CBT Analysis: Can Red Sox Afford to Sign Bay or Holliday?

Jeffrey BrownAnalyst IDecember 28, 2009

BOSTON - SEPTEMBER 22: General Manager Theo Epstein of the Boston Red Sox watches batting practice before a game against the Cleveland Indians at Fenway Park on September 22, 2008 in Boston, Massachusetts.  (Photo by Jim Rogash/Getty Images)
Jim Rogash/Getty Images

Over the last several days, there has been a lot of speculation that the Red Sox's recent shopping spree may not be done. In the aftermath of the New York Yankees' acquisition of RHP Javier Vazquez, some pundits have speculated the Sox may feel the need to make one more big splash in free agency. The thinking is that the Sox will perceive the New York rotation to be close enough to the Red Sox (in quality) that the stark differences in the team’s respective lineups will be impossible to ignore.

With that said, we also know that the ballclub appears determined to keep the team salary below the threshold for the Competitive Balance Tax, also known as the CBT and/or “the luxury tax.” The CBT was designed to be a deterrent to spending. The Collective Bargaining Agreement (CBA) between the league and MLBPA (the Players Association) defines the payroll level beyond which teams will be taxed for their spending. In 2010, the CBT will apply to all teams who have a combined payroll/benefits of $170 million or greater (up from $162 million in 2009).

In order to understand where the Red Sox sit with respect to the CBT, fans must understand the following:

1) The payroll calculation is based on the average annual value (AAV) of a player’s contract, not the annual salary of a specific player;

2) The payroll calculation is based on the full 40-man roster, not just the 25-man roster;

3) The payroll calculation includes obligations to players who are no longer on the roster (thus, the Red Sox calculation will include the $9 million owed to Julio Lugo);

4) The payroll calculation also includes money paid out in certain contractual incentives.

So, in order to begin assessing the likelihood of whether the Sox will continue to pursue additional free agents, let’s take a look at where they are right now in terms of the CBT:

Daniel Bard $400,000 (est)

Josh Beckett $10,100,000

Boof Bonser $650,000

Clay Buchholz $425,000 (est)

Mike Cameron $7,750,000

Manny Delcarmen $900,000 (est)

J D Drew $14,000,000

Jacoby Ellsbury $500,000 (est)

Jeremy Hermida $3,000,000 (est)

Jose Iglesias $2,060,000

Casey Kotchman $3,000,000 (est)

John Lackey $16,500,000

John Lester $6,000,000

Mike Lowell $12,000,000

Jed Lowrie $425,000 (est)

Victor Martinez $7,680,000

Daisuke Matsuzaka $8,670,000

Hideki Okajima $2,500,000 (est)

David Ortiz $13,000,000

Jonathan Papelbon $9,000,000 (est)

Dustin Pedroia $6,750,000

Ramon Ramirez $900,000 (est)

Marco Scutaro $6,250,000

Junichi Tazawa $1,100,000

Jason Varitek $300,000

Tim Wakefield $2,500,000

Kevin Youkilis $10,280,000

40-man Roster $2,000,000

Julio Lugo $9,000,000

Benefits $10,500,000

Total: $168,140,000

So considering all of the current contracts, plus benefits, the Red Sox have less than $2 million to spend before reaching the CBT threshold…so Theo & Company are going to have to get VERY creative if they are going to add another bat without paying any luxury tax (which will be 22.5% of any payroll/benefits in excess of $170 million).

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