Mookie Betts Trade Spotlights Damning Power of Luxury Tax

The baseball world we live in today is increasingly dictated by teams' desire to stay under the luxury tax threshold.
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In the version of baseball all of us want–the pastime, the grown men playing a kids’ game, the way we embrace homegrown stars as if we helped raise them ourselves–Mookie Betts never wears another uniform but that of the Boston Red Sox. And nobody in Boston wears number 50 ever again.

Betts is a joy to behold, a 5-foot-9 dynamo with power who was signed out of the fifth round with more prowess for his bowling than his baseball. He plays the game hard and he plays it extraordinarily well. He accumulated more Wins Above Replacement through age 26 than any player in Red Sox history except Tris Speaker, a dude born in 1888.

Then you get a night like Tuesday night, when the State of the Baseball Union, as it were, becomes all too real and we look foolish in our belief that Major League Baseball is about nothing but doing your level best to win ballgames.

The Boston Red Sox, one of the richest franchises in the game, traded the very epitome of a franchise player. No matter what you will be told, nothing motivated this deal more than Boston wanting to reset its luxury tax rate. The Red Sox chose not to ride out the season to see if they could win again with Betts, the way Washington did with Bryce Harper, and not to defer their decision until July when they could take stock of their standing, the way Baltimore did with Manny Machado.

They chose not to pay Betts as the Angels did Anthony Rendon, at around $35 million per year, or the Phillies did Harper with a total outlay of $330 million. Betts is an outlier. None of the top 16 contracts in history have ever been handed out to a player less than six feet tall. Prince Fielder is the only player that short to be paid more than $165 million–and Betts weighs about a hundred pounds less than Fielder.

I get it. Accountants everywhere are high-fiving one another. What the Red Sox are doing in trading Betts to the Dodgers, and scotch-taping the three years left on the contract of David Price along with him, makes economic sense. As three-time “offenders,” Boston was looking at a progressive tax rate of 50% tax on the overage, up from 20% in the first phase. The Yankees and Dodgers in recent years have hit the reset tax button themselves, paving the way for the coastal titans to snag the two best players to change teams this winter: Gerrit Cole is in New York and Mookie Betts is in Los Angeles.

Last season, with Betts, Boston finished 19 games behind the Yankees. Heck, the Red Sox were 12 games behind Tampa Bay. Their pitchers walked more batters than any team other than the Marlins. There was little reason to believe they would be much better in 2020. This was the time to plan for future years, though the game continues to get carried away with future wins while diminishing the value of present ones.

To understand the economics of this trade, you have to go back to when the players agreed to this Collective Bargaining Agreement, which began in 2017. The threshold at which the tax kicks in increased only from $189 million to $195 million. Four years later, it’s still only $208 million. Revenues went up 19% from 2014-19, but the tax threshold moved only 9% in the same period. The rate has acted as a greater disincentive for teams than the players anticipated. They have to live with this system for these next two seasons before seeking a remedy.

The whole world knew Boston’s motivation, so there is no way they were going to extract full value for one year of Betts. Alex Verdugo is a good ballplayer, but he plays this year at 24, missed time last year with a sore back, and looks like a close facsimile to Andrew Benintendi through 158 games (OPS: .798 for Benintendi, .784 for Verdugo).

Brusdar Graterol has a huge arm, the kind teams love in this era of measurables. When he signed with the Twins in 2014 at age 16 he weighed 170 pounds. He blew out his arm the next year. At 6-foot-1, he now weighs 265 pounds at age 21. Twins general manager Thad Levine once said Graterol and Aroldis Chapman are the only two pitchers he has seen who can throw 100 mph consistently through an outing.

Maybe some year these two are part of the next championship Boston team. It’s not this year. This trade makes the Red Sox demonstrably worse in 2020 (continuing what has been an unbelievably fortuitous offseason for the Yankees. The Astros lose their manager and GM in a sign-stealing scandal, the Yankees get Cole, the Red Sox fire their manager and now they check out of the race this year.)

The Red Sox traded Mookie Betts. It sounds stunning on the face of it, but the man who did it, general manager Chaim Bloom, knew this task was on his to-do list when he was hired after last season. He didn’t draft Mookie and he didn’t win a championship with him. He didn’t have the ties to Betts that Boston fans did, so the parting was clean and clinical. Now that Boston is unabashedly in transition mode, Bloom can go hire a young, inexperienced manager in his 30s or 40s who speaks fluent analytics and is the right hire for the next five years, not this one.

As Bart Giamatti famously once said, this game is designed to break your heart, though the ardent fan in him meant the playing of the game on the field. It applies to the business side, too, if not more so.

But don’t kid yourself. This always has been true. The luxury tax is just the mechanism of today that teams wield to remind us how foolish we can be.

More than a century before the Red Sox traded Betts, they traded Speaker, the only Red Sox player better than Betts through age 26, at least as ranked by WAR. The problem? A salary dispute. In 1916 Boston president Joe Lannin wanted to cut Speaker’s salary from $18,000 to $9,000–that after Speaker hit .322 (down from .338) for the 1915 world champions. Speaker held out in spring training. Rather than pay him, Lannin traded him to Cleveland.

The next day the Boston Globe published a poem by W.L. Dougherty under the title, “The Baseball Fan’s Lament.” How could Lannin have broken up his famed world championship outfield of Speaker, Harry Hooper and Duffy Lewis? It read in part:

We don’t care now who is President, whether Roosevelt or Wilson –

Or whether the bird that Teddy found is beast or bird or reptile -

We don’t care whether the fellow next door ever pays that money to us –

Since Lannin destroyed his star outfield of

Hooper and Speaker and Lewis.

One hundred four years later, the Red Sox have reprised The Baseball Fan’s Lament. Even if the fans understand it, they shouldn’t like it. The Red Sox destroyed the star outfield of Betts, Benintendi and Bradley.