, and Victor Martinez have multi-year deals in 2018. Figure that the club will pick up Ian Kinsler’s $10 million option, rather than pay him a $5 million buyout. Add a $6 million payment to the Texas Rangers for Prince Fielder, and the subtotal comes to $132.039 million for six players.
The Tigers will have up to 10 players eligible for arbitration next season. Six of those will earn a total of $13.125 million in 2017. That group includes Jose Iglesias, Nick Castellanos, Justin Wilson, Alex Wilson, Andrew Romine, and Bruce Rondon. A raise of 50 percent would add $19.7 million to the payroll, bringing the subtotal to $ 151.739 million. First-time arbitration eligible players could include Shane Greene, James McCann, Blaine Hardy, and potentially Anthony Gose. Let’s say three of the four make it through the season and average $1 million apiece for 2018. That’s $154.739 million for 15 players.
Filling out the 25 man roster with 10 players earning just above the minimum salary at $550,000 each adds another $5.5 million. Fifteen players on the 40-man roster in the minors adds $2.25 million (Cot’s estimate), so we have a payroll for the 40 man roster at $162.5 million. Player benefits brings the total to $175.5 million, leaving just over $21.5 million to spend on improving the roster.
The team will need a right fielder and a closer, as well as a backup catcher for 2018. Players already in the organization such as Bruce Rondon could step up to fill a need. A bigger challenge would be presented if Upton opted out and the Tigers had to replace both corner outfielders, and possibly a center fielder as well. In that case, they would have over $43 million to spend on their needs.
There are other nuances that will affect the calculations, such as the inevitable cost of calling players up in September, or during the season to replace others going on the disabled list who still receive their full salaries. There are also rebates for players whose options are not exercised. Avila will very likely leave himself a few million dollars so that he has some wiggle room. He may even leave a large amount of room so that he can make some acquisitions during the season, which is something he could not do in 2016, and perhaps not in 2017 as things stand.
The bottom line is that the Tigers should be able to contend in 2018 and avoid paying a luxury tax, so long as they’re willing to spend a chunk of the money that is coming off the books after the 2017 season.