Picking up the option for Cole Hamels might be a great short-term move. But if that costs the Chicago Cubs a shot at a big-time name, what then?
Last year, the Chicago Cubs stayed under the luxury tax threshold. But, looking at next season, it seems like a foregone conclusion – this team will likely exceed that mark for the first time in recent memory.
But before we dive into the numbers, it’s important to understand how the luxury tax works. There are three distinct tiers.
Tier 1: $206 Million – 20 percent tax on salary overages
Tier 2: $226 Million – 32 percent tax on salary overages above $226 million
Tier 3: $246 Million – 42.5 percent tax on salary overages above $246 million and top draft pick moved back 10 spots in the order.
Those penalties are just for first-time offenders. They get worse if you go over the luxury tax multiple years in a row. That is why the Cubs, Yankees and Dodgers were careful to stay under the threshold in 2018. They wanted to reset their luxury tax penalties ahead of this winter’s free agent class.
After trading away Drew Smyly and picking up Hamels’ option the Cubs payroll is already estimated to be around $226 million for next year. That number includes arbitration estimates, so it isn’t an absolute figure. However, that number doesn’t include the Cubs doing anything else this offseason, either.