What is the Toronto Blue Jays' payroll this season?

Why are the Blue Jays being taxed at 30% on additional 2024 player adds?
New York Yankees v Toronto Blue Jays
New York Yankees v Toronto Blue Jays / Vaughn Ridley/GettyImages
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Savvy Blue Jays fans will have noticed that, for the first time since telecommunications and cable TV company Rogers bought the team for $112M in 2000, the Opening Day payroll has ranked in the top seven of baseball for two consecutive seasons.

The team is also projected to be a luxury tax payor for a second consecutive season in 2024; prior to 2023, when they were a first time payor of $5.5M, Toronto had never paid luxury taxes since the Competitive Balance Tax (CBT) was first introduced in the 1997 season.

Blue Jays Payroll 2024

The Blue Jays have an active payroll of $225M, and a luxury tax payroll (estimated) of $246M. That's per Spotrac, and includes all current 26-man roster allocations, injured players and sunk cost commitments, like the retained salaries owed to Paul DeJong and Whit Merrifield. That luxury tax payroll would trigger an additional tax bill of $2.6M.

Rogers is clearly spending! How effectively the front office is using that financial might to construct the roster remains up for debate, but team president Mark Shapiro clearly has “buy-in” from ownership to spend commiserate with the GTHA’s position as the 4th largest market in MLB, trailing only New York, Los Angeles and Chicago.

Note, however, that those three larger markets all support two MLB teams, as does the combined Maryland and District of Columbia (DC) market.

Toronto also has the entire 41M population of Canada to support them, as evidenced by the throngs of Blue Jays fans who descend on ballparks closer to the Canadian border in Seattle, Minnesota, Milwaukee, Detroit and Cleveland whenever Canada’s team is in town.

What is the Luxury Tax Threshold in MLB?

Most major North American professional sports leagues have a so-called “salary cap”, which limits how much teams can spend to try to promote parity between large and small market teams. MLB is an outlier in that it does not impose a salary cap on teams; however, as teams like the New York Mets and Yankees have shown in recent years, spending the most on payroll is no guarantee of postseason or World Series success.

However, MLB does have a Competitive Balance Tax (CBT) that can act as a quasi-salary cap, and increases depending on certain thresholds. This so-called “luxury tax” kicks in this season for teams spending above $237M when all payroll commitments are included for the entire 40-man roster.

Per MLB, “A team's Competitive Balance Tax figure is determined using the average annual value of each player's contract on the 40-man roster, plus any additional player benefits. Every team's final CBT figure is calculated at the end of each season.”

The following thresholds to calculate the CBT were put in place per the 2022-26 collective bargaining agreement between the MLB players association and the owners of the 30 teams:

2022: $230M

2023: $233M

2024: $237M

2025: $241M

2026: $244M

Any club exceeding this CBT threshold in a given year is subject to an increasing tax rate depending on how many consecutive years it has done so: 20% the first year, 30% if they are above it for a second consecutive year like Toronto based on their current projected payroll, and 50% if they exceed the threshold for three consecutive seasons.

Per MLB, “If a club dips below the luxury tax threshold for a season, the penalty level is reset. So, a club that exceeds the threshold for two straight seasons but then drops below that level would be back at 20% the next time it exceeds the threshold.”

The Jays would have to cut $9M from their current payroll this year to get below the $237M threshold for 2023 to reset their penalty level. Or spend less than $241M next year when the combined $57M in 2023 salaries for Justin Turner, Yusei Kikuchi, Kevin Kiermaier, Joey Votto, Danny Jansen, Yimi García, Trevor Richards and Daniel Vogelbach could all potentially drop off.

There’s also a surcharge threshold for clubs that exceed the base threshold by $20M or more. Teams pay a 12% surcharge if they exceed the threshold by $20~$40M, 42.5% if they exceed it by $40~$60M (and 45% for each consecutive year after that), and 60% if they are $60M or more above.

At a current luxury tax payroll of $246M, the Jays have another $11M in payroll capacity before triggering the 12% surcharge above $257M; that gives them some flexibility should they decide to add players ahead of the July 30th 6pm ET trade deadline for the stretch run and playoffs.

That 60% surcharge is the so called “Steve Cohen tax” named for the New York Mets owner. The Mets paid a record $101M luxury tax on their 2023 payroll which finished the year at $375M, despite a losing record of 75–87.

Compensation tied to qualifying offers

If a team gives a qualifying offer (QO) to a player who then signs elsewhere, like the Jays with Matt Chapman after 2023, the club that lost the player is eligible for draft pick compensation in the next amateur draft. However, if the team that loses the player went over the CBT threshold like Toronto did in 2023, the compensation pick comes after the 4th round.

Any team that signs a player who has rejected a QO from another team is subject to the loss of one or more draft picks. A team like Toronto, that exceeded the CBT threshold in the preceding season, would lose its 2nd- and 5th-highest selections in the next draft, as well as $1M from its international bonus pool for the upcoming signing period. If such a team signs multiple qualifying-offer free agents, it would forfeit its 3rd- and 6th-highest picks as well.

Why are the Blue Jays being taxed at 30% on additional 2024 player adds?

With the team currently exceeding the $237M luxury tax threshold by ~$9M in 2024, Toronto will pay a 30% tax penalty on any overages below $257M. If they exceed that second level, they would pay an additional 12% surcharge.

They will also only receive a compensation draft pick after the 4th round in the July amateur draft in Fort Worth, Texas after losing Chapman; and, the draft pick costs associated with signing a player who reject a QO from another team may help partly explain why Toronto’s front office was reluctant to sign Cody Bellinger and Blake Snell, who both had QO compensation attached to signing them this past offseason.

The team still does have ~$11M in payroll capacity under the second $257M CBT threshold should they be in contention in July, and look to add reinforcements for the rotation and bullpen that have seen their depth thinned by the departures of Mitch White and Wes Parsons, along with the Chad Green and Ricky Tiedemann injuries.