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The Financial Impact of Josh Hader’s Contract In 2024

What do the tax penalties look like for the Astros?

Colorado Rockies v San Diego Padres Photo by Sean M. Haffey/Getty Images

Unless you were hiding under a rock or utterly consumed with playoff football, you were probably aware of the Astros agreeing to terms with Josh Hader, arguably the best reliever in the free-agent market, on Friday afternoon. Clack will have more about this signing from an on-field perspective later this week, but, in short, the Astros now have a legit three-headed monster residing in the backend of its bullpen with Hader, Ryan Pressly, and Bryan Abreu. Remember Billy Wagner-Octavio Dotel-Brad Lidge in 2003? The Hader-Pressly-Abreu version is arguably better, at least on paper.

From a contract perspective, Hader represents an interesting departure from past precedent for Jim Crane. The terms — five years, $95 million — is the largest free-agent contract issued by the organization since Crane purchased the club in 2011. Other than extensions for players already on its roster, the Astros have rarely entered the sweepstakes for top free agents. Whether Hader is an exception or the start of a new trend is left to be seen. But Houston felt it was imperative to address a bullpen noticeably depleted by free agency and last week’s news about Kendall Graveman’s season-ending right shoulder surgery. astrosfaninva will also have some thoughts later this week about the broader perspective and how this contract could affect the long-term outlook of the club.

For 2024, Hader’s contract noticeably alters the trajectory of the Astros’ player payroll. Just last week I wrote a payroll update, highlighting where the club stood concerning the first tax threshold in the CBA of $237 million. Two of the three reputable sources I used (FanGraphs and Spotrac) indicated that the club was barely avoiding the first threshold, dodging a potential 20% tax and draft penalties by a small margin. For the entire offseason, I thought the Astros' primary plan was to stay as close to that $237 million line as possible, allowing for flexibility in either direction. After all, those tax figures aren’t finalized until the conclusion of the league year for 2024. If the season progressed as expected, then address any deficiencies in the roster by the trade deadline. If the season went south, however, then Dana Brown could, in theory, trade from the roster to dip below the threshold and also receive some prospects in return.

Now, with Hader in the fold, those expectations of mine have largely been dashed. Never say never when a club is motivated to shed salary, but I doubt it is a real option at this point unless something goes terribly awry. Below is an updated payroll projection using the same format as last week, now including projected financial penalties.

Cot’s Baseball Contracts
Projected Tax: $4,315,762

FanGraphs (RosterResource)
Projected Tax: $3,516,206

Projected Tax: $3,307,762

As you may have noticed, the Astros are now starting to inch closer to the second tax threshold of $257 million. Per Cot’s Baseball Contracts, the club may have already exceeded that level if its calculations are proven accurate. If so, then any money spent over that second threshold is automatically taxed at 32% compared to only 20% spent over $237 million up to $257 million. At this juncture, I doubt that the Astros are that interested in surpassing the second threshold, although it shouldn’t be outright discounted now considering the recent turn of events. But the heavy lifting is likely done and there could be enough room remaining to add another pitcher to help bolster the depth chart later this year.