Phillies eyeing Luxury Tax loophole for 2020

While the Phillies faithful fret about their rivals for the National League East crown, general manager Matt Klentak is exploring the possibilities of absorbing a 20 percent tax rate for exceeding the CBT (competitive-balance threshold).

Robbing tomorrow:  

Philadelphia Phillies management must now become creative to be between the CBT and under the second penalty level of $228 million AAV (average annual value). Basically, a handful of deep-pocked teams are considering this approach to be more competitive. And the Fightins are one!

"IN OTHER WORDS: “I’m looking for loopholes.” (Said when caught reading the Bible.) – W. C. Fields"

When fans have more information, their conclusions change accordingly. And three categories provide the answers: methods, voices and competition. So, having 70 percent of one, 30 percent of another and 20 percent of a third equals 120 of 300 or only 40 percent of the totality.

As you probably noticed during the Winter Meetings, one organization didn’t sign every superstar. No, three franchises paid top dollar for three top-tier stars:  the high-bid strategy. And the New York Yankees have surpassed the top penalty ceiling of $248 million AAV by $13.56 million AAV.

Besides the Phils, two clubs are flirting with exceeding the CBT. Meanwhile, two organizations may trade some commitments to decrease their annual penalties. But if they please their supporters, the parity-oriented MLB might add another level of draft deterrence and/or tax rate.

Realistically, spending money isn’t a problem for deep-pocketed teams. But losing draft-picking order for transcending the third limit of $248 million AAV hurts what they value: top prospects. So, some front offices are considering a one-season tax by being over $208 million AAV but under $228 million AAV.

The red pinstripes have inked two key pieces for ’20 and are now at $205.35 million AAV or $2.65 million AAV shy of the CBT line. Yes, they can exceed the $208 million AAV for a five-slot starter and two bullpen pieces, or they can swap a player or two for AAV payroll flexibility.

When the Philly faithful hear blowing through the Luxury Tax, they imagine unlimited spending, but GM-speak means only surpassing the ceiling by $15 million AAV tops ($223 million AAV). Roughly, signing three free-agent pitchers could cost $20 million AAV and increase the Fightins’ tally to $225.35 million AAV.