How Jesus Luzardo's New Contract Impacts Phillies Payroll

An important part of the reported five-year, $135 million contract for the Phillies with Jesus Luzardo is that it kicks in next season.

Luzardo is set to make $11M in 2026 after signing a contract in January to avoid arbitration with the Phillies in his final year before free agency.

When Luzardo's new contract extension begins next year, his yearly salary will jump to $27M. That number, the annual average value of the deal, is the one applied to the Competitive Balance Tax, which the Phillies exceeded by $73 million last season and are another couple million dollars over heading into 2026.

The Phils have been subject to the harshest CBT penalties because they've exceeded the tax four years in a row. The longer the streak of consecutive years you've gone over, the rougher the consequences. Their tax bills from 2022-25 have risen from approximately $3M to $7M to $14M to $56M last season, based not only on their repeater status but their constant large payroll increases via free agency and raises.

The great unknown

But ... who knows how Major League Baseball's salary and roster-building structures will even look moving into the future? The Collective Bargaining Agreement expires on Dec. 1 and a lockout is expected. Whenever baseball resumes in 2027, the CBT system as we know it may look completely different. Thresholds could change. Penalties could change.

The timing

When the two numbers were set side by side — Luzardo for $135M over five years, Ranger Suarez with the Red Sox for $130M over the same length — one of the first questions from Phillies fans was, 'Why didn't they just give the money to Ranger?'

Beyond the differences in skill set, upside and age, the timing was important. If the Phillies began a starting pitching contract of that yearly value in 2026, they'd be paying nearly double for it. Their CBT payroll is already approximately $315 million.

Luzardo's raise from $11M to $27M, though, does not kick in until next year. And so much money comes off the books for the Phillies when this season ends.

Off the books after 2026

• Gone will be the $20 million salary of Nick Castellanos, of which the Phillies are paying all except the minimum of $780,000.

• Taijuan Walker's $18M comes off after 2026.

• Alec Bohm's $10.2M will come off and he seems likely to test free agency. Depending on how the season plays out for the Phillies, they may be able to move top prospect Aidan Miller into Bohm's spot in 2027. If they do, they'd save about $9.5M at third base. (First, Miller needs to get past lingering back soreness.)

• Adolis Garcia will earn $10M this season on a one-year deal.

• Two other Phillies in their walk years are Jose Alvarado ($9M) and Edmundo Sosa ($4.4M).

Combined with the Castellanos savings, the expiration of Walker's deal will free up $37.2M. If Bohm is replaced next season by Miller, that number would rise to $46.6M. And it could reach as high as $70M of reduced payroll if Alvarado, Garcia and Sosa walk, not that allowing all three to do so would be ideal.

Even if those savings are on the lowest end at $37.2M, Luzardo's $16M raise doesn't cover even half. And, under either the Bohm/Miller scenario or one where they let Garcia walk, the Phillies would still have a huge chunk of about $30M they could theoretically reallocate to a star free agent.

Unfortunately, there is no obvious free-agent fit for the Phillies in next year's class. It's another relatively weak overall group of outfielders highlighted by a 37-year-old George Springer, Randy Arozarena and Seiya Suzuki, whose defense has rapidly declined. But that is a topic for a different day.

Approximate payroll numbers

The first tax threshold this year is $244M. The fourth, which carries the harshest penalties, is $304M.

The Phillies are at approximately $315M, which would generate a tax bill of $54M.

It is isn't calculated by MLB until season's end, so there's plenty of time for teams to increase or reduce payroll.

The Phils' payroll normalizes next season with the removal of the difficult Castellanos and Walker contracts and other potential changes. Then, even if it's not a good thing, ace Zack Wheeler's enormous $42M AAV goes away after 2027.

This season, 2026, was the trickiest for the Phillies to navigate. It's why they haven't pursued moderate upgrades in recent months, only arming themselves to make a splash for a player they viewed as worthy and also an ideal fit, like Bo Bichette.

Luzardo's hefty raise won't impact the Phils this year, and by the time it does, it will be positively offset elsewhere.