Yankees' restraint a sign system is working

By Mike Bauman
01/03/13 10:00 AM ET

The bout of fiscal conservatism currently being displayed by the New York Yankees may be disconcerting to Yankees fans. Experience has instructed these fans that money is no object as it applies to their team's pursuit of excellence.
But for almost everybody else, the Yankees' move toward a more thrifty position on players' salaries means that Major League Baseball's economic system is working. In this case, the particular mechanism at work would be the luxury tax.
The Yankees have led the Majors in team salaries for 14 consecutive seasons. But in 2013, they will be overtaken by the Los Angeles Dodgers, and by a substantial margin.
The Yankees' current aim, and it is a perfectly reasonable fiscal goal, is to come in underneath the 2014 luxury tax threshold of $189 million. For the vast majority of Major League franchises that sort of money would still be a record-shattering -- not to mention budget-shattering -- amount to spend on players' salaries. For the Yankees, it will be a cutback.
The Yankees have exceeded the luxury tax threshold for 10 consecutive seasons, and have paid a total of more than $224 million in luxury tax penalties. In many seasons, this tax could have been called a "Yankees tax" rather than a luxury tax. According to a report by the Associated Press, the Yankees paid $18.9 million in luxury tax fees in 2012.
The percentage of luxury tax penalty paid increases annually for a team exceeding the threshold. For 2014, that figure for the Yankees would be 50 percent on any salary amount exceeding $189 million. That kind of penalty turns out to be a serious disincentive to spend, even for an operation with the Yankees' resources. Also, if the Yanks get under $189 million to avoid paying the luxury tax for 2014, they will be in position to receive amnesty under the Collective Bargaining Agreement and their tax rate would return to the first-time offender rate of 17.5 percent.
In the absence of a salary cap, Major League Baseball has instituted vastly increased revenue sharing in an attempt to level the economic playing field and decrease revenue disparities among franchises.
Beyond that, the luxury tax also stands as a potential drag on spending by large-market franchises. If it hasn't deterred the Yankees from spending in the past, it apparently has for 2014.
The Yankees, typically in the forefront for high-priced free agents, have stayed on the sidelines for the current round of bidding wars. The 2012-13 free agents have not been shortchanged by this development, given the overall prosperity of the game and the willingness of the Southern California franchises to spend considerable sums on Zack Greinke (Dodgers) and Josh Hamilton (Angels).
The Yankees, meanwhile, have primarily focused on re-signing their own free agents. There were no serious quibbles with them retaining veteran pitchers Hiroki Kuroda, Andy Pettitte and Mariano Rivera, or veteran outfielder Ichiro Suzuki. And with Alex Rodriguez out with another hip problem, they signed Kevin Youkilis to a one-year, $12 million deal to fill in at third base.
All of these moves were sensible. But the limitations of the Yankees' current fiscal approach were reflected in the fact that the youngest player among these transactions was Youkilis, who will be 34 by Opening Day.
Yankees general manager Brian Cashman has stated that the club will continue to attempt to improve its roster. The Yankees will try to be as creative as possible, but in all likelihood they won't be taking on any contracts that tie them to a large amount of spending for 2014.
Thus, this organization is acting very much like the vast majority of franchises would act: with budgetary restraint, with a cautious eye on the bottom line.
These are apparently not your uncle's Yankees. But this is baseball's luxury tax having a definite effect.