Six teams project to have their payrolls exceed the $208 million Competitive Balance Tax (CBT) threshold in 2020, and we’ve already heard rumors about some teams that are looking to shed salary as a result.

The six teams over the tax threshold as of December 14, according to Spotrac.com are:

  1. New York Yankees by $51.3 million
  2. Boston Red Sox by $28.4 million
  3. Houston Astros by $19.9 million
  4. New York Mets by $8.67 million*
  5. Chicago Cubs by $6.5 million
  6. Philadelphia Phillies by $2.7 million

*Note: In recent days, the Mets restructured Yoenis Cespedes’ contract that was scheduled to pay him the equivalent of $29.5 million in 2020. Speculatively, that restructuring stands to reduce the Mets’ payroll substantially in 2020. Spotrac’s tracking of the Mets’ salary situation had not been updated at the time this article was posted, perhaps because they are still awaiting specifics of Cespedes’ new contract.

According to MLB.com:

The Red Sox are trying to reduce their payroll to get below the $208 million Competitive Balance Tax threshold, though a source said that ownership has not made it an absolute mandate for the front office.

None of the above-listed teams have publicly announced their intent to shed payroll, because that would give teams with which they are negotiating a bargaining advantage. However, numerous names have been floated in various recent trade rumors that indicate that most of these teams have this objective in mind. Some of the big names from these teams reportedly being discussed include Boston lefthander David Price ($32 million in 2020), Yankees lefthander J.A. Happ ($17 million in 2020), Houston shortstop Carlos Correa ($7.4 million in 2020), Mets second baseman Jed Lowrie ($11.5 million in 2020), and Cubs third baseman Kris Bryant ($18.5 million in 2020). The Phillies were under the tax threshold until they signed shortstop Didi Gregorius a few days ago.

Regarding Price, who reportedly has come up in discussions between Boston and the Reds, MLB.com reports:

One scenario that has been floated in recent weeks would have the Red Sox attaching a young player — Andrew Benintendi’s name has been mentioned often — to Price in order to dump the pitcher’s contract. The Angels made a deal of that nature on Tuesday when they shipped Zack Cozart and his $12.7 million salary, along with 2019 first-rounder Will Wilson, to the Giants in exchange for a player to be named later or cash considerations, essentially allowing Los Angeles to free up payroll by giving San Francisco a young prospect.

A source said that concept has not been considered by Boston’s front office — nor will it be, especially not with Benintendi.

“That’s not going to happen,” the source said.

Just how much of Price’s contract the Red Sox would need (or be willing) to pay down would depend on the return from the other club. The Padres have discussed a deal that would include Wil Myers — who has three years and $67.5 million remaining on his contract — going back to Boston. That would save the Red Sox roughly $10 million per year, which means they would still need to shed at least one more player — Jackie Bradley Jr., for example — to get below the CBT threshold.

Despite MLB.com’s source saying Boston wouldn’t consider a Cozart-like trade scenario with Price, that strategy is used with great regularity in the NBA, often in trades between teams that are highly competitive and non-competitive. The typical scenario is that a contending team acquires a starting caliber player from the non-contending team. In exchange, the non-contending team takes on “expiring contracts” of non-star-caliber players AND a draft choice or draft choices. The “expiring contracts” (meaning that they expire at the end of the season) open up payroll room for the non-contending teams to hopefully use on free agents who might help them improve. And the draft choices have obvious benefits for a team that is trying to build.

Like the other 29 major league teams, the Cincinnati Reds have an opportunity to be creative in acquiring a potential difference-making player such as Correa or Bryant. They may be able to give up somewhat less in return because the other team may be motivated to not pay the CBT, the terms of which are (according to MLB.com):

A club exceeding the Competitive Balance Tax threshold for the first time must pay a 20 percent tax on all overages. A club exceeding the threshold for a second consecutive season will see that figure rise to 30 percent, and three or more straight seasons of exceeding the threshold comes with a 50 percent luxury tax. If a club dips below the luxury tax threshold for a season, the penalty level is reset. So, a club that exceeds the threshold for two straight seasons but then drops below that level would be back at 20 percent the next time it exceeds the threshold.

Clubs that exceed the threshold by $20 million to $40 million are also subject to a 12 percent surtax. Meanwhile, those who exceed it by more than $40 million are taxed at a 42.5 percent rate the first time and a 45 percent rate if they exceed it by more than $40 million again the following year(s).

If Boston exceeds the tax threshold again, it will be their third consecutive year, so in very round numbers, the Red Sox would pay approximately a $15 million CBT, based on current figures. Essentially the question for Red Sox ownership is whether keeping David Price and his $32 million in 2020 salary on the roster is worth paying an additional $15 million tax. The Cubs and Yankees will be in their second consecutive year over the CBT threshold if they remain there.

Whether what we will refer to as the Cozart/NBA-like trade will be used by other teams in major league baseball is one of the compelling questions of the 2019-2020 offseason. And we here at Redleg Nation, of course, are particularly interested in whether Dick Williams and Nick Krall can use this opportunity via a creative solution. This was the case last year in which the swap of bad contracts (Homer Bailey and Matt Kemp) produced financial benefits for both teams, as part of the swapping of other key players (Yasiel Puig, Kyle Farmer, Alex Wood, Josiah Gray and Jeter Downs).

24 Responses

  1. doofus

    I like the idea of Benintendi with Price. However, look at the players that were attached to Bailey and Kemp. None were “Benintendi-like.” Boston’s prospects are meh.

    The Stros and Mets have the more attractive prospects. And, I would want major league ready prospects in return.

    • Shawn

      That’s because Bailey went one way and Kemp the other.

      • doofus

        You are correct. After I thought about it, they are different scenarios.

  2. Steve Schoenbaechler

    As with each trade, it all depends upon what the other team is ready to give up, in player and money. For instance, I could see teams take on Price if the Red Sox simply send them some money, also. For, no team is going to take on Price’s contract straight up. If the Sox aren’t going to send money, then they have to send player/s. And, that might mean the other team sending player/s, also, obviously less than what the Red Sox would give.

    So, in short, can the Reds take advantage of it? It all depends. Can they? Sure. Will they? That depends upon the whole package from both teams.

    • Tom Mitsoff

      If the Red Sox are able to get rid of Price’s contract without paying out any cash to offset it in a trade, they will save not only the $32 million owed Price this year, but the additional $64 million he is owed in the next two years AND the $15 million tax in 2020. Boston’s ownership would have to at least ponder the possible savings of $111 million over three years if it can be accomplished without significantly degrading the team’s competitiveness.

      • Steve Schoenbaechler

        And, that’s just it. If you can see that, then every GM in the league can see that. They aren’t going to pay that much money for Price, just so Boston can save that much money.

  3. Magnum 44

    I am not sure how many years Giancarlo Stanton has left on his contract I do know no trade clause but I would like to see the Reds F. O. kick the tires on that if they are mentioned for Price I know Stanton is similar AAV

    • Tom Mitsoff

      Stanton has nine years and $259 million left.

      • Big Ed

        Stanton’s may well be the Yankees’ last really stupid contract, depending on what you think of 9-year deals for pitchers. The Marlins got lucky to rid themselves of all but $30 million of that contract, although I never understood any logic behind the Marlins’ decision to enter into that contract.

  4. SultanofSwaff

    I’m warming to the idea of taking on Price straight up IF the Bosox eat somewhere in the range of half his salary. Meaning, if the average annual value could be lowered to the range that’s less than what, say, Bumgarner just received but for 2 fewer years then the deal makes a lot of sense. His peripheral numbers still look good and I could also envision him transitioning into a late inning weapon. I’d love to see Raisel moved or at the very least not be handed the closer’s job on a silver platter after his 2019 dumpster fire of a season.

  5. Doc

    What is happening with Alex Wood? Is he healthy? Are the Reds in play for a low base, incentive-laden contract? One year might be all they need until Lodolo is MLB ready.

  6. wes

    Old Ace’s typically pan out to do alright; getting Price would be a solid acquisition while locking in a starter for next couple seasons- which is a clear need. Especially when the Ace is coming into a no pressure situation where you would literally be the 5th pitcher added. That being said- it’s a loss for Reds if they cannot acquire other talent along with deal. Benintendi is really the only guy who fits that mold and the Red Sox have many many suiters considering their abundance of controllable elite talent they can leverage in a trade so price would not be cheap.

    Winker, Bauer, Iglesias for Benintendi and Price and maybe some 15 million to go toward price salary to get it down some. That would free up over 15 million for Red Sox.

    AND/OR

    Happ is a proven ace and has proven it outside of most players prime age- he would be a great fit in cincy! Eat the whole salary and have them throw in Clint Frazier.

    Do both and you have an OF of Benintendi/Senzel/Frazier and rotation of

    Castillo
    Gray
    Disco
    Price
    Happ

    It’ll cost a lot, but all that would open the window a little wider for this team.

    • Stock

      I think Winker = Benintendi. Maybe Winker is better. Plus Winker has an additional year of control.

      Bauer is much better than Price. And we throw in Iglesias?

      I hope the Reds don’t make that trade.

      Mahle is better than Happ. Mahle may be better than the 2020 version of Price.

      I was so disappointed they did not sign two of the three FA of value (Grandal, Didi, Wheeler) I like Corey Dickerson as much as Castellanos. I don’t think Happ or Price could help the Reds. I would rather spend $5 million on Wood.

  7. BK

    Tom … great article! I’m not suggesting all of these, but just some ideas of how this concept might fit with several teams:

    Winker to the Red Sox for Price, OF Benintendi, LHP Hernandez and $14M/year ($42M total). This would take the Reds payroll to about $137M which should be doable. The Red Sox would save ~$23M.

    DeSclafani to the Yankees for OF Frazier, LHP Happ and cash or a prospect to balance out the deal. Chance Adams, once a top prospect, my thrive in Cincinnati–he’s essentially a “throw in” at this point.

    Contreras would be a good Cubs target. Mahle would provide them an inexpensive rotation piece in return.

    Correa would be a good target from the Astros, but based on his injury history, the return would need to be fairly light. Reddick could provide additional salary relief to the Astros and would fit the Reds needs nicely as competition for Aquino.

    I don’t see Bauer as a fit going back in any of these deals–he would defeat the purpose due to his salary AND I think he will be huge for the Reds in 2020– Steamer has him as the top performer for the Reds next year.

    • Colorado Red

      If Boston is willing to include Benintendi, I doubt they offer any money at all.

      • doofus

        Benintendi at the top of the order with Senzel setting the table, WOW!

  8. eddiek957

    I like the idea of adding a lefty to the rotation. Not sure if I like price or happ. Love to see a healthy competitive starting five. Love to see an upgrade at short. A top shortstop and I like our chances

  9. jim walker

    The competitive balance tax is turning into a de facto soft salary cap.

    In addition to the money, a team exceeding the cap by more than $40m in any season gets its top June draft pick dropped by 10 spots (unless that pick originally would be in the top 6 overall in which case their 2nd pick gets dropped 10 spots instead). Maybe as important as the talent drop off of their pick, would be decrease they would suffer in their signing pool $$ allowance.

    With the Yankees projected $10m over the 40m threshold, they are definitely a team to watch.

  10. Stock

    I am not sure why everyone thinks Benintendi is better than Winker. Last year Winker played 113 games and had 16 HR. His OPS was .830. Benintendi played 138 games hit 13 HR and had an OPS of .774. Winker is cheaper now and has one more year of control.

    2019
    1. Winker: .269/.357/.473/.830 (Career OPS: .845)
    2. Nick Castellanos: .289/.337/.525/.862 (Career OPS: .797)
    3. Corey Dickerson: .304/.341/.565/.906 (Career OPS: .803)
    4. Benintendi: .266/.343/.431/.774 (Career OPS: .783)

    Maybe I am missing something but I prefer both Winker and Dickerson to Benintendi. Castellanos and Dickerson are so close I pursue the cheap one this winter.

    • Michael E

      Winker is two years older, can’t run a lick and can’t stay healthy. Benintendi is actually quite fast, not elite fast, but well above average and would play up even more in GABP. I get the stat comparison, but Winker is still just potential and may stay that way till he’s past his prime and, gulp, even slower than molasses.

      I can stand waiting for him to produce..maybe one more year, but he has been a disappointment, moreso for missing game after game than his ability, but with injuries comes concerns of declining stats and more injuries.

    • Michael E

      Oh, and Benintendi plays EVERY day, over 600 PAs three straight years. That’s a big plus in his column.