Luxury Tax Penalties Handcuff Yankees' Pursuit of Blake Snell
At this point, the dream of Blake Snell joining the New York Yankees is on life support.
With the regular season approaching and Snell still looking for a team, he has shown a willingness to do a short-term deal with opt-outs, according to MLB Insider Jon Heyman.
Heyman said that Snell was open to a "Bellinger-type deal", in reference to Cody Bellinger (who was also a Yankee target at one point) re-signing with the Chicago Cubs for three years and $80 million, with opt-outs after each of the first two seasons.
On the surface, this would seem like an optimal route for the Yankees to take in their alleged pursuit of Snell, due to being in "win now" mode and their hesitance to give a massive, long-term contract to the 31-year-old. Unfortunately, there is a major obstacle that stands in their way: the luxury tax.
Because a short-term deal for Snell would be for a higher AAV, the Yankees would be paying a truly exorbitant sum for the reigning NL Cy Young winner; with the payroll already over $300 million, the Bronx Bombers are subject to a 110% tax to every dollar on a new contract, which would more than double the total payment.
Granted, payroll shouldn't mean much to the Yankees when taking their revenue into account. Not only are they the most valuable MLB franchise by far, but they are the second-most valuable sports team in the entire world (behind only the NFL's Dallas Cowboys) at $7.1 billion. With that in mind, spending over $300 million on player payroll certainly wouldn't harm the team's overall finances.
The bigger concern for the Yankees, though, are the draft pick and international money penalties. They would lose two draft picks and $1 million from their international signing pool; this would make it much harder for the Yankees to build from within.
Both the draft and international free agency are important to the team and their acquisition of young prospects; they got Anthony Volpe, Austin Wells, Spencer Jones, and George Lombard Jr. in the draft, while Jasson Dominguez, Roderick Arias, and Everson Pereira were acquired as international amateur free agents. The Yankees have been able to manage both a strong on-field product and farm system at the same time to keep their championship window open every year, but these penalties for stepping over the luxury tax threshold can deprive them of the young and cheap talent they need to supplement their superstars with to win a championship.
With this information in mind, it's clear that the Yankees would still be sacrificing their long-term future even if they gave Snell a short-term deal, and with opt-outs in the deal, he could walk away for another team and leave the Bronx Bombers in a perilous situation. Even though the Yankees made a similar sacrifice this offseason by trading a large haul of pitchers for Juan Soto (who is a free agent after the season), that move is still beneficial to the team's future because Soto is only 25 years old and can be built around, giving incentive to keep him long-term. Snell, being 31 years old with signs of regression, has no such advantage despite his own talent and theoretical impact on New York's rotation this year.
Although the Yankees can afford Snell and he could help them in their championship push for 2024, at this point it's for the best to not sign him due to the additional tax penalties that would hurt the team in the long run, even with a short-term deal.
