clock menu more-arrow no yes mobile

Filed under:

The long-term luxury tax penalties should be a nonfactor this winter

Mostly because, as of now, we don’t have the slightest idea what they will be.

If you buy something from an SB Nation link, Vox Media may earn a commission. See our ethics statement.

Boston Red Sox Summer Camp Photo by Jim Davis/The Boston Globe via Getty Images

This offseason has been moving at a snail’s pace. There are a whole host of reasons and theories for why this is, of course. Some hope does exist that, after passing Wednesday’s non-tender deadline, things will start to move a bit more quickly. But non-tenders aren’t the only reason. The fact that we still have no idea whether or not the National League will have a designated hitter in 2021 certainly doesn’t help matters. And really, this is just a continuation of the trend we’ve seen in baseball over the last handful winters.

As with everything to do with baseball this winter, though, it’s impossible to talk about the pace of things without mentioning the financial side of all this. The league was forced into a shortened, fanless season in 2020, and that has affected the bottomline of all teams. The extent to which said bottomlines were actually affected is up for debate, and based on the little public information we have there’s a good chance it wasn’t actually as bad as the owners are making it seem publicly. This is an important topic, but it’s not really what I want to focus on here today. Instead, I want to look at things through the lens of the luxury tax as well as the crisis on the horizon with respect to the expiring Collective Bargain Agreement.

That is sort of the hidden side effect of all this pandemic madness. If 2020 were a normal year, we would have been talking about the upcoming CBA negotiations all season and that would have likely been the main focus of the offseason. The current CBA expires on December 1 of next year, and the relationship between players and owners right now isn’t exactly strong, to put it lightly. As of right now it’s impossible to know how things will shake out but everything is on the table, including a potential lockout that costs games. We do know that whenever a new CBA does come, though, there are likely to be major changes to the economic system of the league, a system that quite frankly is broken at this point.

And it’s exactly that uncertainty that needs to be considered when we talk about anything relating to the luxury tax this winter. As of this writing, the Red Sox have roughly $37 million to spend before they hit the first luxury tax threshold for 2021. This is according to Cot’s Contracts.

Given all of the holes present on the Red Sox roster and their stated desire to put a better product on the field, one that is capable of competition in this league, it is nearly impossible to imagine a contending-caliber roster without exceeding that spending this winter. I won’t go so far as to say it’s completely impossible because Kevin Garnett taught me that anything is possible, but you really have to squint to get there. The point is, they need to at least be open to exceeding that mark if they really want to improve the roster to any significant extent. There will be arguments against doing so, however, largely boiling down to the idea that since they likely won’t win a championship in 2021 there is no point in starting those penalties this year.

Remember, the reason the team dipped under the tax threshold in 2020 (whether they want to admit it was the goal all along or not, it was always extremely clear that it was) was not so much about saving money in 2020. That was simply a happy side effect for the owners. Ostensibly, the reason was more regarding the fact that penalties get steeper for repeat offenders, and to lessen the penalties you need to dip under the threshold for at least a year. And so the thinking goes that the sooner they go back over, the sooner they’ll have to dip back under.

We don’t even have to get into my thoughts that these penalties have always been overblown, because that’s not even the biggest issue with this line of thinking. The biggest issue ties back to the very simple fact that we have no idea what the long-term luxury tax penalties are going to be moving forward, or even whether or not they will exist at all. It’s impossible to talk about starting long-term penalties for the tax without mentioning this very clear and inarguable fact that we’re speaking entirely in hypotheticals. In reality, not exceeding the tax due to fear of future penalties with the Red Sox roster in the state it is currently in would be akin to essentially wasting another year with a wholly uncompetitive roster on the off-chance things don’t really change. And again, it’s hard not to foresee major economic changes to the way the league is structured even if the specifics are unclear at this point.

Along these same lines, it’s also worth mentioning these arguments apply to service time manipulation as well. We don’t know what service time will mean in a longer term context at all, so there’s no point in delaying a good player’s time and making the major-league team worse for that. This doesn’t apply to the Red Sox too much because they don’t have a prospect ready to come up they’d wait on unless you want to make that argument for Tanner Houck. Even with him, though, there are still things to work on at Triple-A.

Regarding the payroll, none of this is to say the Red Sox have to go buck wild and sign every top free agent this winter. There are good arguments against just about every top free agent on the market this winter, both in general and in the specific context of the Red Sox roster. But they could have an opportunity to do something like buy a prospect by taking on a bad contract as outlined by Ken Rosenthal earlier this week. The luxury tax shouldn’t be a deterrent if that is indeed on the table.

To the organization’s credit, this hasn’t been something I’ve seen from them or even leaked in a report to this point. But I’ve seen the argument from some analysts and fans, and it’s worth nipping in the bud right now. If you want to argue against specific potential acquisitions, fine. That’s fair. But simply being wary of exceeding the tax out of fear of long-term penalties given all of the uncertainty moving forward just doesn’t track.