Calculating the luxury tax

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Calculating the luxury tax

Postby jehr » Tue Dec 19, 2017 4:44 pm

Dumb question for my own personal curiosity. If the Cubs sign Darvish and want to go after Harper and stay under the LT limit next year, could they do something like sign him to a 20 year contract, heavily front loaded with like a million per year in the last 10 years, and a player opt out after the main paying years are up? If the LT is based on AAV, I'm assuming AAV is calculated assuming the player doesn't opt out, so that would spread his pay over 20 years instead of 10 for LT purposes. It's a pretty obvious proposal to circumvent the LT rules with the top player... But is that accurate for how they apply it?
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Re: Calculating the luxury tax

Postby Transmogrified Tiger » Tue Dec 19, 2017 6:15 pm

jehr wrote:Dumb question for my own personal curiosity. If the Cubs sign Darvish and want to go after Harper and stay under the LT limit next year, could they do something like sign him to a 20 year contract, heavily front loaded with like a million per year in the last 10 years, and a player opt out after the main paying years are up? If the LT is based on AAV, I'm assuming AAV is calculated assuming the player doesn't opt out, so that would spread his pay over 20 years instead of 10 for LT purposes. It's a pretty obvious proposal to circumvent the LT rules with the top player... But is that accurate for how they apply it?


My understanding is that what you've described would lower the luxury tax value of the contract, but in that extreme an example MLB would almost certainly not approve the deal. You're allowed to frontload a contract(Zobrist's is frontloaded, for example), but if you're doing so with an opt out that makes it a certainty those other years aren't going to be used, MLB would step in. You could maybe get away with it if the dollar amounts after the opt out were a high enough proportion of the total contract, but there's also a reason you haven't seen this in the luxury tax era like the NHL did.
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Re: Calculating the luxury tax

Postby Regular Show » Wed Dec 20, 2017 6:39 am

jehr wrote:Dumb question for my own personal curiosity. If the Cubs sign Darvish and want to go after Harper and stay under the LT limit next year, could they do something like sign him to a 20 year contract, heavily front loaded with like a million per year in the last 10 years, and a player opt out after the main paying years are up? If the LT is based on AAV, I'm assuming AAV is calculated assuming the player doesn't opt out, so that would spread his pay over 20 years instead of 10 for LT purposes. It's a pretty obvious proposal to circumvent the LT rules with the top player... But is that accurate for how they apply it?


Like TT said, there is NO way MLB would approve this contract. I mean it's pretty obvious what the signing team is trying to do lol. The Blackhawks did something similar to this with the M. Hossa contract, and they would've suffered a penalty if he retired before the end of his contract (they did regain cap space because he is on medical IR with a bad skin disorder).
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Re: Calculating the luxury tax

Postby The Logan » Wed Dec 20, 2017 2:52 pm

Didn't the nats do that with Scherzers signing bonus or something? And his signing bonus was huge as a result? Or am I imagining things?
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Re: Calculating the luxury tax

Postby Transmogrified Tiger » Wed Dec 20, 2017 3:09 pm

The Logan wrote:Didn't the nats do that with Scherzers signing bonus or something? And his signing bonus was huge as a result? Or am I imagining things?


The Nationals are notorious for doing deferrals that go beyond the years of the contract, Bobby Bonilla style. That doesn't change the luxury tax calculations though, because the total contract amount and the duration the player is under contract remain the same.
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