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Competitive Balance Tax Discussion
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Post by The Town Sports Cards on Feb 5, 2020 10:12:13 GMT -5
I struggle with the Comp Balance Tax issue. On the one hand, no good business man sets himself up to pay extra money he doesn't have to. On the other hand, the 2019 Sox tax was $13.4 million. The Sox have been averaging $80M in profits the last few years, so we're talking now only making $67M in profit and that's not really a penalty for fielding consistent World Series favorites. That all being said, if the Red Sox decided to just say "Screw You" to the tax and just outspent everyone and continually went over the tax, not only would other owners/teams hate us, but it would likely result in either harsher penalties or an actual hard cap. As much as we wall like to think we know what it takes to run a half billion dollar company, there's tons of behind the scenes happenings and politics that are just as important to the organization as a whole as signing a new first baseman. So maybe it would be easy to just sign Mookie, keep Price, go over the tax again, and boohoo John Henry only gets to line his pocket with $60M instead of $80M. But do you really think Major League Baseball is just going to let us keep doing that?
As for the draft picks, I honestly see that as a far secondary penalty, because if you commit to outspend everyone you can absorb having weaker draft classes.
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Post by wOBA Fett on Feb 5, 2020 11:08:41 GMT -5
I struggle to see why the Sox can't just go all in, absorb the tax hit, then buy draft picks from other teams over the competitive balance threshold
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Post by The Town Sports Cards on Feb 5, 2020 11:22:02 GMT -5
I struggle to see why the Sox can't just go all in, absorb the tax hit, then buy draft picks from other teams over the competitive balance threshold Because literally all the stuff I said in my post |
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Post by fenwaythehardway on Feb 5, 2020 11:33:39 GMT -5
I struggle with the Comp Balance Tax issue. On the one hand, no good business man sets himself up to pay extra money he doesn't have to. On the other hand, the 2019 Sox tax was $13.4 million. The Sox have been averaging $80M in profits the last few years, so we're talking now only making $67M in profit and that's not really a penalty for fielding consistent World Series favorites. That all being said, if the Red Sox decided to just say "Screw You" to the tax and just outspent everyone and continually went over the tax, not only would other owners/teams hate us, but it would likely result in either harsher penalties or an actual hard cap. As much as we wall like to think we know what it takes to run a half billion dollar company, there's tons of behind the scenes happenings and politics that are just as important to the organization as a whole as signing a new first baseman. So maybe it would be easy to just sign Mookie, keep Price, go over the tax again, and boohoo John Henry only gets to line his pocket with $60M instead of $80M. But do you really think Major League Baseball is just going to let us keep doing that? As for the draft picks, I honestly see that as a far secondary penalty, because if you commit to outspend everyone you can absorb having weaker draft classes. And this is... supposed to make me feel better about the trade? |
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Post by The Town Sports Cards on Feb 5, 2020 11:52:53 GMT -5
No, it's asking questions about what you expect owners to do. Which owner do you prefer ran the Sox if you all hate Henry so much? The Wilpons? Steinbrenners? Guggenheim group? One of the 12 teams that's spending less than half the payroll the Sox are Still projecting after jettisoning $43M?
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Post by dirtdog on Feb 5, 2020 22:52:40 GMT -5
The players got bent over in the last CBA. This issue along with the non sense with the draft at the top of the list.
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Post by umassgrad2005 on Feb 6, 2020 0:50:02 GMT -5
No, it's asking questions about what you expect owners to do. Which owner do you prefer ran the Sox if you all hate Henry so much? The Wilpons? Steinbrenners? Guggenheim group? One of the 12 teams that's spending less than half the payroll the Sox are Still projecting after jettisoning $43M? I don't think most of us want a new owner, yet that doesn't mean we love everything he does either. He can overall be a very good owner and still do things that drive the fans crazy. Personally I hate how he used a situation he created to act like we had no choice but trade Betts. He uses the media he owns to spin things. Yet he does a lot of good things also. |
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Post by The Town Sports Cards on Feb 6, 2020 8:44:03 GMT -5
You don't have to love everything he does, but you also can't be unreasonably mad at him for trying to fix the past mistakes of a fired President of Baseball Operations. Yes he probably "signed off" on the Sale/Eovaldi/Pearce contracts but none of us have ANY idea whatsoever at the process that the team goes through for those decisions. Maybe he just trusted Dombrowski too much, maybe he gave Dombrowski too much power to do these contracts. But people are making it sound like they were in the room when Henry demanded Dombrowski sign Sale for a long-term deal no matter the cost. I'm just asking people to be reasonable for once. This is supposed to be a forum of people who aren't just the casual armchair quarterbacks calling WEEI and saying every player sucks and should be released after one 0-4 night.
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Post by James Dunne on Feb 6, 2020 8:51:00 GMT -5
You don't have to love everything he does, but you also can't be unreasonably mad at him for trying to fix the past mistakes of a fired President of Baseball Operations. . You can absolutely blame a boss for the mistakes of his subordinate. Especially in a case like this where the boss had to sign off on it. Dombrowski wasn't, like, embezzling money without Henry's knowledge. Ownership knew the CBT situation too. That doesn't necessarily make Henry "cheap" or whatever, but he's obviously not blameless here. He screwed this up too. |
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Post by Chris Hatfield on Feb 6, 2020 9:22:22 GMT -5
You don't have to love everything he does, but you also can't be unreasonably mad at him for trying to fix the past mistakes of a fired President of Baseball Operations. . You can absolutely blame a boss for the mistakes of his subordinate. Especially in a case like this where the boss had to sign off on it. Dombrowski wasn't, like, embezzling money without Henry's knowledge. Ownership knew the CBT situation too. That doesn't necessarily make Henry "cheap" or whatever, but he's obviously not blameless here. He screwed this up too. As I've said multiple times, if he wanted to get under the CBT this season, that needed to be communicated to Dombrowski. That either wasn't, or was without any discussion of the way forward. |
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Post by The Town Sports Cards on Feb 6, 2020 10:54:00 GMT -5
You can absolutely blame a boss for the mistakes of his subordinate. Especially in a case like this where the boss had to sign off on it. Dombrowski wasn't, like, embezzling money without Henry's knowledge. Ownership knew the CBT situation too. That doesn't necessarily make Henry "cheap" or whatever, but he's obviously not blameless here. He screwed this up too. I'm not trying to be smug, I honestly don't know the answer to this. Can someone point me to the actual role Henry plays in contract negotiations? Does he literally "sign off" or is it just the GM/PoBO going to him and saying, I want to sign player X for Y years and Z dollars, we'll be fine under the cap, that ok? I'm trying to figure out if the blame is on Henry for messing up himself, or for messing up in trusting his employee. Because as a business owner, you can't literally sign off on every decision, you hire employees you trust to make decisions for you. And Dombrowski had earned that trust in winning the 2018 WS. |
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Post by James Dunne on Feb 6, 2020 11:00:15 GMT -5
You definitely sign off on giving Chris Sale and Nathan Eovaldi $225 million.
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Post by The Town Sports Cards on Feb 6, 2020 11:08:43 GMT -5
You definitely sign off on giving Chris Sale and Nathan Eovaldi $225 million. Ok, walk me through that sign off. Who's in the room? Is he just handed a contract to read? Is someone convincing him this is a good idea? Or is Henry just in his office with a bunch of spreadsheets trying to figure out the future of the club? Because I'm guessing it's more like, Dombrowski says I want to sign Sale, Henry says "ok, make sure we can stay under the cap in 2020" and then Dombroski signs a contract. No CEO of a company is involved in every deal. Maybe the Sale contract, but in the grand scheme of a $6.6 BILLION dollar organization (Red Sox plus all of Henry's other holdings), a $30M/year contract is not the most important decision Henry would be thinking about. |
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Post by James Dunne on Feb 6, 2020 11:43:34 GMT -5
Good point, a common theme in business is that when a VP who reports directly to the CEO spends 3% of the company's worth on contracts and then the company has insufficient cash on hand a year later, the CEO essentially did nothing wrong.
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Post by The Town Sports Cards on Feb 6, 2020 11:55:36 GMT -5
Try 0.45%. $30M of $6.6B is 0.45%. Yes, the CEO is not spending a lot of time worrying about 0.45% of the budget
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Post by soxcentral on Feb 6, 2020 12:00:44 GMT -5
Try 0.45%. $30M of $6.6B is 0.45%. Yes, the CEO is not spending a lot of time worrying about 0.45% of the budget The number you guys were discussing was $225 million overall, compared to the overall net worth (not annual revenue) of $6.6B. Which is 3.4%. You'd be right if the team generates $6.6B annually, but I don't think that's the case. |
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Post by James Dunne on Feb 6, 2020 12:05:07 GMT -5
Try 0.45%. $30M of $6.6B is 0.45%. Yes, the CEO is not spending a lot of time worrying about 0.45% of the budget The Sale and Eovaldi contracts were for $225M. If you're going to use company value, then the equivalent measure is contract total value, not annual. A company worth $6.6B does not have a $6.6B budget. But for the sake of this thought experiment, let's suppose it was "only 0.45%." The lack of oversight in long-term spending commitments caused a major division of his company to not to be able to meet its budget the next year, and it had to divest valuable resources to regain financial flexibility. I honestly can't believe you're defending this. He did a bad job as the boss. That doesn't mean he's always done a bad job as the boss, that doesn't negate other good moves he's made. But he gets blame here. Why in the world are you so interested in defending John Henry for the Boston Red Sox not having money? |
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Post by fenwaythehardway on Feb 6, 2020 12:05:53 GMT -5
Try 0.45%. $30M of $6.6B is 0.45%. Yes, the CEO is not spending a lot of time worrying about 0.45% of the budget The number you guys were discussing was $225 million overall, compared to the overall net worth (not annual revenue) of $6.6B. Which is 3.4%. It's also literally two hundred and twenty five million dollars, which last I checked is a awful lot of money, pretty much regardless of context. |
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Post by The Town Sports Cards on Feb 6, 2020 12:07:00 GMT -5
I'm defending from people talking about a process they know nothing about. You have no idea what specific role Henry played in any of these contracts
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Post by James Dunne on Feb 6, 2020 12:09:46 GMT -5
I'm defending from people talking about a process they know nothing about. You have no idea what specific role Henry played in any of these contracts To paraphrase our greatest modern philosopher, "it doesn't matter what specific role Henry played." If he didn't play any role in signing off on $225 million dollars in contracts then he's at fault! If he had an active role in approving it he's at fault! If he communicated the budget commitments and his underlings didn't meet them then he's at fault! |
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Post by thegoodthebadthesox on Feb 6, 2020 12:16:30 GMT -5
Try 0.45%. $30M of $6.6B is 0.45%. Yes, the CEO is not spending a lot of time worrying about 0.45% of the budget The Sale and Eovaldi contracts were for $225M. If you're going to use company value, then the equivalent measure is contract total value, not annual. A company worth $6.6B does not have a $6.6B budget. But for the sake of this thought experiment, let's suppose it was "only 0.45%." The lack of oversight in long-term spending commitments caused a major division of his company to not to be able to meet its budget the next year, and it had to divest valuable resources to regain financial flexibility. I honestly can't believe you're defending this. He did a bad job as the boss. That doesn't mean he's always done a bad job as the boss, that doesn't negate other good moves he's made. But he gets blame here. Why in the world are you so interested in defending John Henry for the Boston Red Sox not having money? As someone whose partial job it is to balance a budget for an organization, even something that is 0.05% of the total budget is going to be scrutinized. Anyone that thinks just because an organization has a net worth of $6 billion (which is not liquid assets, by the way) they can throw out $30 million a year like it's pocket change doesn't understand how businesses operate. |
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Post by soxcentral on Feb 6, 2020 12:16:31 GMT -5
Exactly, it's always the fault of the person at the top if the person at the top has any integrity.
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Post by aboynamedkimandrew on Feb 6, 2020 12:35:46 GMT -5
I struggle with the Comp Balance Tax issue. On the one hand, no good business man sets himself up to pay extra money he doesn't have to. On the other hand, the 2019 Sox tax was $13.4 million. The Sox have been averaging $80M in profits the last few years, so we're talking now only making $67M in profit and that's not really a penalty for fielding consistent World Series favorites. That all being said, if the Red Sox decided to just say "Screw You" to the tax and just outspent everyone and continually went over the tax, not only would other owners/teams hate us, but it would likely result in either harsher penalties or an actual hard cap. As much as we wall like to think we know what it takes to run a half billion dollar company, there's tons of behind the scenes happenings and politics that are just as important to the organization as a whole as signing a new first baseman. So maybe it would be easy to just sign Mookie, keep Price, go over the tax again, and boohoo John Henry only gets to line his pocket with $60M instead of $80M. But do you really think Major League Baseball is just going to let us keep doing that? As for the draft picks, I honestly see that as a far secondary penalty, because if you commit to outspend everyone you can absorb having weaker draft classes. We've all run the numbers and it seems that the penalties should be absorbable for the biggest market teams, yet we've seen the Dodgers and the Yankees, the two teams most willing to outspend the Red Sox, make conscious efforts to get under the threshold to reset the counter. I don't know whether it's the socio-political dynamics of MLB that you cited, but there are clearly other dynamics beyond pure cash outlays at work. |
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Post by umassgrad2005 on Feb 7, 2020 17:04:43 GMT -5
You definitely sign off on giving Chris Sale and Nathan Eovaldi $225 million. Ok, walk me through that sign off. Who's in the room? Is he just handed a contract to read? Is someone convincing him this is a good idea? Or is Henry just in his office with a bunch of spreadsheets trying to figure out the future of the club? Because I'm guessing it's more like, Dombrowski says I want to sign Sale, Henry says "ok, make sure we can stay under the cap in 2020" and then Dombroski signs a contract. No CEO of a company is involved in every deal. Maybe the Sale contract, but in the grand scheme of a $6.6 BILLION dollar organization (Red Sox plus all of Henry's other holdings), a $30M/year contract is not the most important decision Henry would be thinking about. I can guarantee you 100% that isn't what happened. He knew exactly what he was signing and what it meant for future payrolls. We know from his own comments over the years how involved he is. He's involved more than a lot of owners. |
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Post by James Dunne on Feb 8, 2020 9:33:18 GMT -5
So as I understand (and these leaks are always wonky so I take it with a grain of salt), ownership could only give a yes or no rather than meddle/micromanage the specifics of a deal. I think of it as the difference of how in a lot of governments a veto is allowed but a line-item veto is not.
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