MLB payroll decline proves the Red Sox weren’t being cheap

The Boston Red Sox are still among the top spending teams

The narrative that has been building since the Boston Red Sox hired Chaim Bloom as their chief baseball officer is that the former Rays executive brought his frugal spending habits with him from Tampa Bay. The perception is that he’s turning this proud franchise into the “Tampa Bay Red Sox” or “Boston Devil Rays” but the criticism is unwarranted.

Bloom hasn’t made a big splash by signing a free-agent to a lucrative contract but shopping in the bargain bin proved to be a successful strategy last offseason. While fans were disappointed that the Red Sox didn’t land some of the biggest names on the market a year ago, Kike Hernandez and Hunter Renfroe proved to be outstanding values who outproduced some of the stars fans were clamoring for.

Criticizing Bloom for his lack of spending overlooks a leaguewide trend. According to the Associated Press, Major League Baseball payrolls dropped 4% in 2021 compared to the league’s last full season, and the $4.05 billion total was the lowest in a fully completed year since 2015.  Payrolls are down 4.6% from their record high of just under $4.25 billion in 2017.

Bloom’s efforts to dip under the luxury tax threshold have been viewed as being “cheap” when in reality, this is the new normal. Only two teams paid the tax in 2021. The Los Angeles Dodgers had a $262 million payroll, the second-highest in major league history, that resulted in a $32.65 million tax bill. Their staggering payroll was warranted considering they won the World Series the previous year. They also don’t have a ton of long-term salary on their books and their payroll will almost certainly decline next season with Corey Seager bolting in free agency and Clayton Kershaw potentially following him out the door.

The San Diego Padres barely stepped over the tax threshold and were charged a $1.29 million tax for a roster that failed to make the playoffs. Paying the tax for a non-contender is a worst-case scenario that the Red Sox found themselves in during the 2019 season.

Why are teams so reluctant to pay the luxury tax? It’s only money coming out of the pockets of billionaire owners, right? Well, not exactly. Clubs that exceed the tax by $40+ million have their highest selection in the next draft pushed back 10 spots unless the pick falls in the top six. In that case, the team will have its second-highest selection moved back 10 places instead. 

This happened to Boston in the 2019 draft when they had to wait until the 43rd overall pick to make their first selection. Celebrating a World Series title in 2018 made the penalty worthwhile but it’s not a viable strategy every year.

Many of the top free-agents have declined qualifying offers, meaning it would cost another team their second-highest draft pick plus $500,000 from their international bonus pool if they sign them. Teams that exceeded the tax the previous season lose their second- and fifth-highest draft picks plus $1 million from their international bonus pool.

Bloom inherited one of the worst farm systems in baseball when he took over the Red Sox front office but in short time he’s vaulted them into the top-10. Losing draft picks would have been counterproductive to those efforts. Want to sign a player on the international market who could potentially be the next Xander Bogaerts or Rafael Devers? That might be impossible if tax penalties carve into the funds they are allowed to spend.

Part of why the Red Sox aren’t spending on high-priced free-agents is because they have already spent a significant amount on their current roster. While the Dodgers and Padres both paid the tax this year, four other teams barely squeezed under the threshold — the Phillies ($209.4 million), Yankees ($208.4 million), Mets ($207.7 million) and Red Sox ($207.6 million).

That’s right, the Red Sox had the sixth-highest payroll for luxury tax purposes this year, spending just under $1 million less than the Yankees. Signing Gerrit Cole last winter created the perception that the Yankees were still a financial juggernaut that could bully their division rival by outspending them but they barely outspent Boston this season.

But Boston is a big market! There’s no excuse for them not being one of the top spending teams, right? Wrong again. According to the 2021 Nielsen DMA rankings, Boston was the 10th-biggest TV market in the country. Several clubs reside in bigger markets than Boston but spent less on payroll than the Red Sox.

The Chicago Cubs had the third-highest payroll in 2019 but dropped to 13th at $152 million. The Washington Nationals dropped from fourth in 2019 to 10th at $168 million. If market size dictated spending then both clubs should be ahead of Boston but that didn’t happen this year. Why? They fell out of contention, necessitating that they become sellers at the trade deadline. Those teams needed to take a step back before they could move forward. Boston did the same when they slashed payroll for the 2020 season and they quickly turned their fortunes around with savvy moves that launched them back into the postseason this year.

The Red Sox haven’t suddenly transformed into a small-market team heading for one of baseball’s lowest payrolls. They are spending in the range they should be expected to spend. They are cautious of when they should exceed the tax because there are penalties that hinder their ability to build a sustainable contender, not because they are worried about John Henry’s wallet.

Boston might not be spending to the levels we have seen in the past but the same can be said for essentially every team. Payrolls are in decline across the sport, which is part of why we’re currently in a lockout. That could potentially change once a new Collective Bargaining Agreement is in place, depending on if there are any changes to the penalties meant to prohibit excessive spending. The Red Sox can’t be expected to spend freely when they don’t even know what the rules are yet.

The implication that Bloom is turning the Red Sox into the Rays isn’t exactly an insult. Tampa Bay won the AL East with the lowest payroll in baseball and they made it to the World Series the previous season. Four of the top eight spenders missed the playoffs this year. The Atlanta Braves won a championship with the 14th-highest payroll at $148 million.

It’s not about spending the most money, it’s about spending wisely. That’s what Bloom has done for the Red Sox. A restocked farm system and a return to the postseason shows his plan is working.