Red Sox: Three ways to dip under luxury tax while still contending
By Sean Penney
Re-Negotiate Martinez contract
J.D. Martinez is set to earn $23.75 million in 2020 and $62.45 million over the next three seasons. However, he has a clause in his contract that allows him to opt-out after any of those seasons to test free agency again.
If Martinez exercises the opt-out this offseason, it’s possible he could walk away to sign with another team. Removing his salary from the payroll is enough to get Boston under the tax line but removing his bat from the lineup severely hinders their chances to contend for a playoff spot.
There’s a way to keep Martinez and still save some money. The key is convincing him to opt-out in order to sign a new deal with a lower average annual value, which is what matters for luxury tax purposes.
Martinez counts for about $22 million against the tax under his current deal. The Red Sox could offer him a new contract that pays him the same amount over the next three years while tacking on two more years at a lower rate.
Let’s say the Red Sox offer Martinez a five-year, $95 million deal. The average annual value drops to $19 million, saving $3 million per year against the tax.
Would Martinez accept that offer? His agent is Scott Boras, so we can assume the preference would be to test the market to get a better offer but it’s unclear where he’d find one. The Red Sox were his only serious suitor when they signed him to a 5-year, $110 million deal. Is he going to match that now that he’s two years older? If he plays out the remainder of his contract before testing the market, is any team giving a 35-year old designated hitter more than $16 million per year?
He may look around for other options if he opts out but it’s reasonable to believe the Red Sox can convince him to stay on a new deal that lowers his tax hit. An AAV of around $19 million drops the total payroll to about $218 million.