clock menu more-arrow no yes

Filed under:

Incentives could push Washington Nationals over the luxury tax threshold

New, 53 comments

Mark Lerner recently said he wanted the Washington Nationals to stay under the luxury tax. However, with incentives piling up, the Nats could go easily over.

MLB: Spring Training-St. Louis Cardinals at Washington Nationals Steve Mitchell-USA TODAY Sports

One of the key themes of the entire offseason around baseball has been the Competitive Balance Tax, otherwise known as the Luxury Tax. The Washington Nationals are no different, especially when a Bryce Harper return would signify the team exceeding this.

The Nats have now been over the threshold two seasons in a row, paying a 20 percent tax in 2017 and then a 30 percent last season. So if they exceed the threshold again in 2019, they would pay a 50 percent tax on their overages.

While it’s debatable whether the 50 percent tax is as bad as some in baseball make out, if the Nationals come in under the tax threshold then the penalty escalation resets. So if the Nats went over the threshold in 2020, they would be back to only paying 20 percent again. That’s something the team hopes to do in 2019.

“It’s a pretty severe penalty if you go over and it’s been our goal all year to stay under that,” Lerner told Todd Dybas of NBCS Washington on Friday.

Now, that’s all well and good wanting to stay under, but as things stand, they could easily go over.

According to Baseball Prospectus’ Cots’ Baseball Contracts, the Nationals have $181 million in annual average value committed to players in 2019. Then there’s $14.5 million in estimated health and pension benefits, leaving the Nats about $10.5 million under the threshold.

But the last part of the luxury tax calculation is the player incentives that they get for reaching certain milestones during the season. And this part has a chance to send the Nationals over the threshold if players perform as expected.

We break down each player with an incentive on their contract, providing the maximum they could receive, a likely minimum and then a realistic estimate at what they could receive. All the incentive details and figures below are according to Cot’s.


Max Scherzer

  • All-Star, Gold Glove, Silver Slugger: $100k
  • MVP, Cy Young: 1st: $500k, 2nd: $250k, 3rd: $150k, 4th: $100k, 5th: $75k
  • LCS MVP: $150k, WS MVP: $250k

Max Possible Incentives: $1.7m What a year this would be for the Nationals if Scherzer came out with all his incentives. He would’ve won the World Series and NLCS MVPs, the NL Cy Young Award and MVP as well as a clean sweep of the other pitcher awards. But overall, this isn’t a realistic proposition.

Min Likely Incentives: $175k Obviously, the minimum would be no incentives, perhaps if the right-hander got injured early on in the season. But on the premise that he won’t miss much time, the minimum we can likely expect is another All-Star appearance and 5th in the Cy Young voting, which he has done each of the last six seasons.

Realistic Incentives: $600k Now when we’re talking about some more realistic incentives, the main difference is going to be his standing in the Cy Young voting. Scherzer is arguably the best pitcher in baseball right now, so for the sake of this piece, let’s pencil him in to win the Cy Young. He could also potentially win the Silver Slugger, but there are probably too many other good hitting pitchers to have him win that.


Patrick Corbin

  • All-Star, Gold Glove, Silver Slugger: $100k
  • MVP, Cy Young: 1st: $500k, 2nd: $250k, 3rd: $150k, 4th: $100k, 5th: $75k
  • LCS MVP: $150k, WS MVP: $250k

Max Possible Incentives: $1.7m Just the same as Scherzer, Corbin can max out at $1.7 million if he has a completely dominant season and takes yet another step forward. Reaching the peak of the incentives isn’t necessarily impossible, but it’s far from likely for him to pitch well enough to win both the MVP and Cy Young, unfortunately.

Min Likely Incentives: $0 Now, the worst case scenario is probably more likely if he falls back to his previous levels where he was posting 4.00+ ERAs. He would be nowhere near the Cy Young top five, nor in All-Star consideration at mid-season and miss on all his incentives.

Realistic Incentives: $200k However, based on the success we saw last season, he seems likely to replicate it in some form. He’s probably more likely to be an All-Star again than not, and we’ll give him 4th in the NL Cy Young race as well, after a 5th place finish last season.


Stephen Strasburg

  • Annual Performance Bonus: $1m (180 IP)

Max Possible Incentives: $1m The situation for Strasburg is extremely straightforward, all he has to do is hit 180 innings to earn an extra $1 million. He has been able to hit that milestone twice in his career and wasn’t too far off a third time, so it’s certainly in his range.

Min Likely Incentives: $0 However, only crossing that threshold twice in nine big leagues seasons casts doubt over whether he can do it again. All it takes is one injury that keeps him out for a month or so and that may prevent him from reaching the milestone.

Realistic Incentives: $1m This is one that could easily go either way, as 180 innings is certainly reachable. We’ll give the long-time Nat the benefit of the doubt and forecast that he only suffers a minor injury this year and can return to 2017 form.


Anibal Sanchez

  • Games Started: $500k each for 18,22,26,30

Max Possible Incentives: $2m After a bounce-back season with the Atlanta Braves, the Nats are hoping that Sanchez can continue his resurgence. If he’s able to replicate something close to his 2.83 ERA last year and stay relatively healthy, then it’s entirely realistic he could make 30 starts and max out his incentive.

Min Likely Incentives: $500k Based on the $19 million the Nationals will pay Sanchez, they clearly have a lot of faith in him and will give him plenty of chances to succeed. That should allow him to hit at least the first milestone at 18 starts. But with three DL trips in the last two seasons, health is far from a sure thing for the right-hander and could limit him.

Realistic Incentives: $1.5m Last season, Sanchez ended up making 24 starts for the Braves, though he did miss about six weeks due to a right hamstring strain. We’ll give him somewhere between 26-30 starts here, and assume that maybe he has a minor injury along the way that will keep him from hitting that top figure.


Trevor Rosenthal

  • Appearances: $500k each for 25, 30, 35, 40; $1m each for 45, 50
  • Games Finished: $1m each for 20, 30, 40; $2m each for 50, 60

Max Possible Incentives: $8m Coming off of Tommy John surgery, it was clear that Rosenthal wasn’t going to get a huge guaranteed contract. He has a hefty set of incentives to make up for that if he makes enough appearances or closes out games. There’s an $8 million limit on these incentives

Min Likely Incentives: $2m Because the guaranteed money at $7 million was so low for a potentially elite reliever, the incentives on his deal are easily reachable. As this is just his first season back from surgery, there could be small injuries that may restrict him to around 40 appearances, just as Sean Doolittle did last season.

Realistic Incentives: $4m Assuming everything goes to plan, Rosenthal should be Doolittle’s primary setup man this season. Even with the surgery not too far in the past, he should be able to handle a normal reliever’s workload over the course of the season and make 50 appearances. He may even close out a few games, but perhaps not as many as 20.


Jeremy Hellickson

  • Games Started: $200k each for 3,5,7,9,11,12,14,16,18,21,23; $300k each for 25-30

Max Possible Incentives: $4m The Nationals signed Hellickson with the intention of making him their fifth starter and pitching in the same way as last season. Assuming he can stay healthy and perform to his 2018 levels, he has a good chance to reach 30 starts and max out his incentive clause.

Min Likely Incentives: $1m Now that Hellickson will have a full Spring Training under his belt by the time, he’s the overwhelming favorite to open the season as the fifth starter. But with promising youngsters in Joe Ross and Erick Fedde, if he underperforms, he could be demoted to the bullpen. But starting off in the rotation.

Realistic Incentives: $3.1m Hellickson made at least 27 starts in three straight seasons before his injury-plagued season with the Nationals in 2018. With the way the Nats used him last season, he has a fair chance to stick in the rotation for most of the season, so we’ll peg him in for 27 starts with the team this year.


Howie Kendrick

  • $1.1m based on plate appearances. No specifics found

Max Possible Incentives: $1.1m The final contract with incentives specified by Cot’s is that of Howie Kendrick. Though there are no details about how to achieve the various stages of the incentive, just that the maximum is $1.1 million, so let’s pencil that in as the maximum, which could happen if injuries were to strike at second base or the outfield.

Min Likely Incentives: $0 As we don’t know the exact details involved in this incentive, it’s difficult to firmly put a minimum on this. But as a bench player, he could end up being squeezed out if the regular starters are performing as expected. The team is also relying on a 35-year-old coming off of an Achilles tear, which makes health concerns a real issue.

Realistic Incentives: $250k Based on the way that Cot’s phrases the incentive, it seems like there are steps along the way, rather than a milestone similar to Strasburg’s incentive. Management is still high on Kendrick as a useful bench bat and occasional starter, so let’s give him roughly a quarter of the bonus inline with his role with the team.


Summary

Maximum Possible Incentives: $18.4m If you’ve been keeping track of the maximum numbers throughout the previous slides you may wonder why it doesn’t add up here. Well, as much as we’d like it to be possible, Max Scherzer and Patrick Corbin can’t both win the playoff series MVPs or the Cy Young, or MVP.

The likelihood of the Nationals reaching their absolute maximum incentives is incredibly slim. It would require Scherzer and Corbin coming in first and second for the Cy Young and the MVP, including an incredible playoff run, and it would also require Kendrick to become a regular in the lineup to achieve the requisite number of plate appearances.

Minimum Likely Incentives: $3.675m While in theory, it’s not impossible the Nationals pay nothing in incentives, that may require a meteor striking Nationals Park. As you’ve seen, we’ve been tallying up what a player should be recording, even in a likely worst-case scenario.

With the likely minimum incentives sitting at just over $3.5 million, the Nats may need to be careful with any mid-season acquisitions. That would give them about $8 million in tax space as things stand, meaning shopping at the very top end of the trade market is going to be unrealistic.

Realistic Estimate: $10.65m We’ve gone through each of the player’s incentives to come up with a realistic estimate of what the Nationals could end up paying in total this season. Remember, the Nats currently have around $10.5 million in breathing room, so our estimate would put them marginally above the tax threshold.

It still wouldn’t be the worst thing in the world if the Nationals ended up over the tax. They would only need to pay 50 percent on the overage, which wouldn’t likely be a huge amount.

The only other notable downside of going over would be a lesser compensatory draft pick if a player left after declining a qualifying offer. You would think that if Bryce Harper leaves for greener pastures, Anthony Rendon would be likely be extended, meaning the only other potential QO candidate is Strasburg, if he chooses to opt out of his extension. So that penalty is also negligible for the team.

This estimate is going to be in flux throughout the season and the front office should be monitoring how close particular players are getting to their incentive milestones. Even with no other roster moves at all, which is unrealistic if the team ends up contending, the Nationals could easily exceed the luxury tax.