Taxing issue for Red Sox in offseason
The Boston Red Sox are in a box.
A box that might prevent them from signing free-agent closer Ryan Madson, reduce their leverage in trade talks for Oakland Athletics closer Andrew Bailey and temper their pursuits of free-agent outfielder Carlos Beltran and Japanese right-hander Yu Davish.
A box that is motivating them to explore trading shortstop Marco Scutaro and might even compel them to do the same with third baseman Kevin Youkilis, though at this point there is no indication that the Sox are even thinking about moving "Youk."
Here’s the problem:
The Red Sox need a right fielder, a closer and two starting pitchers, and they already have committed about $170 million in payroll for 2012, according to the projections of a rival club.
That estimate leaves the club only under $8 million under the luxury-tax threshold of $178 million — a threshold that, for all intents and purposes, amounts to a virtual salary cap for the Sox this offseason.
Unless, of course, the Sox ignore it.
Might be a good idea, no?
The Sox’s tumultuous offseason — Ben Cherington and Bobby Valentine in, Theo Epstein and Terry Francona out — shifted the onus to club president Larry Lucchino, who was perceived by many to be the architect of the upheaval.
Lucchino needs the Sox to win; this is on him now. And to win, the Sox just might need to blow past the luxury-tax threshold, painful as the implications might be.
The Red Sox, after exceeding the threshold in each of the past two offseasons, will be taxed at 40 percent for each dollar they spend over $178 million, 50 percent if they continue to bust the threshold next offseason and beyond.
On the other hand, if the Sox can stay below $178 million, they will be taxed at a rate of only 17.5 percent the next time they exceed the threshold — a powerful incentive for them to refrain from big spending this offseason.
The Red Sox can create flexibility by signing designated hitter David Ortiz to a multiyear deal at a lower average salary than the $14 million or so that he would earn in arbitration.
They also can bid for the negotiating rights to Darvish knowing that they could backload the pitcher’s contract and that his posting fee would not be included in luxury-tax calculations.
The Sox, though, do not seem eager to get involved with Darvish, perhaps because of their mixed experience with another Japanese righty, Daisuke Matsuzaka.
“I’m not sure the timing this offseason puts us in position to be the most aggressive team,” Cherington told reporters Friday.
Cherington might only be bluffing; the Yankees, too, are hemming and hawing about their potential interest in Darvish, and harbor their own luxury-tax concerns for the future. Maybe both teams will bid for Darvish, maybe not.
Among major-league free agents, Madson seems out of reach given the Sox’s current bind; he sought a four-year, $44 million contract with the Phillies earlier this offseason. Yet it’s highly doubtful Madson will get that kind of deal from another club. The Sox are the only big-money team still pursuing a closer.
Another free-agent right-hander, Francisco Cordero, 36, is coming off an excellent season, but at a salary of $12,125,000. Bailey would be much more affordable; he is eligible for arbitration for the first time, and MLBTradeRumors.com projects his salary to be $3.5 million.
So, if the Red Sox are serious about staying under $178 million, the Athletics would appear to be in a position of strong leverage — particularly when one of Boston’s division rivals, Tampa Bay, also is involved in the bidding for Bailey.
If the Sox land Bailey, maybe they can spend on Beltran. Or, they could go cheap with Josh Reddick in right field. Cuban outfielder Yoennis Cespedes, a player in whom the Sox have interest, according to a major-league source, likely will get a better deal from another team.
The rotation is another story.
The Sox could try to find the 2012 versions of Freddy Garcia and Bartolo Colon, the latter of whom is still a free agent. They are one of the teams talking to the Athletics about lefty Gio Gonzalez, the most coveted pitcher available in trade. But again, they’re limited if the luxury-tax threshold is a genuine concern.
Trading Scutaro — a player drawing interest from the Rockies, among other clubs — would clear as much as $6 million. (The Sox’s decision to pick up Scutaro’s option looks more curious by the day.) Jed Lowrie and rookie Jose Iglesias could cover short.
Replacing Youkilis would not be as easy. The Sox’s top third-base prospect, Will Middlebrooks, needs more time in the minors. Trading Youkilis — who is signed for $12 million next season with a $13 million club option for 2013 — also would be problematic. Youk’s value is down after two injury-marred seasons.
It’s quite the box that the Red Sox are in, one from which there is no easy escape. Unless, of course, they say, "The heck with the luxury tax; we’ll pay it, if necessary.” Which, in the end, might be the best — and only — solution.