What not paying the luxury tax means for Cubs and Alex Cobb

Patrick Mooney
NBC Sports Chicago

ORLANDO, Fla. – The Cubs are not projected to pay the luxury tax this year after staying under Major League Baseball's $195 million threshold, a source with knowledge of the team's financials said Monday, a significant development as they chase high-profile free agents and reload for another World Series run.

As the general manager meetings opened at the Waldorf Astoria Orlando, a USA Today report incorrectly identified the Cubs as one of six teams expected to pay the competitive balance tax in 2017, which can have consequences in the draft and on the international market.

But the Cubs are now looking at a calculation around $183 million for this season, minimizing a variable if they sign someone like pitcher Alex Cobb, who is expected to turn down the one-year, $17.4 million qualifying offer from the Tampa Bay Rays and has expressed interest in reuniting with manager Joe Maddon and pitching coach Jim Hickey in Chicago.

In this scenario, the potential cost for the Cubs to acquire Cobb would now include giving up their 2018 second-round draft pick and $500,000 from their international bonus pool.

As part of the collective bargaining agreement, if the Cubs had exceeded the luxury tax and signed Cobb, they would have lost their second- and fifth-highest draft picks and $1 million from their international bonus pool.

This status also means that if Cy Young Award winner Jake Arrieta and All-Star closer Wade Davis decline their qualifying offers and sign elsewhere as free agents, the Cubs will receive two third-round draft picks.

The Cubs had a 20-percent luxury tax on last year's championship bill, with the Associated Press reporting the payment was just under $3 million. If the Cubs had crossed the threshold for a second straight season, their tax would have risen to 30 percent, and then escalated to 50 percent if it happened for a third consecutive year.

But now the penalty level would be reset back to 20 percent – just in time for what is shaping up to be a spectacular class of free agents next winter.

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