Yankees Re-Sign Derek Jeter, Lower Luxury Tax Calculation
Worth noting: Joel Sherman of the New York Post suggests that pretty much everything written below is wrong.
$12M deal actually will cost #Yankees more toward '14 luxury tax than if let Jeter just pick up his $9.5 million player option (cont)
— Joel Sherman (@Joelsherman1) November 1, 2013
Way luxury tax salaries, computed Jeter would have cost $10.75M on payroll if option picked up will cost $12.8M now #Yankees
— Joel Sherman (@Joelsherman1) November 1, 2013
It is certainly possible that I’ve interpreted the luxury tax calculations incorrect. The post will be updated once I have clarification.
Derek Jeter is going to stay with the Yankees, surprising absolutely no one. This was never really in doubt, especially because Jeter had the right to ensure he played 2014 in New York, thanks to a player option that was added to the end of his three-year, $51 million option on the deal he signed in 2010. He could have exercised his right to become a free agent, but heading into his age-40 season and coming off the worst year of his career, interest probably wouldn’t have been overwhelming. And it’s unlikely he wanted to end his career in any other uniform, so this was always the expected outcome.
However, the actual announcement sheds some fun light on the details of how the CBA works and how the luxury tax is calculated. The Yankees could have just let Jeter exercise his player option — listed as $8 million, but reported by Jon Heyman to actually be worth $9.5 million — but instead, they signed him to a new contract that will pay him $12 million next year instead. Why the $2.5 million to $4 million raise over what his own player option called for?
Three words: the luxury tax. The Yankees have been desperately trying to get under the $189 million threshold, and by paying Jeter more, their tax calculation is actually going to go down.