Red Sox have money to spend under new CBA luxury tax thresholds

An updated look at how much room the Red Sox have in their budget

Major League Baseball finally came to an agreement with the MLBPA to ratify a new collective bargaining agreement, bringing a merciful end to the lockout. The new deal will implement several changes, not the least of which includes raising the thresholds for the competitive balance tax. With more room to operate under the dreaded luxury tax, the Boston Red Sox should be ready to spend.

The Red Sox entered the lockout with a payroll that was approaching $200 million, giving them slightly more than $10 million in wiggle room under the threshold that was in place last season. Under the new agreement, the CBT will be set at $230 million this year and steadily increase to $244 million over the five-year deal, according to ESPN’s Jeff Passan.

The minimum salary governing players with less than three years of major league service will jump from $570,500 to $700,000 this year, gradually increasing to $780,000 by the end of the deal. This gives a bump in pay to approximately half of the players on Boston’s 40-man roster but those raises barely put a dent in the payroll space they carve out with the CBT jumping significantly.

According to the Twitter account Red Sox Payroll, Boston has an estimated $200.83 million committed to this year’s payroll. That leaves them approximately $29.18 million beneath the first level of CBT penalties. This is only an estimate based on projections for various factors that are yet to be determined.

Boston has $133.01 million committed to 14 players on guaranteed contracts this season. Another $19.7 million is estimated for arbitration-eligible players (based on predictions from MLB Trade Rumors). The Red Sox still have $16 million owed to David Price on their books for one final season. Then there is an estimated $15.5 million for medical expenses and benefits.

The cost of pre-arbitration players for luxury tax purposes will depend on how much time they spend on the major league roster. It also assumes that those players will receive the $700,000 minimum. Teams aren’t obligated to pay these players more than that but it’s not uncommon for certain players to get a minor bump as a reward that puts them in the player’s good graces before they become arbitration eligible.

The expenses all add up rather quickly but in the end, the Red Sox should still have in the neighborhood of $29 million to spend before they need to worry about the CBT. That’s enough room in the budget to put Boston in the mix for any of the elite talent remaining on the market.

Boston might prefer to spread that payroll space over several signings considering they have multiple holes to fill. The Red Sox are in the market for a corner outfielder, at least one late-inning bullpen arm, plus they could continue to stockpile starting pitching depth.

One of the reasons why the players fought so hard to raise the CBT thresholds is because most teams have treated it as a salary cap. The Red Sox are no strangers to paying the tax, leading the majors in payroll as recently as 2019, but they quite memorably went to drastic lengths to trim the budget to reset the dreaded repeater penalties.

The penalties for first-time offenders are a bit more manageable so it shouldn’t surprise us if the Red Sox exceed the tax this year. The non-monitory penalties tied to draft picks and international signing bonus money remain in place as a possible deterrent. However, those concerns could be mitigated if an agreement is reached this summer for an international draft that also eliminates qualifying offers and the penalty for signing those free agents.

The new CBA includes a fourth level of the CBT with a higher surcharge meant to dissuade teams like the Dodgers and Mets from getting out of control with their spending habits. The price will be steep for teams that exceed the tax by $60+ million. It’s highly unlikely that Boston will approach that level but it’s realistic to project them to land in the first tier by going over the threshold by less than $20 million. That would give them enough room to chase a star in free agency or on the trade market with room to fill a few other holes.

Regardless of whether or not they plan to exceed the CBT, Boston has room in the budget. With free agency set to reignite tonight, that payroll space might not last much longer.