Go for it, Jim: The Case for Paying the Luxury Tax This Season.
Between light luxury tax penalties and 2025 being their best chance in the near future to win the World Series, the case is strong for the Astros to add multiple players at the deadline.
Baseball’s trade deadline is fast approaching. Last night, the Mariners began the annual week of frenzied acquisitions by acquiring Josh Naylor to fill one of their huge holes at corner infielder.
The Astros are of course 5 games up on the Mariners. And thus, they are in the same position as the Mariners, likely to acquire players that can help the team over the final two months of the season in exchange for prospects who might help in the future. And since the Astros a 95% chance to get to the playoffs, those acquisitions will also help the Astros in a third month—October.
That the Astros should be buyers is clear. But there are two limits on the Astros ability to buy at this trade deadline. The first is the Astros modestly regarded farm system—Keith Law at The Athletic ranked it 29th in February; it could worse, Fangraphs ranks it 30th. The Astros cannot change the ranking of their farm system this week, so that will stay the same.
The second limit is something they can change. And that is the budget for payroll set by owner Jim Crane. He can increase it if he so chooses.
I will argue he should. He should increase the payroll because the luxury tax penalties for doing so are relatively light. And he should because this season is likely the Astros best chance in the next several years to win the World Series.
The Luxury Tax Penalties are Light
According to Cot’s Contracts, the Astros are currently projected to spend $239.2 million on payroll as calculated for Competitive Balance Tax purposes.1 That number is quite meaningful because it is just $1.8 million below the luxury tax threshold of $241 million.
Basically, any player that the Astros acquire at the deadline will push them into the luxury tax.2
But here is the good news for Jim Crane. The luxury tax penalties are pretty mild. The Astros will owe a 30% tax on any salary they pay above the threshold. If, for example, they end up $10 million over the threshold, it will cost Jim Crane $3 million.
The Astros paid a 20% luxury tax rate on in 2024. If they repeat this year, the tax goes up to 30% this year. That will cost more money, but in reality, it will only cost something like $1million more from Crane.
There are some harsher luxury tax penalties the Astros would prefer to avoid. For example, there are extra surcharges if the team is $20 million over the luxury tax threshold. But that would require the Astros to add something like $60 million in annual payroll at the trade deadline, which is almost impossible even if they wanted to do that. Going $40 million over would push their draft pick down 10 spots—again, not a concern this year.
Further, the Astros are quite certain to avoid the luxury tax—and higher 3rd time repeater penalties—in 2026. Next year, they get off of a number of contracts (good news, the contracts of Jose Abreu, Rafael Montero, and Ryan Pressly will be off the Astros books; bad news, the contract of Framber Valdez will likely be off the books next year too).
Thus, the only cost of paying the luxury tax this year is a few million off of the profits of Jim Crane. Good news, Astros fans. He can afford it.
Why to Prioritize 2025
It is obviously easy for me—some dude with a Substack—to spend Jim Crane’s money. It’s not my money.
With that being said, I can make the case the General Manager Dana Brown should be making to Crane—spending on this year’s team is a worthwhile investment.
The reason is simple. This is likely the team’s best chance to win another World Series in the near future. The 2025 Astros entered the season with a 29% chance of winning the AL West and a 52% chance of making the playoffs, according to Fangraphs. Thanks to excellent run prevention—keyed by star pitchers Hunter Brown, Framber Valdez, Josh Hader, and Bryan Abreu—the Astros are big favorites to win their division and are near-lock to make the playoffs.
Further, the American League is wide open this season. There are no super-teams in the AL. Detroit got off to a great start this season, but they have lost 10 of their last 11 games, primarily due to regression from their pitchers. The Yankees looked strong early in the season, but they have gone 21-24 since May 31 to give up the lead in the AL East. The Blue Jays took that lead, and they seem like any other team.
In short, the playoffs are always a coin flip. They seem even more of a coin flip this season, especially for a team that can have its four star pitchers throw as large a share of innings as possible.
The reason to spend at this season’s trade deadline is not just a story about 2025. It is likely the Astros will not be as good a team in 2026, 2027, or 2028, as they are this season.
Framber Valdez will be a free agent after this season, and it seems unlikely that the Astros will re-sign him. A team without one of the star pitchers will almost certainly be a weaker team that this one. Bryan Abreu is a free agent after the 2026 season, and Jeremy Pena, Isaac Paredes, and Jake Meyers will be free agents after the 2027 season.
This is a familiar pattern to Astros fans at this point. The team has lost a number of high-quality free agents since emerging as a super-club in 2017. The Astros have maintained themselves as a high-level team throughout that period by developing star players through its farm system. Hunter Brown is the latest success story.
Can the Astros do that again? Will Spencer Arrighetti, or Colton Gordon, or some minor leaguer like Ryan Forcucci or Miguel Ullola develop into the next Framber Valdez, who is the next Dallas Keuchel?
It’s certainly possible. No one thought Valdez would win Cy Young Award votes when he was a young pitcher. But the odds are against it.
How should Jim Crane set his budget for this season? Not based on the hope that some minor league pitcher develops into a star, but on the reality that his farm system is not well-regarded. It is not likely to produce the high-quality regulars over the next few seasons needed to sustain the Astros at the top of the AL West.
And if the future looks worse than the present, then it makes sense to value the present.
In short, go for it, Jim. Authorize Dana Brown to make multiple trades to acquire pieces to help the Astros this season. The team could use a left-handed bat to help it overcome the spate of injuries that have ravaged the everyday lineup, and that will fill a hole when the injured players recover. It is unclear who would start Game 3 of a playoff series for the Astros, much less Game 4. Trade for a starting pitcher. The bullpen has been excellent, but teams could always use an extra arm, especially a right-hander. Get one of those too.
Go for it, Jim. All it will cost you is money. You’ve got money. What you need is a third World Series ring.
Two notes here. One is what the CBT payroll is and what the actual payroll is are slightly different things. Those differences are not important to this article. Second, “Competitive Balance Tax” is the PR-based euphemism Major League Baseball uses for a luxury tax. I’ll use the easier to understand term here—luxury tax.
Technically, the Astros can avoid paying the luxury tax by acquiring players who make less than $5.6 million in annual payroll. Almost no players paid so little will be additions at this year’s trade deadline.