Trade Deadline Big Picture Issues: #1. How Much Luxury Tax Will Jim Crane Pay?

How Much Crane Will Pay Will Affect the Quality and Quantity of Players the Astros Will Add This Month. But We Don't Have Much History to Determine How Much He Will Pay.

After the All-Star Break, the attention of much of the baseball world and almost all of the baseball media will turn to the trade deadline, which is on July 30 this season. The break in meaningful games give me an opportunity to address some big picture questions about the Astros as an organization as they decide what course to take this season. I’ll address one for each day of the All Star break.

Today, the question is how much luxury tax is Jim Crane willing to pay?

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Before this past offseason, one could ask if Jim Crane was willing to pay the Competitive Balance (i.e. luxury) tax?  As the chart below shows you, he had never done it before. In fact, for the last several seasons, the Competitive Balance Tax (CBT) Threshold seemed to serve as a de facto salary cap for the Astros.

Now we have a clear answer to the question of whether Crane will pay the tax?  The answer is affirmatively yes. This offseason, the Astros had two clear needs—backup catcher and bullpen—and met both by signing the most expensive option on the free agent market.

So the question now moves to how much luxury tax will Jim Crane pay. Roster Resource currently estimates that the Astros “competitive balance tax” payroll is at $256.8 million. Teams pay a 20% tax on any salary above $237 million this season, so that will cost Crane an extra $4 million that will come out of his profits.

The tax increases to 30% on a payroll over $257 million. Since the Astros are just under that mark, any new additions to the payroll will be taxed at that higher rate.

Obviously, at Crane’s level of wealth, those extra few million in taxes are essentially a rounding error, and will not concern his heirs at all. But billionaires like paying taxes as much as the rest of us, and like cutting into the boss’s profits even less than we do—they’re the boss whose profits are being cut. As such, the question of how he balances his personal profits and his willingness to invest in his baseball team matters to us.

The Astros have a clear need for healthy starting pitching. They definitely need at least one starting pitcher and may need a second. Three projected starters are out for the season, Justin Verlander is on the IL, and the returns of Luis Garcia and Lance McCullers from elbow surgery are being delayed even further.

The messaging from the Astros all season has been that they will buy at the deadline, and the recent winning stretch gives them no reason to update their prior preferences. Recent reports that the Astros have focused on first baseman and are in discussions with teams that might trade one.

There is little doubt that the Astros will try to acquire help at the deadline. But the question is how much.  Will they get two starting pitchers?  Will they address first base as well?  Or will they just stop at one player? 

There are many factors that will determine whether and how many players the Astros can acquire at the trade deadline. For example, several potential first base targets are on NL Wild Card contenders and their teams may prefer to chase their own playoff spot rather than sell.

But one of these factors is Jim Crane’ willingness to pay more in luxury taxes. We know he’s willing to pay them.  But we don’t yet know how much.