Red Sox payroll spending may be trapped by the luxury tax

BOSTON, MA - SEPTEMBER 27: Rick Porcello
BOSTON, MA - SEPTEMBER 27: Rick Porcello /

For the Boston Red Sox to add payroll they would have to cut payroll to remain under the luxury tax. Would trading Rick Porcello solve that?

In the parlance of the bean counters in Major League Baseball it’s called a “competitive balance tax” and we know it as a luxury tax (LT).  The Boston Red Sox have managed to squeeze under the tax threshold for 2017, but 2018 may offer a bit of a challenge. The good news for the spend-happy is the tax threshold will be $197 Million for 2018.

Where do the Red Sox sit?  That is difficult to assess since there are unknowns with the biggest and most fiscally volatile being arbitration figures.  MLB Trade Rumors does some projections and that can give some insight into just how the Red Sox structure will change.

If you take the numbers from Baseball-Reference, Cot’s,  and Spotrac you get some figures, but it’s still questionable. Wandering through the maze – are they really paying Manny Ramirez $2 million? – you can get a general figure to work with. I took it at $187 Million or about $10 Million under the tax. It is a fiscal quagmire for me to sift through the various spreadsheets. A good, but not an admittedly solid starting point.

"A club exceeding the Competitive Balance Tax threshold for the first time must pay a 20 percent tax on all overages. A club exceeding the threshold for a second consecutive season will see that figure rise to 30 percent, and three or more straight seasons of exceeding the threshold comes with a 50 percent luxury tax. If a club dips below the luxury tax threshold for a season, the penalty level is reset. So, a club that exceeds the threshold for two straight seasons but then drops below that level would be back at 20 percent the next time it exceeds the threshold.-"

The Red Sox are also in the market for some improvements and most notable is a hitter who can send about 20 or so home runs a year out of Fenway Park.  To get such a talent the Red Sox can trade or sign a free agent, but either way, expect a significant jump in salary. If J.D. Martinez or Eric Hosmer signed I doubt a Go Fund Me page will be started.

Martinez had a 3.8 fWAR and Hosmer a 4.1 fWAR and if you go by Fangraphs a WAR point is equal to $7 Million. But even condensing the salary of a Martinez you may expect a figure more than $20 Million and the years as an unknown. The same would apply to a trade situation.  If the Red Sox managed to capture Jose Abreu from the White Sox they would also capture a projected $18 Million arbitration figure.

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The Red Sox are in a bind unless owner John Henry decides to sell a yacht and use it to cover expenses. So where do you get the dough? Looking at the Red Sox payroll what stands out is the big – or really, really big numbers. Forget David Price as too much for too long, but how about Rick Porcello?

Porcello managed an interesting double in 2017 by leading all American League pitchers in losses (17) and home runs allowed (38). That coming after a remarkable Cy Young Award season. A real turnaround or is it a turn back to the pitcher he always was? Was 2017 an anomaly? I would suspect it was, but Porcello is only 29-years-old and signed through 2019 for $42.25 Million. Make Porcello available as one possible option.

Teams need pitching and Porcello would find a home somewhere and I doubt two things would happen. The first is Boston would not have to kick in payroll and secondly Boston would get a pair of rusty cleats in return. Then you must replace Porcello and here is where Steven Wright comes into play. Wright is cheap and Wright may or may not return to All-Star form, but, hey – that risk and reward thing.

The next one that is standing out like a neon sign is Hanley Ramirez.  Hanley is costly – very costly at $22.75 Million and the possibility of a vesting of $22 Million in 2019. To dump Hanley, who would ostensibly be replaced by a new and improved slugger, would cost.  Even a non-sober GM would expect a good portion of that contract to be paid by the Red Sox, so Hanley may just be a keeper unless they kick in some contractual money.

The Red Sox can also nickel and dime savings. Robbie Ross certainly was not instrumental in the 2017 Red Sox and that is a quick $2 million. Is Sandy Leon expendable at $2.1 million? Or Brock Holt at $2 million? The Sox are thin at catcher so Holt may be on the outside with the cheaper Tzu-Wei Lin. However, I do not see the cheapo approach as being viable since replacement parts may cost as much.

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For the exotic, the Sox could move Craig Kimbrel and go to Joe Kelly, Carson Smith and Tyler Thornburg. But when contracts do expire in a few years you are faced with free agency or deep arbitration for several players. The long-term deals are now coming home to roost.

The Red Sox are stuck unless they move some money. Don’t expect any serious FA hunt unless that happens, but then comes the possibility that the Red Sox will willingly exceed the threshold and pay a 20% surcharge as a first-time offender. So, this becomes the potential turnaround. Let’s check that out.

The Red Sox are masters of dead money and that means Rusney Castillo, Pablo Sandoval and Allen Craig. The Red Sox are flush with cash and have clearly shown they are willing to accept their losses and move on. If the Red Sox go over the threshold by $20 million they may be willing to assume the surcharge as a cost of doing business. The team has exceeded in the past, so this is not a novel approach. You have no decision on cutting any payroll.

With the new Collective Bargaining Agreement (CBA) continuing the method of exceeding the threshold has continuing and escalating surcharges. Will the Red Sox simply do a one-year bump and then attempt to reset for 2019? Always a possibility since the LT will increase to $206 Million for 2019. As a fan, I certainly would want to keep Porcello and all others mentioned.

Next: Red Sox Free Agent Targets: 5 available hitters

Whichever direction the team goes, the focus for the fans will be if they have improved the product. I doubt anyone will be dramatically concerned with another ticket price increase.