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Issue can be taxing

By Nick Cafardo
Globe Staff / July 17, 2010

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General manager Theo Epstein isn’t giving signs the Red Sox will do something big at the trade deadline, but that might be more a function of budget concerns than available talent.

Budget has never been an issue for the Red Sox, but the luxury tax has now become a major issue for the team at a crucial time in the season.

A Red Sox source confirmed there was a lot of accuracy in a recent AOL Fanhouse story that quoted a source saying the Red Sox feared going over the luxury tax threshold and paying a massive fine, which would also affect next season’s payroll.

Now here’s the interesting part: Because Dustin Pedroia, Victor Martinez, Jason Varitek, Jeremy Hermida, Josh Beckett, and possibly Jacoby Ellsbury could return from injury within the next 2-3 weeks, the team can wait for these players to come back rather than increase the budget.

Can’t blame them for that.

A Red Sox team source indicated that if a major injury occurs in the second half, the team would make a trade if it was in a position to win. For example, the team could swing a deal for Roy Oswalt or Dan Haren if a starter went down. The only way we’ll know if this is a probability is if another major Sox player was to be injured.

This pause over the luxury tax — which is 22.5 percent of every dollar spent over $170 million (though this is not an exact figure) — explains why the team, which is around $170 million in actual payroll — hasn’t begun to act on contracts for next season. The Competitive Balance Tax (CBT) is very complex and the feeling is, according to a major league source, “you get reset if you d on’t go over at a lower rate so it makes no sense to slightly go over it.’’

The AOL story points out that if the Red Sox went over the threshold, the “reset’’ about would mean the team would be susceptible to a 30 percent tax on a 2011 payroll that could eclipse $178 million. Beckett, Pedroia, Kevin Youkilis, Daisuke Matsuzaka, and Jon Lester are all due major raises totaling about $15 million. Then there are probable hikes for Jonathan Papelbon, Daniel Bard, Clay Buchholz, and Ellsbury.

Any player acquired would have his prorated salary tacked on to the team’s payroll right now.

As the AOL story accurately points out, the Red Sox waited until after the season began to announce the completion of Beckett’s contract extension, which doesn’t take effect until next season and that’s when it will begin to count on Boston’s actual payroll.

The team, which has more than $45 million on the disabled list at the moment, will have a lot of financial decisions to make this offseason on free agents Martinez, David Ortiz, and Adrian Beltre. They would appear to be three key figures, but the Sox have to decide whether Martinez is their full-time catcher, whether Beltre should be given a long-term commitment, and whether Ortiz’s $12.5 million option should be picked up. The Red Sox do have money coming off the books with Mike Lowell ($12 million) and Julio Lugo ($9 million) gone — they are paying Lugo this season. But if they re-sign Martinez and Beltre, who are currently at $7.1 million and $9 million, their salaries would be much higher.

They may ask Ortiz to negotiate down, if he’s still productive by the end of the season. Recent talk about an extension for Ortiz is pure gibberish as the DH market has come down considerably. If Ortiz’s option is picked up it’s a major victory for the big slugger. The Red Sox really don’t want to commit to more than one year on the 35-year-old Ortiz.

In the past the team has gone all-out to add a piece at the deadline if needed.

What they will perhaps do is find a lower-priced relief pitcher or a higher-priced one — in which the seller would have to pay the majority of the salary. Kerry Wood could fall into that category.

The Red Sox covet Kansas City outfielder David DeJesus, but it appears the price in terms of players they’d have to give up seems more exorbitant to the Sox than does the remainder of the $4.7 million in salary he has remaining. DeJesus also has a $6 million option for next season.

This is a strange situation because most teams don’t have the financial wherewithal to make significant moves, and many of them spend half the money the Red Sox do on payroll. The Yankees seem to know every season they are going to get clobbered with a luxury tax and because they take in so much revenue, it’s something they build into their budget. The fact they were willing to add Cliff Lee is proof money is no object. And it usually isn’t with the Red Sox, either. By adding a few free agents this offseason, including John Lackey, Marco Scutaro, and Mike Cameron, their payroll got perilously close to the luxury tax threshold, leaving them very little room to do anything major during the season.

But Boston thought it had a team that could compete with the Yankees and Rays for a postseason spot. They still may.

The only concerns management may have at this point is can they stay in the hunt long enough so their full roster can make the impact they think it can? And can they avoid additional injuries?

Nick Cafardo can be reached at Follow him on Twitter @nickcafardo.

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