The Boston Red Sox don’t need to stay below the luxury tax line
A year ago, the overwhelming narrative focused around the Boston Red Sox was the competitive balance tax. Ownership was hellbent on resetting the punitive penalties for repeat offenders, slashing payroll to the point where the team simply couldn’t afford to fill the glaring holes on the roster with viable major league talent. The result was a frustrated fan base and a last-place finish in the AL East.
This year feels different. While Boston isn’t opening the checkbooks for a wild spending spree, they have made a series of moves to improve the roster. The free-agent signings of Kike Hernandez, Garrett Richards, Martin Perez, Matt Andriese and Hunter Renfroe, plus the trade for Adam Ottavino, have added approximately $35 million to the 2021 payroll.
These transactions leave the Red Sox roughly $5.68 million shy of the competitive balance tax threshold, according to the Twitter account Red Sox Payroll. Boston has some wiggle room that they can use to add another platoon infielder or a bullpen arm but they don’t have the budget for a big splash if they intend to avoid the tax.
Which leads us to wonder, how important is it for the Red Sox to stay under the tax line again this year? According to MassLive’s Chris Cotillo, Chief Baseball Officer Chaim Bloom explained that while he’s mindful of the team’s payroll, the budget isn’t hard-capped to prevent him from exceeding the tax.
"“It’s a factor, but I don’t know that it has ever been a firm ceiling or a firm mandate,” Bloom said. “It’s obviously a factor we have to consider like we’d have to consider anything that involves the wise use of our resources. There’s not any kind of firm, hard ceiling.”"
Even if ownership has given their blessing for Bloom to exceed the tax this year, it doesn’t mean he’s going to recklessly charge through that barrier. The Red Sox missed out on the top position players on the free-agent market and are unlikely to chase reigning NL Cy Young Trevor Bauer. Any of those high-profile options would have put them well into tax territory. Most of them were also tied to a draft pick penalty since they declined a qualifying offer, which was as much of a deterrent as the payroll ramifications.
There are too many lingering questions hovering over the core of the Red Sox roster to assume they are ready to jump back into contention. Chris Sale’s timeline remains uncertain and the team plans to be cautious as he works his way back from Tommy John surgery. Eduardo Rodriguez could be rusty after missing last season due to health issues stemming from COVID-19. Rafael Devers, Andrew Benintendi and J.D. Martinez are looking to bounce back from disappointing seasons.
Boston could splurge on another pricey free-agent or two, blowing by the tax threshold in the process. That would make the team look better on paper but it won’t matter unless most of the aforementioned core players recover from lost seasons. Paying the luxury tax for a team that still doesn’t sniff the playoffs would be a nightmare. Not only would it mean enduring more penalties, but it would also start the clock on when Boston would want to reset the tax again to avoid the steepest penalties reserved for third-time offenders.
That doesn’t mean they need to treat the tax threshold as a roadblock that must be avoided at all costs. If Bloom sets his eyes on a target, he shouldn’t shy away from signing them even if it means taking a small step over the tax line.
Luxury tax penalties are calculated based on what the team spends by the end of the season, not the Opening Day payroll. The Red Sox could conceivably begin the season with a payroll that exceeds the $210 million threshold. If the team surprises us by staying in the playoff race, paying a small penalty for a first-time offender could be worthwhile. They might even be willing to add players mid-season if they have a legitimate chance at making a run.
If their core players fail to bounce back or the roster is derailed by a plague of injuries, Boston could pivot to being a seller at the trade deadline. Similar to how they approached last year’s deadline when they shipped out expendable players on expiring deals such as Brandon Workman, Mitch Moreland and Kevin PIllar, the Red Sox could trim enough from their payroll to dip back under the tax with some deadline deals.
Resetting the penalties created financial flexibility for the Red Sox but it’s not an open invitation to dive back into tax territory. The goal isn’t to “win” the offseason, it’s to build a sustainable winning franchise. They won’t hamstring their future by spending for the sake of it.
However, Bloom doesn’t need to act as if he’s allergic to the tax. He needs to stay the course with what he’s been doing by adding depth to improve the roster. If that results in stepping slightly over the threshold, so be it. They can address that concern during the season once they determine if they have a legitimate chance to contend or if they should be focusing on the future.