The Detroit Tigers currently have the second highest payroll in Major League Baseball. For luxury tax purposes, Detroit’s 2017 payroll will stand at $214,339,286 once Alex Avila’s contract is on the books, according to Cot’s Contracts. Even the New York Yankees, who have never had a payroll shy of the tax threshold, have a lower payroll than the Tigers, at $210 million. Only the Los Angeles Dodgers have a higher projected payroll than Detroit.
When the Tigers signed Alex Avila to a one year, $2 million contract for the 2017 season, the club actually committed to paying a total of $2.6 million because the team is in a 30 percent tax bracket. Every dollar in salary added to or trimmed from the payroll will either cost or save the club $1.30.
Avila’s salary also puts the Tigers’ payroll on track for them to pay a “surtax.” This is because their payroll will be more than $20 million above the new tax threshold of $195 million, as things currently stand. Under the terms of the new collective bargaining agreement (CBA), teams that exceed the new tax threshold of $195 million by $20 to $40 million must pay a “surtax” of 12 percent on the overage. The surtax will be averaged between the old and new tax structures in the first year of the new CBA.
The Tigers were one of six major league baseball clubs to be hit with a “competitive balance tax” for the 2016 season. Detroit paid $4 million as a result of their payroll being $23 million above the tax threshold of $189 million for the 2016 season.
Detroit had the third highest payroll in the major leagues in 2016. That year, they were slapped with a 17.5 percent tax as a “first time” offender. They did not exceed the tax threshold in 2015 due to the tax saving trades at the July 2015 trade deadline.
Teams to pay a luxury tax for 2016 were:
- Los Angeles Dodgers, $31.8 million
- New York Yankees, $27.4 million
- Boston Red Sox, $4.5 million
- Detroit Tigers, $4 million
- San Francisco Giants, $3.4 million
- Chicago Cubs, $2.96 million
The Tigers paid a tax for the second time in 2016. The last time they paid a tax was for a $1 million overage in 2008. Ironically, the club did not make the playoffs in either of the two seasons that they were hit with a tax bill.
The highest luxury tax payrolls in MLB for 2016 were:
- Los Angeles Dodgers: $252,551,634 (50 percent tax)
- New York Yankees: $243,793,306 (50 percent tax)
- Detroit Tigers: $212,044,266 (17.5 percent tax)
- Chicago Cubs: $205,917,980 (17.5 percent tax)
- Boston Red Sox: $204,012,716 (30 percent tax)
- San Francisco Giants: $200,315,484 (30 percent tax)
The Dodgers and Yankees each pay a 50 percent tax on the amount above the threshold, as they are habitually over the limit. Los Angeles is paying a tax for the fourth consecutive season despite actually reducing payroll by some $46 million from the previous year. The Yankees are paying the tax for the 14th (!) consecutive season since the scheme was first introduced. The Tigers have virtually the same roster and salaries on the books for 2017.
There are still moves to be made before the season officially begins, and the Tigers may yet trim some salaries. But without any further reductions in payroll, Detroit would surely exceed the $215 million surtax trigger with normal player movement, as players are called up in September, or to replace players going on the disabled list during the season. In addition, the $13 million estimate for player benefits is almost certainly a low-ball estimate.
Tigers general manager Al Avila has said that he is under no mandate to cut payroll, but has made it clear that payroll is going down over the next few seasons. The club did not add any players that added to payroll during the 2016 season.
There are other consequences for exceeding the tax threshold under the new CBA. Should the Tigers lose J.D. Martinez to free agency after the 2017 season, they would receive only a supplemental fourth round draft pick instead of a first round pick because they are over the tax threshold.