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Luxury Tax May Prevent Red Sox From Blockbuster Trade

According to FanHouse's Ed Price, the Red Sox may not be able to make a splash at the trade deadline because of the luxury tax:

While we don't normally think of the Red Sox as having financial limitations, the issue, the source said, is Major League Baseball's "luxury tax," officially known as the Competitive Balance Tax, or CBT.

That tax, which in the Red Sox' case would be 22.5 percent of every dollar over $170 million in payroll, is based on the so-called "actual club payroll," not the Opening Day payroll. So the pro-rated salaries of any players acquired in a trade would count toward that figure.

Boston ownership is so concerned about not paying luxury tax that the team waited until after Opening Day to sign Josh Beckett to a contract extension so his CBT salary figure would not go up in 2010.

The Red Sox are expected to go after an outfielder or a reliever -- but a cheap one at that:

The Associated Press listed Boston's Opening Day payroll as $162.7 million, although the luxury-tax figure will also include players on the 40-man roster and players' benefit.

Thus, the Red Sox are about tapped out. The source said the front office would have to "jump through hoops" -- make a strong case to ownership -- just to add $500,000 in salary over the rest of the season. That's the equivalent of a player making $1.1 million for the year.

Paying luxury tax this year would make Boston liable to a 30 percent luxury tax on payroll over $178 million in 2011, when Beckett, Kevin Youkilis, Dustin Pedroia and Jon Lester are due for raises.