Yes, the Phillies have never exceeded the luxury tax. No, that does not mean that they don’t have payroll flexibility going forward, even with Bryce Harper’s new contract on the books.
It’s simple, really. The luxury tax payroll is calculated based on the annual average value (AAV) of a team’s contracts, not the per-season value. For example, Bryce Harper will be paid $30 million this season between his signing bonus and his first year’s salary. But, the Phillies will not have Harper’s $30 million calculated into their payroll for tax purposes. Instead, Harper’s $330 million deal is divided by its length—13 years—and the $25.38 million figure that results is what is considered for the luxury tax.
Here is a rough estimate as to what the Phillies’ future luxury tax payroll looks like, from now until 2021, the last season under the current collective bargaining agreement:
Phillies’ estimated luxury tax obligations, 2019-21
As you can probably already tell, this is not the entire Phillies’ 40-man roster. These are just the players who are guaranteed a specific salary for the 2019 season. All other active, major league, pre-arbitration players are set to make the league-minimum, unless Philadelphia voluntarily gives them a raise (which does happen). The remainder of the 40-man roster—the minor leaguers—will make a set salary, too.
Because we know how much the Phillies will be paying each of their arbitration-eligible players in 2019, the payroll is pretty much set. There isn’t a whole lot of estimating being done here, so we have a fairly solid indication as to how much they will spend this year. That figure is an approximate $187,650,280, keeping them about $18.3 million under the luxury tax threshold of $206 million.
For 2020 and 2021, the numbers become a bit more murky. Before I present the data, I think I should offer a quick explanation as to how I generated the numbers:
- First, I simply took the guaranteed salaries you see in the figure above and summed them. The Phillies know that they will be paying Harper the $25.38 million in 2020 and 2021. There is no uncertainty there.
- Second, I had to estimate how much the Phillies will be paying their arbitration-eligible players. This is a toughie, mainly because we just don’t know how many arbitration-eligible players the Phillies will have on their roster in the next two years.
- What I did, then, is that I noticed that the Phillies have just five players this season who are due to make the league minimum. So, I worked under the assumption that they will only have five players making the league-minimum in each of the next two years. Thus, I subtracted the number of guaranteed salaries that the team had from 20, giving me an estimate as to how many arbitration-eligible players remain.
- (Of course, that figure could change based on how many free agents the Phillies decide to sign and how many pre-arbitration players they decide to carry. Which is why I must remind you that this is an estimate.)
- Then, I found that the average salary for an arbitration-eligible player in 2019 (excluding extensions) was $4.06 million. I included five percent inflation for each of the next two years, making the average arbitration salary $4.26 million in 2020 and $4.48 million in 2021. I multiplied this figure by the number of arbitration contracts I expect the Phillies to give out.
- Lastly, I added in the same values for the 40-man minor league players, and increased the amount of player bonuses earned by $500,000 each year. (These are both practices done by Cot’s Baseball Contracts.)
With all of that said, here is what I expect the Phillies’ luxury tax payroll to look like in 2019, 2020 and 2021:
Phillies’ estimated luxury tax payroll, 2019-21
|Estimated Arbitration Contracts||----||$51,177,940||$62,692,976|
|Estimated Pre-Arbitration Contracts||$2,875,000||$2,875,000||$2,875,000|
|Non-majors 40-man roster||$2,500,000||$2,500,000||$2,500,000|
|Estimated player benefits||$14,500,000||$15,000,000||$15,500,000|
|Total 40-man payroll||$187,650,280||$185,454,220||$160,969,256|
|Amount under tax||$18,349,720||$22,545,780||$49,030,744|
What’s key here is the 2021 figure. This is the season after Mike Trout, the native Philadelphian and known Eagles and Sixers fan, becomes a free agent. And with the Phillies already (!) reportedly saving for Trout, this seems to be very key for their future. By that point, Trout will likely be commanding more than $40 million per year, if not $50 million per year. By my estimates, that wouldn’t even throw them over the tax by that much. Even if the Phillies spent $10 million over the 2021 luxury tax of $210 million, they’d be hit with just $2 million in taxes (assuming they don’t exceed the tax in 2019 or 2020), which appears to be well worth the cost if it means bringing Trout aboard.
For what it’s worth, Phillies’ team president Andy MacPhail would not rule out the Phillies’ payroll ever exceeding the luxury tax in a quote from earlier this offseason:
“Nobody can read the landscape a year out. You may have a need you didn’t anticipate or you may have solved a problem you thought might be a need. I think that’s an ownership call and they’ll address as they see it when the time comes. But I wouldn’t say absolutely, categorically no by any means.”
Of course, this post just adds fuel to the fire about Trout and his future. I still firmly believe that Trout will remain an Angel for life, but it’s never not fun to imagine what it would look like if he played in Philadelphia.
The bottom line? Trout or no Trout, the Bryce Harper contract by no means puts a financial burden on the Philadelphia Phillies. And that could be a scary thought for the National League for years to come.
Devan Fink is a Featured Writer at Beyond The Box Score. You can follow him on Twitter @DevanFink.