Luxury Tax threshold and trying to sign Trout long term

[Docwaukee]

I mentioned this in another thread, but just an FYI:

 

AAV of a contract counts toward the luxury tax threshold and not what you are paying that year.

 

So for 2013, the Angels luxury tax number that takes AAV into account was 177mil with the tax being above 178.  So they barely made it. 

 

the 2014 luxury tax is above 189.  The halos shed vargas yet Arb increases likely push the number to a similar range.  Call it 180mil. 

 

If they sign Trout to a long term deal, the AAV will likely be 20mil or more which would push them well above the threshold. 

 

Their tax rate for 2014 is 17.5%, so anything that counts above 189mil, they would have to pay that extra additional amount. 

 

One way or the other, if they intend to stay below the luxury tax, they have almost no payroll flexibility. 

 

Looks like Trout is going to get another very small raise this year. 

Edited September 18, 2013 by Dochalo

[Angel Oracle]

If Arte supposedly has the money, then paying the tax for say 3-4 years won't hurt him.

He should have thought about that before signing both Pujols and Hamilton.

[Agalloch]

If Arte supposedly has the money, then paying the tax for say 3-4 years won't hurt him.

He should have thought about that before signing both Pujols and Hamilton.

 

Especially Hamilton, he saw what Trout did and if having another 25 Million a year guy was going to hurt his chances to lock him up then that should have been the first thing on his mind.

[YouthofToday]

It's not my money. Sign Trout long-term and Tanaka + Vargas long-term, right? I thought the Wells trade wouldn't impact out ability to spend!

Edited September 18, 2013 by YouthofToday

[tdawg87]

I know the "it isn't my money" thing goes both ways, but Arte should be willing to pay the tax for a couple years if it means keeping your best player for 6 more years.

If he wants to pay Pujols and Hamilton for what they did for their team, then he should be willing to pay Trout for what he already has done and will continue to do for his team.

[gotbeer]

I show us at an AAV of $158 million for 2013, $152 million for 2014, 126 million for 2015, and $106 million for 2016.  If it shows the salary for the year, the AAV is on tab 2.

 

https://docs.google.com/spreadsheet/ccc?key=0AprnDWGvbY9ZdHZ4RDc2Z0tDT2Q4S19tR3pWNVRqaGc&usp=sharing

 

Also, one very important thing to note.  The CBA runs through 2016.  With the way the Doggies, Yanks, and even the Red Sox and Angels are spending, and considering that teams are getting huge sums from tv both locally and nationally, I can see a huge jump in the Competitive Balance Tax.  

[Troll Daddy]

I don't see the reason to rush into a extension for Trout.

Why not wait another year?

[Docwaukee]

I was mistaken about the tax being 176 - that was for 2012 yet I read in a article from the times that I can't find now the current number for 2013 is somewhere around 172.  Still, that will make 2014 about the same with only Vargas coming off and arb raises.  The problem with the luxury tax is that the % increases for consecutive years being over

yr 1 is 17.5%

yr 2 is 30%

yr 3 is 40%

yr 4 is 50%

 

that's why I think they will wait at least one more year until they offer Trout a big contract. 

[ettin]

I know the "it isn't my money" thing goes both ways, but Arte should be willing to pay the tax for a couple years if it means keeping your best player for 6 more years.

If he wants to pay Pujols and Hamilton for what they did for their team, then he should be willing to pay Trout for what he already has done and will continue to do for his team.

 

Dochalo is quite correct but tdawg is right in pointing this out. Going over the luxury tax for 1 or more years would not be a burden to a team that has no debt and receives undisclosed amounts of money from the 25% share of FSW it receives.

 

We keep looking at the luxury tax threshold as some hard wall when in reality it does punish teams but doesn't punish them particularly hard for going over the threshold for a year or two. It is when teams like the Yankees go over for 2+ years that the tax rate skyrockets.

Edited September 18, 2013 by ettin

[ettin]

I was mistaken about the tax being 176 - that was for 2012 yet I read in a article from the times that I can't find now the current number for 2013 is somewhere around 172.  Still, that will make 2014 about the same with only Vargas coming off and arb raises.  The problem with the luxury tax is that the % increases for consecutive years being over

yr 1 is 17.5%

yr 2 is 30%

yr 3 is 40%

yr 4 is 50%

 

that's why I think they will wait at least one more year until they offer Trout a big contract. 

 

Doc, if they start Trout's contract off small, say $8 million for 2014, even if we do exceed the threshold it would only be by no more that about $10 million or so. That is only an additional 1.7 million next year and then, if we continue to stay over by that rough amount, by about 3-4 million the following year (and 4-5 million in 2016). In 2017 we have a lot of money coming off the books and it wouldn't even be an issue.

 

Considering that we may even DFA someone like Blanton and eat $8 million (not to mention the $19 million on Vernon) this is pocket change to be honest. There is really no reason to not extend Trout now and just pay him less the next 2-3 years and then kick it in after.

Edited September 18, 2013 by ettin

[Docwaukee]

Doc, if they start Trout's contract off small, say $8 million for 2014, even if we do exceed the threshold it would only be by no more that about $10 million or so. That is only an additional 1.7 million next year and then, if we continue to stay over by that rough amount, by about 3-4 million the following year (and 4-5 million in 2016). In 2017 we have a lot of money coming off the books and it wouldn't even be an issue.

 

Considering that we may even DFA someone like Blanton and eat $8 million (not to mention the $19 million on Vernon) this is pocket change to be honest. There is really no reason to not extend Trout now and just pay him less the next 2-3 years and then kick it in after.

but again, it doesn't matter what his early contract numbers are.  It's the AAV of his contract.  So if he gets 8/160, 20mil counts toward the number to the luxury tax every year for the entirety of the deal.   

[gotbeer]

but again, it doesn't matter what his early contract numbers are.  It's the AAV of his contract.  So if he gets 8/160, 20mil counts toward the number to the luxury tax every year for the entirety of the deal.   

 

Another reason why Tanaka may make a lot of sense for the Angels.  If I am not mistaken, the posting fee does not count against the Competitive Balance Tax.  So you can bid $30, 40, 50, 60 million.  And sign him to a 6/$60, and it will only count $10 million a year.  

[ettin]

but again, it doesn't matter what his early contract numbers are.  It's the AAV of his contract.  So if he gets 8/160, 20mil counts toward the number to the luxury tax every year for the entirety of the deal.   

 

Okay yes AAV. So still we are talking 3-4 million in 2014, 6 million in 2015, 7 million in 2016. Still not a lot overall.

[Ithaca]

I miss being able to ignore posters.

[ettin]

Another reason why Tanaka may make a lot of sense for the Angels.  If I am not mistaken, the posting fee does not count against the Competitive Balance Tax.  So you can bid $30, 40, 50, 60 million.  And sign him to a 6/$60, and it will only count $10 million a year.  

 

Correct, the posting fee is counted, under the current posting rules, as marketing budget if I am not mistaken which is not counted towards the luxury tax. You then offer him a multi-year contract at about $8-10 million (this guy isn't Darvish btw) for a #2/#3 type starter which is pretty reasonable in all likelihood. The only question is Tanaka good enough? It sounds like he is for $10 million a season but I haven't seen him pitch personally so I just hope the Angels scouts get a good look at him.

[Angel Oracle]

Isn't Tanaka the top pitcher in Japan at this point?  

[HaloFan85]

but again, it doesn't matter what his early contract numbers are.  It's the AAV of his contract.  So if he gets 8/160, 20mil counts toward the number to the luxury tax every year for the entirety of the deal.   

Then what's the purpose of backloading big contracts when there's no salary cap and it's the AAV that only counts towards the tax?

[YouthofToday]

The longer we wait to extend Trout I would expect the deal to be less team-friendly. The closer Trout gets to being a free agent the higher his price goes up. I would think at least.

That said, Trout might be the best player at his age in the history of the game. There is no precedence for this monster of a ballplayer.

[meat]

I don't see the reason to rush into a extension for Trout.

Why not wait another year?

This must be sarcasm. 

Because he's the ONLY reason to follow Angels baseball.

[stormngt]

I mentioned this in another thread, but just an FYI:

 

AAV of a contract counts toward the luxury tax threshold and not what you are paying that year.

 

So for 2013, the Angels luxury tax number that takes AAV into account was 177mil with the tax being above 178.  So they barely made it. 

 

the 2014 luxury tax is above 189.  The halos shed vargas yet Arb increases likely push the number to a similar range.  Call it 180mil. 

 

If they sign Trout to a long term deal, the AAV will likely be 20mil or more which would push them well above the threshold. 

 

Their tax rate for 2014 is 17.5%, so anything that counts above 189mil, they would have to pay that extra additional amount. 

 

One way or the other, if they intend to stay below the luxury tax, they have almost no payroll flexibility. 

 

Looks like Trout is going to get another very small raise this year. 

 

Don't give a damn about the tax.  The most important thing to do is extend him now.  The longer we wait, the less incentive Trout has to sign.  Offer him now a serious contract and there is no doubt he signs.  But every year we rate, the higher the extension price will be and the less likelihood we extend him.

[Docwaukee]

Then what's the purpose of backloading big contracts when there's no salary cap and it's the AAV that only counts towards the tax?

no having to pay them until the big tv contract money kicks in. 

[Lifetime]

Are you sure about your AAV numbers doc? That seems too high. 

[Troll Daddy]

This must be sarcasm. 

Because he's the ONLY reason to follow Angels baseball.

 

It's not sarcasm ... hopefully that's not the only reason to follow Angel baseball. You don't need Trout to win a championship. The FO holds all the chips at the moment. Do you try to lock him up now ... yes! The reason you offer a contract is to save money primarily. I think a 6-7 contract should work for both parties.

 

10 contracts should be outlawed.

[YouthofToday]

It's not sarcasm ... hopefully that's not the only reason to follow Angel baseball. You don't need Trout to win a championship. The FO holds all the chips at the moment. Do you try to lock him up now ... yes! The reason you offer a contract is to save money primarily. I think a 6-7 contract should work for both parties.

10 contracts should be outlawed.

If they last beyond a player's age 36 season yes. If the player is an historic talent and a contract locks them up from age 23 to age 33 season you absolutely do it. Edited September 19, 2013 by YouthofToday

[Docwaukee]

Are you sure about your AAV numbers doc? That seems too high. 

I guess we can't assume this is correct, but I would hope that they'd fact check before throwing out the numbers. 

 

signing bonuses also count to the AAV. 

 

http://articles.latimes.com/2013/mar/25/sports/la-sp-sn-vernon-wells-trade-20130325