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Luxury tax and Phillies 2013 payroll
by Scott Butler 8/5/12

Come out to Citizens Bank Park and purchase tickets to watch Nate Schierholtz, Erik Kratz, Kevin Frandsen, and John Mayberry in action! Not exactly the type of advertising campaign to encourage parents to jam the kids in the car and head out to the ballpark now, is it? But the fact that Hunter Pence, Shane Victorino, and Joe Blanton are no longer part of the mix might be the best news all season.

See, parting ways with those three players means the Phillies should finish the season under the $178 million luxury tax threshold. That is terrific news because it gives the Phillies much more flexibility with next year's payroll given the structure of MLB's collective bargaining agreement. In the current agreement, the luxury tax is set at $178 million in 2012 & 2013 before increasing to $189 million in 2014.

The luxury of no tax

Knowing the Phillies won't reach the luxury tax this year is nice, but the real advantage comes in 2013. The system is structured so that repeat offenders pay continually higher taxes: beginning next season, the rates are 17.5 percent for first offenders, 30 percent for second-time offenders, 40 percent for third-time offenders, and 50 percent for four-times or more offenders.

With the Phillies avoiding the penalty this season, if they exceed it next year they will be slapped with a 17.5 percent tax rather than the 30 percent fee they would have incurred if they went over in 2012. Anything less than winning the World Series could have been catastrophic for a team with serious needs in many areas.

It explains Ruben Amaro's recent comments regarding the trades: "That’s why we moved Hunter Pence and Victorino," said Ruben. "It creates a lot of salary flexibility for us." Normally the translation for the word flexibility is more money in the owners' pockets, but in this case flexibility may actually mean flexibility.

With the luxury tax threshold increasing to $189 million in 2014, the Phillies would be much more amenable to getting close to that number next season now that they will only be taxed at 17.5 percent. If the Phillies extended their payroll to nearly $189 million over the next two seasons, they would only pay around $1.75 million in 2012 and nothing in 2014. Twelve games under .500 doesn't look quite as bad now, does it?

The luxury tax and the Phillies 2013 payroll

Now on to the specifics in regards to the 2013 payroll. The Phillies already have $138.35 million guaranteed to 10 player next season. Nate Schierholtz projects to make around a $3 million in arbitration salary and Antonio Bastardo should make around $1.5 million in arbitration. That leaves Domonic Brown, John Mayberry Jr., Vance Worley, Josh Lindblom and Jake Diekman who should earn close to the 2013 minimum of $490,000, plus a backup catcher (possibly Kratz) and a utility player who should also earn close to the minimum, bringing the total payroll to around $147 million for 19 players.

Which brings us back to the luxury tax. If the Phillies are willing to stretch their payroll to close to $189 million next year, they have over $40 million dollars to spend. That's flexibility. It means the Phils will have $40 million to pay for third base, center field, right field, and up to three relief pitchers.

Here is how the 2013 payroll looks when we break it down using a projected lineup, starting rotation, and bullpen:

Phillies 2013 projected Starting Lineup:

1. Jimmy Rollins SS - $11 million ($9.5 million counts towards luxury tax)
2. CF (to be determined)
3. Chase Utley 2B - $15 million ($12.1 million counts towards luxury tax)
4. Ryan Howard 1B - $20 million ($25 million counts towards luxury tax)
5. Carlos Ruiz C - $5 million ($3.375 million counts towards luxury tax)
6. RF (to be determined)
7. Domonic Brown LF - $480,000
8. 3B (to be determined)

Bench

Nate Schierholtz (LF/RF) - $2.75 million
Laynce Nix (LF/1B) - $1.35 million ($1.25 million counts towards luxury tax)
John Mayberry Jr. (OF) - $515,000
Utility player - close to $490,000 minimum
Backup catcher - close to $490,000 minimum

Starting Rotation

Roy Halladay RHP - $20 million
Cliff Lee LHP - $25 million ($24 million counts towards luxury tax)
Cole Hamels LHP - $24 million
Vance Worley RHP - $515,000
Kyle Kendrick RHP - $4.5 million ($3.75 million counts towards luxury tax)

Bullpen

Jonathan Papelbon - $13 million ($12.5 million counts towards luxury tax)
Antonio Bastardo - $1.5 million
Josh Lindblom - $515,000
Jake Diekman - $495,000
3 open bullpen positions

Now that the initial shock of the fire sale and likely missing the playoffs for the first time in six years has worn off, the silver lining is beginning to emerge. The Phillies were not going to win the World Series this season, but at least they have a fighting chance of winning it next year. So we put up with commercials for the Philadelphia Iron Pigs for one season in hopes of World Championship ads in 2013.

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