The Notorious B.I.G. may have said it best: “Mo money, mo problems.” Even though the late rapper probably was not referring to Major League Baseball’s competitive balance tax (CBT), the Red Sox can relate.
But thanks to some creative deal-making, the team has found a way to maximize revenue while minimizing their CBT, or “luxury tax,” for the upcoming season, WEEI.com reports.
MLB’s luxury-tax threshold is $170 million for the 2010 season, an increase of $8 million from last season. Despite the increase, most teams continue to trim payroll to save money during difficult economic times.
Last season, the Yankees had the highest payroll in baseball, spending more than $200 million. Meanwhile, the Red Sox had the fourth-highest payroll, spending nearly $123 million in player salaries.WEEI.com’s Alex Speier breaks down how baseball’s CBT works:
— Payroll for CBT purposes is determined by the average annual value of the entire contract, not the salary in a single season.
— Player option years are considered guaranteed money.
— Team options are not considered guaranteed.
— A cash transfer from one team to another is deducted, in full, from payroll calculations for luxury-tax purposes.
The Red Sox have done a masterful job in handling their payroll for the upcoming season with regard to the luxury tax. The team restructured the contract of pitcher Tim Wakefield, acquired infielder/outfielder Bill Hall along with cash from the Mariners for first baseman Casey Kotchman and signed third baseman Adrian Beltre to a contract that averages only $7 million a season.
Add it all up, and the Red Sox have managed their finances well this winter. As a result, their 2010 payroll won’t break the bank.
