Did The Red Sox Help The Yankees Too Much?

Re-examining the Ottavino deal

The Red Sox trade for Adam Ottavino yesterday was a surprise, not so much for the deal itself but for who it was with. Before yesterday, the Red Sox hadn’t made a trade with the Yankees since 2014, and before that, the last time had been 1997. The Red Sox don’t make trades with the Yankees, and there’s a pretty simple reason for that, namely the two teams are competing for the same thing. The 2014 trade happened because the Red Sox were out of contention and the Yankees were in contention, but in this case, both clubs are ostensibly trying to compete, which is one of the things that makes this deal so odd.

The other odd part about the deal was the composition of the deal itself. Basically the it looked like this.

Red Sox get: Adam Ottavino, Frank German (prospect)
Yankees get:

In my write up I’m not sure I even mentioned the return from Boston to New York, which, technically, is, “a player to be named later or cash.” Presumably that is unless one option is a player named Cash, in which case it would be, “a player to be named later, cash, or a player to be named Cash”. If an optional player is named Later, then it would be “a player to be named later, cash, or a player to be named Later.” If it was both, then it would be “a player to be named later or cash or a player to be named Later or a player to be named Cash.” Clearly the Red Sox need to corner the market on players named Cash and Later just so they can confuse the hell out of potential trade partners. But I digress. 

Point is, New York didn’t actually get anything. It’s not often one team calls up a rival and says, “Hello good gentlemen, how’s about we send you a good player and also one of our prospects, entirely free of charge?”

Of course that’s not what New York did, and we know that because New Yorkers aren’t that polite. Also, because New York did get something out of it. They got the ability to not pay Adam Ottavino’s salary this year. The reason they wanted to subtract Ottavino’s salary was because with it they were only a million dollars away from reaching the dreaded luxury tax threshold.

[cue scary music]

This threshold is so dreaded and so scary it’s basically like those murderous stuffed bunnies in Monty Python and the Holy Grail. Sure, it looks innocuous but if you get too close the luxury tax threshold will jump up and eat your face, or at least that’s how teams treat it. As soon as they got close, the Yankees started doing things you’d do if you were totally spooked, like giving away Adam Ottavino and a prospect to their chief rivals.

So it appears the Yankees really fleeced themselves. They lost a good reliever, they lost a good prospect, and all they got was a bit more money which was money they already had in the first place. In other words, they could’ve just kept Ottavino and German and spent the $9 million over the luxury threshold instead.

It should be noted the Yankees have a very smart front office and obviously they felt like they got fair value here, otherwise they wouldn’t have agreed to the trade. So, to them, Ottavino and German were worth $9 million under the threshold. So here’s a question about that. Are we maybe looking at this wrong? Was it the Red Sox who got fleeced?

Think about it. The Red Sox don’t make deals with the Yankees, and they don’t do that because both teams are in direct competition with each other. This is true right now. Both teams are competing to win the 2021 AL East. And yet the Yankees were happy enough to make this trade. The Yankees gave the Red Sox what they wanted but the Red Sox also gave the Yankees what they wanted, and what the Yankees wanted was $9 million of room under the tax threshold. Did the Red Sox help out their chief rival and, in doing so, make the very thing they are attempting to achieve more difficult?

To think that you have to believe in the luxury tax threshold as the face-eating bunny it really isn’t. If you do believe that though, then the Red Sox gave the Yankees $9 million to spend on their team in 2021, and that’s $9 million to spend on a free agent market with a fair bit of good options available. Marcus Semien is out there if the Yankees are afraid of Gleyber Torres at shortstop (speaking of face-eating bunnies). Rich Hill and Jake Odorizzi are available if the Yankees want to upgrade their rotation. These aren’t small additions, and they’re bigger, more important additions than a reliever, and more immediate additions than a Double-A reliever.

So the question then becomes, could New York really not make any of those moves before this trade? For that answer, I turn to Jake Devin at Pinstripe Alley, SB Nation’s Yankees blog. This passage comes in the context of discussing signing a few players which would put the Yankees at a payroll of $225 million.

Teams that breach the first threshold [of $210 million] incur a tax of 20-percent on any overages. However, teams that clear it in three consecutive seasons, as the Yankees would if they did so in 2021, incur a 50-percent tax. That means that the Yankees’ hypothetical tax bill of 50-percent on a $15-million overage would come in at a grand total of $7.5 million.

In that scenario, if the Yankees went over the threshold again this year, 2021, which would be their third straight year over, they’d have to pay 50 percent of every dollar they spend between $210 million and $230. So suppose the Yankees signed Marcus Semien for $10 million, but they didn’t trade Ottavino to the Red Sox. How much would they have to pay extra? Answer: about $4.5 million. Is it worth $4.5 million to keep both Adam Ottavino and Frank German in the Yankees organization? Apparently not.

Now if the Yankees were going to spend a lot more, their bill would be a lot more, and there are other more draconian penalties for overspending further including moving a team’s first round pick back 10 spots in the draft, but clearly the Yankees never intended to go that far past $210 million. To prove the point, they just gave away Ottavino and German for free. So we’re really talking about a relatively trivial amount of money here.

So did the Red Sox help out their rivals? It sure doesn’t seem like it. I’m sure the Yankees have their reasons, as the Red Sox have theirs, but we can see now why the teams were able to make this deal happen. One of them had room under the tax threshold, and the other didn’t. Welcome to 2021. Don’t let the luxury tax threshold eat your face.