Cham­pion Red Sox owe nearly $12M in lux­ury tax

South Florida Sun-Sentinel (Sunday) - - For The Record - By Ron­ald Blum

NEW YORK — Bos­ton should be happy to pay this tax bill.

The World Se­ries cham­pion Red Sox owe $11,951,091 in lux­ury tax for hav­ing base­ball’s top pay­roll, ac­cord­ing to fi­nal cal­cu­la­tions by the com­mis­sioner’s of­fice ob­tained by The As­so­ci­ated Press. The only other team that owes is the Wash­ing­ton Na­tion­als, who must pay $2,386,097, their sec­ond straight year with a bill.

Be­cause Bos­ton was more than

$40 mil­lion over the tax thresh­old, it be­came the first team to in­cur a new penalty put in place for the

2018 sea­son: the top Red Sox se­lec­tion in next June’s am­a­teur draft will be dropped 10 places. Bos­ton’s top pick had been pro­jected to be No. 33 over­all be­fore the penalty.

Bos­ton has owed tax in the years of three of its four ti­tles this cen­tury, pay­ing $3,148,962 in 2004 and $6,064,287 in 2007. The Red Sox stayed un­der the tax thresh­old when they won in 2013. The only other cham­pi­onship teams to owe since the tax be­gan in 2003 were the 2009 New York Yan­kees at $25.7 mil­lion and the 2016 Chicago Cubs, at $2.96 mil­lion.

This year’s ini­tial tax thresh­old was $197 mil­lion, count­ing pay­rolls by av­er­age an­nual val­ues and in­clud­ing earned bonuses, ad­just­ments for cash trans­ac­tions and op­tion buy­outs and just over $14 mil­lion per team in ben­e­fits. Bos­ton’s pay­roll for the tax was $239.5 mil­lion, ex­ceed­ing the $237 mil­lion thresh­old that trig­gered the draft penalty. Wash­ing­ton’s was $205 mil­lion.

Bos­ton boosted its pay­roll dur­ing spring train­ing when it added slug­ger J.D. Martinez, who counted at $23.75 mil­lion on the tax pay­roll and then earned

$700,000 in bonuses while lead­ing the ma­jor leagues with 130 RBIs.

Ahead of the July 31 trade dead­line, the Red Sox ac­quired World Se­ries MVP Steve Pearce, who added $3,208,602 to the pay­roll, in­clud­ing a $50,000 Se­ries MVP bonus; pitcher Nathan Eo­valdi, who added $720,430 and be­came a key com­po­nent to the ti­tle run with a pair of post­sea­son wins and a six-in­ning re­lief out­ing in World Se­ries Game 3 against the Los An­ge­les Dodgers; and sec­ond base­man Ian Kinsler, who added

$3,766,666.

San Fran­cisco had the third­high­est pay­roll at $195.7 mil­lion fol­lowed by the Dodgers at $195 mil­lion — up from $182 mil­lion on open­ing day, The Dodgers had paid tax in each of the pre­vi­ous five sea­sons, a to­tal of $149.6 mil­lion.

The Cubs were fifth at $193.3 mil­lion, and the Yan­kees sixth at

$192.98 mil­lion — the first time the Yan­kees fin­ished un­der the thresh­old after 15 con­sec­u­tive years over that re­sulted in taxes to­tal­ing $341.1 mil­lion.

By drop­ping un­der the thresh­old, the Yan­kees and the Dodgers re­set their tax rates for 2019 and put them­selves in bet­ter po­si­tion to pur­sue a tal­ented free-agent class that in­cludes Bryce Harper and Manny Machado.

Bos­ton has owed in nine of 16 sea­sons, a to­tal of $37.1 mil­lion. The Red Sox paid in 2015 and ’16, then dropped un­der the thresh­old by just over $3 mil­lion in 2017, re­set­ting their tax rates to the low­est level this year. Bos­ton paid at a

28.1 per­cent ef­fec­tive rate. Wash­ing­ton is pay­ing for the sec­ond straight sea­son, rais­ing its to­tal to $3.8 mil­lion.

Only eight teams have gone over the tax thresh­old: Detroit paid $9 mil­lion over three sea­sons, San Fran­cisco $8.9 mil­lion over three sea­sons and the Los An­ge­les An­gels $927,000 in 2003.

Next year’s tax starts at $206 mil­lion, and Bos­ton’s rates will rise from 20 per­cent to 30 per­cent on the first $20 mil­lion over, 32 per­cent to 42 per­cent on the next $20 mil­lion and 62.5 per­cent to 75 per­cent on any amount over $246 mil­lion.

Red Sox pres­i­dent of base­ball op­er­a­tions Dave Dom­browski pre­dicted Bos­ton against will ex­ceed all three thresh­olds next year.

Wash­ing­ton’s rate rises to 50 per­cent on the first $20 mil­lion over, 62 per­cent on the next $20 mil­lion and 95 per­cent on any amount over $246 mil­lion.

Checks for the com­pet­i­tive bal­ance tax, as it is nor­mally known, go to the com­mis­sioner’s of­fice and are due by Jan. 21.

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