The Phillies have been repeat offenders, thus they are taxed at a base rate of 50% for being over the tax threshold for three or more consecutive years.
With their payroll exceeding the third apron of $281 million, the signing of Max Kepler for $10 million actually incurs a cost of $19.25 million because they must pay a 92.5% penalty on every dollar spent.
This penalty increases to 110% if they surpass $301 million, which they are roughly $2 million away from after adding Kepler.
As a result, Philadelphia has not been as active in the free agency market as in previous years, clearly aware of their current spending and the future costs associated with bringing in a star player.
"I would be surprised if we got into impactful free-agent type of signings from an offensive perspective," Dombrowski added.
Nevertheless, the Phillies may be keeping their plans close to the chest.
Middleton has not hesitated to spend, and if he believes this team requires another bold move, there is a possibility that something could be arranged.
"Well, I don't want to say it's a tight payroll in the sense that from an ownership perspective, I don't think I've ever gone to John (Middleton) on anything and him say no, don't do something," Dombrowski shared.
The Philadelphia Phillies have been known for their willingness to invest in talent in the past.
They awarded Bryce Harper the then-largest contract in Major League Baseball history with a 13-year, $330 million deal prior to the 2019 season.
This was succeeded by several high-value contracts over the next few winters, including a $115 million deal for J.T. Realmuto in 2021, $100 million and $79 million contracts for Nick Castellanos and Kyle Schwarber, respectively, a $300 million contract for Trea Turner in 2023, and last offseason, a $172 million re-signing of Aaron Nola along with a three-year, $126 million extension for Zack Wheeler.
A significant amount of money has been invested, not to mention the contracts for Taijuan Walker, Cristopher Sanchez, and others acquired during this period.
Phillies fans have certainly appreciated this from owner John Middleton.
It has been a clear indication that he is committed to doing whatever it takes to bring a championship back to the city, reviving Philadelphia's enthusiasm for baseball in recent years with postseason appearances following a long period of obscurity.
However, the Phillies have encountered a setback.
Since their World Series appearance in 2022, they have declined each season, being eliminated at an earlier stage of the playoffs.
To remedy this, fans were hopeful that Philadelphia would once again loosen their purse strings to acquire a high-profile player to address the existing gaps in the roster.
That has not materialized.
Jordan Romano, Max Kepler, and Jesus Luzardo are the three Major League acquisitions made so far, and although there are rumors of more moves to come, one thing has become very clear from the front office this winter: they are facing financial constraints.
"Everybody we sign is a major penalty at this point. You're cognizant of that," Dave Dombrowski stated, according to Corey Seidman of NBC Sports Philadelphia.
This is due to their luxury tax penalties.
Jun 5, 2023; Philadelphia, Pennsylvania, USA; Philadelphia Phillies owner John Middleton before game against the Detroit Tigers at Citizens Bank Park.
Eric Hartline-Imagn Images
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