Yankee fans, brace yourselves: If you really want to improve your team, it’s going to hurt. 

You have two choices: Blow through the luxury tax or trade your best prospects. Pick your poison.

The problem

Let’s start with the lineup. Realistically, if everyone is playing their proper positions, the Yankees have legitimate starters at only four positions: RF (Aaron Judge), 3B (Gio Urshela), 2B (DJ LeMahieu), and DH (Giancarlo Stanton). If you give Joey Gallo the benefit of the doubt in LF, that’s five.

That means they need to fill four holes: CF, SS, 1B, and C. And since they're heavy on RH power bats, ideally they'd fill those with LH contact bats, to the extent that they can.

Meanwhile, on the pitching side, they could also use a No. 2 starter and a couple more bullpen arms. 

And they need to do all this now, because Judge is still in his prime and is only under control for one more year (extending him is yet another issue). They also have Gerrit Cole in his prime, and a very itchy fanbase.

The budget

• As a reminder, there are only two forms of capital with which to improve a team: money or players. If the Yankees want to stay under the luxury tax again in 2022 (after walking a tightrope to do so in 2021), they have very little wiggle room to work with. Let’s take a look:
• *Projected budget (in millions, per Fangraphs’ Roster Resource): $211
• *Projected luxury tax calculation: $223

The first luxury tax limit for 2021 was $210, which means, if it stays the same, the Yankees are already over the line. If it climbs to, say, $215 for 2022, they’re still over.

That means they have to start cutting -- and that’s before they even think about signing free agents.

What if they just spent like crazy?

Gone are the days when George Steinbrenner could just, famously, buy the top players in baseball to win a World Series. It’s harder than that now.

But okay, let’s say his son Hal decides to open his checkbook. GM Brian Cashman could swoop in and sign one of the big free agent shortstops (Carlos Correa?), a free agent CF (Starling Marte?), a No. 2 starter (Marcus Stroman? Robbie Ray?), and a 1B (re-sign Anthony Rizzo?).

Filling the holes that way will cost serious money. Upgrading those four positions via free agency will add at least $90M to the budget in 2022 alone. That will put them way over the third luxury tax limit (assuming the current CBA rules stay the same) not just for 2022, but for the foreseeable future, as stars typically require longer-term deals. But hey, as Mets owner Steve Cohen said, if you’re going to go past the luxury tax, you might as well go big. 

Financially, that would require paying a 42.5% tax on the overage amount, since they'd be over the third limit. So if they take the budget to, say, $300M, it will cost them an extra $38M. In addition, their highest draft pick would move down 10 places in the order. It’s hard to envision even the rich Yankees doing that.

That’s because Steinbrenner and Cashman believe strongly in building a sustainable, efficient model. They are not unlike the Dodgers in this regard -- spend smartly, build a strong farm, keep the line moving. Blowing past these limits and getting taxed and penalized goes against that whole philosophy.

So what about the trade market?

Some pundits (like Jim Bowden of The Athletic) think it might be feasible to just trade castoffs. It is not. Let’s look at our estimates:

Expendable players with zero value (or less):

• [baseball-trade-values-player-link player="8186"]
• [baseball-trade-values-player-link player="7576"]
• [baseball-trade-values-player-link player="8472"]
• [baseball-trade-values-player-link player="9344"]

Keep in mind there’s a reason most of these guys are still on the team -- no one wants them. 

To be very clear: It is not realistic to expect any other team to accept failed prospects or injured major leaguers for established stars. No one wants any team’s flotsam and jetsam.

• Other teams are not taking:
• *a guy with concussion issues who may never play again
• *a guy who’s put up -1.7 fWAR in the past three years, can’t play the field, and is out of options
• *a guy who is always injured and whose contract is deeply underwater
• *an $8M catcher who can’t catch and hit only .204 this past season

Other teams have their own problem children. They don’t want more. So those castoffs are not movable. 

So what do the Yankees have to work with?

Cashman already traded multiple prospects from the middle tier of his farm to land Jameson Taillon, Gallo, Anthony Rizzo, and Clay Holmes. So it’s a bit picked over. And those half-measure additions still weren’t enough to get them past the Wild Card round.

Meanwhile, the bottom of the farm is, well, the bottom. That’s not going to move any needles.

That leaves the top. Here’s what they’ve got:

• Top tier ($20M+):
• [baseball-trade-values-player-link player="14265"]
• [baseball-trade-values-player-link player="9087"]
• [baseball-trade-values-player-link player="14264"]

There is a second tier of prospects we value between $6M and $10M, consisting of Alexander Vargas, Luis Medina, Austin Wells, Clarke Schmidt, Trey Sweeney, Yoendrys Gomez, and Antonio Gomez. Those are likely secondary pieces in any serious trade.

In other words, packages led by those top three prospects (some combined, depending on the target) are what other teams will ask for. 

If the Yankees want Matt Olson, the A’s will ask for Volpe straight up, or Peraza or Dominguez as the lead piece with secondaries attached.

If the Yankees want, say, Bryan Reynolds, the Pirates will ask for both Volpe and Dominguez; if they want Cedric Mullins, the Orioles will ask for Volpe plus secondaries, or both Peraza and Dominguez. You get the idea.

So if they go this route, Cashman and Steinbrenner will have to stomach the losses of Volpe, Dominguez, and Peraza, et al, which will strip the farm bare of most of its best talent for the foreseeable future. Not a happy choice either.

The Third Way

Many Yankees fans will no doubt contemplate a third approach. This involves a combination of trading and non-tendering more expensive players while somehow escaping luxury-tax penalties and keeping the top prospects.

For example, they could (and probably should) non-tender Sanchez (estimated salary: $7.9M), Frazier ($2.4M), and Andujar ($1.7M). That will save them $12M. It helps, but not enough. That’s not even half of what Carlos Correa’s likely AAV will be. And now they need another catcher, since they lost Sanchez.

They could also look to trade players with value making more money:

• [baseball-trade-values-player-link player="9675"]
• [baseball-trade-values-player-link player="9590"]
• [baseball-trade-values-player-link player="8209"]

Since none of these players is going to generate a huge return, the main reason to move them would be to save money (and the fact that Torres is blocked at 2B). Shedding the salaries of Voit ($5.4M), Gallo ($10.2M), and Torres ($5.9M) will save another $21.5M. 

Adding that to the cuts above, they’ve saved a total of $33.5M. That takes their luxury tax total down to $189.5M, leaving them headroom of only about $25M (assuming a limit of $215M). That’s not even enough to afford Correa. And since they traded Gallo, now they need another outfielder. 

And if they somehow combined this approach with a prospect trade for an established veteran, they still have to pay that veteran’s salary -- Olson is set to make $12M this year. Doing that would leave headroom of only $13M, again with multiple holes to fill. 

And that also means that if they pivoted to trading only for less expensive (in salary terms) players like Reynolds or Mullins, their scope of options would be limited. And the other GMs would ask for even more in player capital, knowing they have more leverage.

So this approach seems less than ideal. It’s a whack-a-mole game.

The looming decision

So which way should the Yankees go? They proved this year that muddling through doesn’t work. The whack-a-mole approach above just feels like moving the deck chairs. If they want a true championship team now, with Cole and Judge in their prime, they need to go bold.

So should they spend like crazy, and get heavily taxed and penalized? Or stay under the limit and trade their best prospects? 

Either way, it’s going to sting.