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Machado, Harper & the Luxury Tax

With the Cubs currently playing their patented brand of Jekyll and Hyde baseball, many fans have already turned their attention to this year’s trade deadline and beyond. And with good reason: two young superstars, Manny Machado and Bryce Harper, are being linked to the Cubs in rumors on a daily basis.

This past offseason, Kris Bryant openly speculated if his record-setting deal in arbitration would have any effects on the team’s potential pursuit of Harper, his long-time friend from Las Vegas, in free agency. Recently, Machado spoke about his childhood dream of winning a World Series alongside Cubs’ outfielder Albert Almora Jr.; the two grew up together in Hialeah, Florida, and refer to each other as cousins.

Almora (far right) and Machado (center) go way back. — by Joe Flaherty
Almora (far right) and Machado (center) go way back. — by Joe Flaherty

Each new personal anecdote adds another log to the fire.

Admittedly, it’s easy to get caught up in the hype. The merit of either player is beyond debate. They’re both entering their prime; both can flat out rake; both are plus defenders. This is not an upside gamble like the eight-year contract the Cubs gave Jason Heyward. These are two MVP-caliber commodities whose best ball is ahead of them.

But in order for the Cubs to put together this pseudo family reunion of elite baseball talent, there’s obviously going to be a price to pay.

Let’s start with Machado, since he’ll most likely be moved before the deadline. The 25-year-old shortstop is enjoying the best start to a season in his young career, hitting .335 with 15 homers and 43 RBI. Based on Offensive WAR, he’s the most valuable offensive player this side of Mike Trout or Mookie Betts.

Machado was involved in infinite trade rumors this offseason, but now that the Orioles have dissolved into a full-fledged dumpster fire, he’ll almost assuredly be moved before July 31st to help kick start Baltimore’s rebuild (good luck with that).

Traded or not, Machado is guaranteed $16 million. Once he hits free agency, his contract will surely inflate; Spotrac rates his market value higher than $26 million annually.

In order for the Cubs to make this move, they’re have to dump some salary. The team currently sits about $15 million below the Luxury Tax threshold (LTT), which is $197 million, and they’re doing everything in their power to stay there.

When a team exceeds the LTT, they not only have to pay an increasing tax on the overage. It can also cost a team draft picks and international signing pool money, both of which have been integral to turning the Cubs into the team they are today.

In other words, if a team is going to exceed the LTT, they have to deem the trade/signing worthwhile beyond a shadow of a doubt. While Machado is an absolute stud, a trade for him would only guarantee a few months of his services. Granted, he could be a key part of a postseason run. But it would come at a steep cost.

Since the Orioles will be looking to acquire young talent, any deal would likely start with Addison Russell, who’s spot at shortstop would be taken by Machado.

Russell, 24, is a former 11th overall pick and still has room to grow — by Joe Flaherty
Russell, 24, is a former 11th overall pick and still has room to grow — by Joe Flaherty

Russell is still just 24, but he’s seen both his power output and defensive metrics (which were his strong suit) decrease over the past two seasons. He’s on the books for just $3.2 million this season, but losing that salary would allow the Cubs to bring on Machado’s contract while staying under the LTT.

Additional pieces to the deal would likely include multiple top pitching prospects. Be prepared to become acquainted with names like Adbert Alzolay, Alex Lange and Oscar de la Cruz until the deadline passes.

It’s a clear need for the Orioles, since their pitching is worse than atrocious, but it’s a tough sell for the Cubs. Beyond veterans like Jon Lester, there’s not a ton of young pitching to go around.

The front office has to decide whether a few months of Machado is worth multiple years of Russell and a potential front-line starter. A case could be made either way.

Another factor to consider is how much of an impact half a season, and presumably another deep playoff run, could have on Machado’s free agency. In Baltimore, Machado has only played in seven playoff games over five seasons. The Cubs have averaged over 10 playoff games per season over the past three years. The Cubs would have the opportunity to show Machado what a title chase truly looks like, not to mention show off all of their shiny new amenities.

With or without Machado, if the Cubs manage to hit the offseason under the LTT, then the real fun begins.

Both Machado and Harper will become unrestricted free agents. Signing either player long-term would definitely qualify as a move that would improve your team beyond a shadow of a doubt, so to hell with the LTT.

Free agency is a crapshoot, and both Machado and Harper will have plenty of suitors. Both players will likely command deals with an average annual value north of $30 million, with Harper rumored to be seeking a deal approaching $500 million in total. Rightfully so: Baseball Reference projects him to be more than 50% qualified for the Hall of Fame and he’s younger than I am (I’m only 25).

The Cubs already have over $149 million committed to just 12 players in 2019, when the LTT will increase to $206 million. The team will see a total of seven players hit arbitration. This includes names like Bryant, Javier Baez and Kyle Schwarber.

Players entering arbitration last season received an average raise of 113%, which was 17% higher than just one season prior. As players like Bryant start blooming at younger ages, you can expect that percentage to continue climbing.

Let’s assume players average a 130% raise through the arbitration process next season. Those same seven players, who collectively make $21 million this season, could theoretically haul in over $48 million total in 2019.

Rough math, sure, but if the averages hold true for the Cubs that means $197 million could already be allocated across 19 players. Luckily, the team also has five players under Team Control next season, meaning they can offer them salaries at or near the league-minimum rate.

Per Statista, an MLB league minimum would approach $600k next season. Between the five players, that’s another $3 million on the payroll.

In theory, the Cubs could still retain most of their current roster next season at $200 million, still $6 million below the LTT. If they’re serious about their pursuit of either Machado or (especially) Harper, then there are a few more moves that could ease the burden.

The first would be to move Ben Zobrist, who’s owed $12.5 million next season. The utility man has served as an excellent clubhouse presence, but he’s already taking playing time away from some of the younger talent. He’ll be 37 in 2019; the Cubs would be wise to listen to every potential offer for him that would offload the bulk of his contract.

The Cubs can save about $20 million by parting ways with Heyward (left) and Zobrist (right) — by Joe Flaherty
The Cubs can save about $20 million by parting ways with Heyward (left) and Zobrist (right) — by Joe Flaherty

The second (more obvious) move would involve Heyward, but this one’s a little trickier. Heyward, who has five more years on his contract following 2018, has a player option to forgo his remaining tenure with the Cubs. He also has a limited no-trade clause from 2019 to 2020, making a salary-dump trade harder to manufacture.

If Heyward actually performed up to his expectations, then he’d be able to exercise that option in an attempt to sign a more lucrative deal elsewhere. But now he can only hope to leverage that option into salvaging a little more money while searching for another suitor.

If Heyward opts out, he’d receive $12.5 million in deferred signing bonuses.

Think about it: if the Cubs guarantee a super-max deal to a guy like Harper, who plays right field as well, Heyward would have no place on the team going forward. (Brief Tangent: would the Cubs consider putting Machado at a corner outfield spot too? I wouldn’t put it past Joe Maddon). He’d be wise to take the money and run.

If the Cubs can convince Heyward to opt out, they’d save an additional $10 million. Combine that with a $10 million savings (conservative estimate) by dealing Zobrist, they’d now have a $26 million buffer underneath the LTT.

Many dominoes would need to fall the right way, but if they do, then they’d be foolish not to break the bank for either player. Harper is the more logical fit, especially if you hang on to Russell past this year’s deadline.

But it’s entirely plausible that the Cubs bid heavily on both players. Signing either one would almost certainly put the Cubs over the LTT for 2019, but this is not unprecedented. The Cubs gladly paid the overage on their lofty payroll that won them a title in 2016. And don’t think for a second that the new amenities at Wrigley, such as the Hotel Zachary, weren’t constructed with the tax overages in mind.

The approach that I personally think the front office will take is to make Harper the prime target. If the team ever hopes to make another draft pick or sign another international free agent again, they’d be wise to avoid adding two ultra-deals in the same offseason.

Plus, there are a ton of opportunities to lighten the salary burden in 2019 and beyond. Buyout clauses are in place for Lester, Jose Quintana, Brandon Morrow and Pedro Strop that could save the team close to $38 million. If Yu Darvish’s struggles continue, his opt out clause after 2019 could save the team $81 million over the following four seasons (but good luck getting him to agree to that).

The Cubs are primed to make noise in free agency, and I trust Theo Epstein and Jed Hoyer when it comes to payroll magic. Acquiring Machado at the deadline could severely compromise the long-term window for the team, but if the Cubs find themselves near .500 at the All Star break for the second straight year, a move wouldn’t surprise me there, either.

What do you think?

This article was originally published on @joeflah13