Are the Chicago Cubs past the peak of their competitive window?

Chicago Cubs are over the luxury tax in 2019

The payroll of the Chicago Cubs organization has never been higher – ever. According to one estimate, the 2019 Chicago Cubs will have a luxury tax number of over $229 million. That’s over the first two of three thresholds for the luxury tax. Two hundred and twenty-nine million dollars is less than $17 million away from the highest threshold of Major League Baseball’s luxury tax.

The luxury tax number can be different than the total of player’s salaries for a given season. Players who have multi-year contracts and get paid different amounts in different seasons have the averaged annual value (AAV) evened over the length of the contract. Buyouts and options in players contracts also impact a player’s AAV. The luxury tax also includes the cost of benefits and minor leaguers on the 40-man roster.

Each luxury threshold has higher and higher penalties than the one(s) below it. The penalties also get worse the longer a team is over the luxury tax. The penalties start out as having to pay extra money for every dollar over (a tax). But eventually, they can result in draft pick penalties and international spending restrictions.

That’s why it has been important for teams to occasionally reset their luxury tax penalties. The Cubs were careful to stay under the luxury tax in 2018 because they knew that they were going to go right past it this season. This season will probably be the first of many seasons that the Cubs will be over the luxury tax given the plethora of young guys inching closer to the open market.