Existing contracts and the CBA will crimp the Chicago Cubs’ style this winter. But the financial spigot opens in a big way come 2020, for a variety of reasons.
Clubs have already started laying the groundwork for 2019 and the Chicago Cubs are off to an early start. They don’t have the spending flexibility they’d like, so their analytics gang in the front office will have to really sharpen their pencils.
The pressure is on to score big especially after two potentially huge swing-and-miss efforts last offseason in Tyler Chatwood and Yu Darvish. But they will have to look beyond the bright shiny objects in 2019.
The CBA, spending thresholds, penalties and free agents
Let’s start with rules, shall we? The new CBA imposes team spending thresholds through 2021. They are:
$206 million in 2019; $208 million in 2020; and, $210 million in 2021.
The penalties for exceeding the thresholds are far more severe than under the previous CBA. For first time violators, the tax is 20 percent of the difference between the threshold amount and the actual team salary, 30 percent for the second violation and 50 percent for three or more violations.
Further, there are add-on penalties for being $20 million and then $40 million over the threshold salary amount. So, a third-time CBT payor club with a $260 million payroll in 2018 would have had paid a 50 percent tax rate on its payroll between $197 million and $217 million; a 62 percent tax rate on its payroll between $217 million and $237 million; and a 95 percent tax rate on payroll in excess of $237 million. All told that would have amounted to $100+ million in taxes.
But it gets worse. Teams that exceed the second add-on penalty would have their first or second-highest draft pick moved back 10 places.