In a season where MLB combined for the smallest luxury tax bill in 15 years, the 2018 World Series Champion Boston Red Sox stick out like a sore thumb.
According to the Associated Press, the Boston Red Sox owe exactly $11,951,091 after finishing the 2018 season with the highest payroll in MLB. The only other team to have to pay the penalty were the Washington Nationals. Their tax bill, however, was only for $2,386,097.
2018 is the first time since 2003 that MLB as a whole combined for a luxury tax bill under $15M. The Red Sox comprised over 83% of the total bill while the Nationals paid the remaining 17%.
The World Series Champions exceeded the luxury tax threshold in 2018 when they added J.D. Martinez to the roster out of free agency. At $23.75 M, including a $700K in performance-based bonuses, Martinez cost the Rd Sox over $24M for the 2018 season. Then, Boston acquired World Series MVP Steve Pearce and his $3.2M salary at the trade deadline. They also added Nathan Eovaldi and Ian Kinsler who combined for close to $4.5M.
The Current Luxury Tax System
More from Call to the Pen
- Philadelphia Phillies, ready for a stretch run, bomb St. Louis Cardinals
- Philadelphia Phillies: The 4 players on the franchise’s Mount Rushmore
- Boston Red Sox fans should be upset over Mookie Betts’ comment
- Analyzing the Boston Red Sox trade for Dave Henderson and Spike Owen
- 2023 MLB postseason likely to have a strange look without Yankees, Red Sox, Cardinals
When the
was put in place in 2003, nobody imagined that teams would willingly cross the threshold in order to obtain free agents. As it currently stands, teams that exceed the collectively bargained threshold are taxed on each dollar above the threshold. For each consecutive year that a team exceeds the threshold, the tax rate increases for that team.
The Yankees have been the face of the luxury tax system, having paid a penalty each year since its inception 15-years ago. In all, the Yankees have combined for a luxury tax bill just under $320M since 2003. That total dwarfs the next team, the Dodgers, who have combined for a total bill just under $150M.
You might be wondering what happens to all of this money? Well, according to MLB’s CBA, for the years 2017-2021, the first $13M goes to MLB Players Benefit plan. 50% of the remaining funds are put into player retirement accounts, and the remaining funds are distributed to teams that did not exceed the threshold
As it stands, the Boston Red Sox are the only team currently slated to be on pace to pay the bill next season. Perhaps this is the reason why the Red Sox are reportedly looking to shed payroll.
The plan – or lack thereof – paid off in 2018 for the Red Sox, but will spending money always lead to championships?
My guess is, no!