The Dodgers last week got hit with a competitive balance tax bill for the first time, and will have to pay roughly $11.4 million for their 2013 payroll, per the Associated Press.
The limit to avoid paying tax in 2013 was $178 million. The Dodgers payroll came in at $236,872,242, per the AP, just shy of the Yankees, who at $237,018,889 had the highest payroll in baseball for the 15th consecutive season.
But for purposes of the tax, the Dodgers payroll was roughly $243 million, higher than the Yankees.
Payroll figures include the average annual value of all players on the 40-man roster, plus any bonuses earned or cash payments sent or received (the Dodgers received $3.9 million in 2013 from the Red Sox as part of the Punto Trade, for instance), plus a 1/30th share of the player benefit costs, reported by the AP at $10.8 million per team.
Note: The disparity between the Dodgers' payroll figure for tax purposes and the payroll worksheet is that I track actual payments made each season. For purposes of the tax, Hyun-Jin Ryu's bid fee of $25.7 million and dead money to Manny Ramirez, Andruw Jones and Hiroki Kuroda, for instance, doesn't count against the tax (the latter three counted against the tax when they were still under contract).
Per the collective bargaining agreement, as first time offenders, the Dodgers pay a tax of 17.5% of anything over $178 million. The Dodgers total bill, per the AP, was $11,415,959.
But the bottom line is that it appears that for the foreseeable future the luxury tax will be an expense for the Dodgers, already factored in as the cost of doing business. The Dodgers have over $198 million committed to 16 players in 2014, and that's without including Juan Uribe, J.P. Howell or the arbitration salaries of Clayton Kershaw, Kenley Jansen and A.J. Ellis.
The Dodgers have $121.2 million committed to nine players in 2015 (not including Howell, Uribe or the options of Chad Billingsley, Dan Haren and Brian Wilson), and $122.75 million committed to eight players in 2016.
The limit raises for the next three seasons to $189 million, but the penalties rise for each successive offense. Exceeding the luxury tax threshold a second year in a row draws a 30% tax, a third straight year costs 40%, and every year after costs 50%.
That upper tier is where the Yankees have been for some time, and why there have been rumblings of trying to get under the $189 million threshold for 2014. If New York can get under the number just one time, their next trip over the limit would reset their penalty back to 17.5% rather than their current rate of 50%. The Yankees, per the AP report, have a tax bill of $28 million for 2013.
The Yankees and Dodgers were the only teams to exceed the $178 million limit this season.
Per the CBA, the luxury tax bill is due to be paid to the commissioner's office by January 21.