After reading through the comments to the last two posts on the Damon signing, I felt the need to generate a new post in response to the many misconceptions that are being tossed around:
To begin with, George Steinbrenner isn’t spending his money. He’s spending the Yankees’ money. There are many major league owners who are richer than Steinbrenner, but no major league teams that generate more revenue. That said, when the Yankees expenses increase, it does come out of the fans’ pockets. In addition to the cost of concessions at the Stadium, consider the fact that ticket prices have gone up each of the last two years as the Yankees have slipped into the red.
All of which is proof that the luxury tax is working. Since the new basic agreement went into effect in 2003, the Yankees have exceeded the luxury tax threshold each year and in 2005 paid more than $30 million in luxury tax alone. In 2006, they’ll owe forty cents on every dollar they spend above $136.5 million. As of this morning, Hardball Dollars estimates the Yankees’ 2006 payroll at $186.2 million. That figure does not include the league-minimum salaries of Chien-Ming Wang, Andy Phillips or Bubba Crosby, nor does it include the still-undetermined arbitration awards due to Shawn Chacon and Aaron Small. Chacon earned $2.35 million in ’05 and finished strong. Let’s round him up to $4 million. Small earned the league minimum, but went 10-0, so let’s give him $1 million (both are likely lowball estimates). Wang, Phillips and Crosby make up another million. So that’s a $192.2 million payroll, $55.7 million more than the tax threshold, meaning the Yankees already owe $22.28 million in luxury tax. Any further additions, such as a designated hitter, will actually cost the Yankees 40 percent more than the actual 2006 salaries of those players.
Also, for those counting the big salaries that have come off the books, don’t forget that Jason Giambi and Randy Johnson will earn a combined $8 million more in 2006 than they did in 2005.
At any rate, for readers such as Debris to pin the Damon signing, or any other, on the Yankees’ “economic advantage” over the Red Sox is simply absurd. Now that the Red Sox are bouncing around in John Henry’s deep pockets and the Yankees are cutting payroll, that advantage no longer exists.
