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Dodgers to pay $26.6 million in luxury tax

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Kirby Lee-USA TODAY Sports

LOS ANGELES -- The Dodgers received a bill from Major League Baseball, exceeding the competitive balance tax threshold for a second consecutive season. The team must pay a whopping $26.6 million in tax, per figures released by the Associated Press on Friday.

The threshold for 2014 was $189 million in payroll, which includes average annual value of contracts of every player on the 40-man roster, plus benefits. The Dodgers, per MLB's calculations, had a payroll of approximately $277,737,083. As a a team that exceeded the tax for a second straight season, the Dodgers had to pay at a rate of 30 percent, resulting in a tax of $26,621,125.

The MLB tally is not too far off my internal tracking of the Dodgers' payroll, which counts actual money paid out in each year. I had the Dodgers at $279.7 million in 2014.

The Dodgers paid more than the Yankees, ending New York's run of 15 consecutive seasons as paying the most in luxury tax.

In 2013, the Dodgers were taxed at a 17.5-percent rate as a first-time offender, and were hit with an $11.4 million bill. The Dodgers already are at $228.6 million for 2015, and that's before arbitration salaries for five players add to that total.

The penalties for future overages are 40 percent for a third consecutive season over the limit, and 50 percent for a fourth straight year, and all consecutive years after that.

Dodgers president of baseball operations Andrew Friedman and general manager Farhan Zaidi came from the Rays and Athletics, were the luxury tax wasn't even a consideration. Now, it factors into each decision the Dodgers make.

"It's fun and exciting, but there is a different feeling of responsibility to fully vet out these options, because there is a lot more money involved," Zaidi said during the winter meetings in San Diego. "It's $1.40 for every dollar spent."

The threshold will be $189 million in both 2015 and 2016. The team already has $154.9 million committed to 10 players in both 2016 and 2017.

Per the collective bargaining agreement, the competitive balance tax is distributed by MLB as follows:

  • The first $2,375,400 of proceeds collected for each Contract Year shall be used to fund benefits to Players, as provided in the Major League Baseball Players Benefit Plan Agreements.
  • 50% of the remaining proceeds collected for each Contract Year, with accrued interest, shall be used to fund benefits to Players, as provided in the Major League Baseball Players Benefit Plan Agreements.
  • 25% of the remaining proceeds collected for each Contract Year shall be contributed to the Industry Growth Fund and, with accrued interest, used for the purposes set out in Article XXV.
  • 25% of the remaining proceeds collected for each Contract Year, with accrued interest, shall be used to defray the Clubs’funding obligations arising from the Major League Baseball Players Benefit Plan Agreements.

The Dodgers' bill for competitive balance tax for 2014 is due to the commisioner's office by January 21, per the AP.