LOS ANGELES — The Dodgers were hit with a $31.8 million competitive balance tax bill for their 2016 payroll, per the Associated Press, the cost for spending over the closest thing that MLB has to a salary cap.
MLB valued the Dodgers’ 2016 payroll at $252,551,634, an amount that includes payments to everyone on the 40-man roster plus benefits (benefits were valued at $12,953,201 per team, per the AP). MLB’s calculations are slightly different that my payroll tracker, which includes the total amount paid each season rather than average annual value. I had the Dodgers’ total final 2016 payroll at $250.7 million.
Any amount over $189 million in 2016 was taxed at a rate depending on how frequent the offending teams have surpassed the limit. This was the fourth straight season the Dodgers have had the highest payroll in baseball. As first-time offenders in 2013, the Dodgers were taxed 17.5% of the overage, followed by 30% in 2014, 40% in 2015, then the maximum 50% rate in 2016.
The Dodgers’ tax in 2016 was approximately $31,775,817.
The Dodgers have paid a total of $113.5 million in competitive balance tax the last four years, including a record $43.7 million in 2015.
The Dodgers are headed for another hefty luxury tax bill for 2017 with a payroll again expected to land somewhere in the $250 million range, after retaining free agents Rich Hill, Kenley Jansen and Justin Turner.
The Dodgers have made no secret that their long-term goal calls for a continual supply of young talent going forward, a more sustainable and effective (and profitable!) plan than simply spending exorbitantly every season.
To date, the Dodgers have roughly $200 million committed for 2017, and $159 million for 2018.
The new CBA calls for more punitive penalties for spending $20 million and $40 million over the threshold.
Per the collective bargaining agreement, the competitive balance tax is distributed 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 competitive balance tax payment is due to the commissioner’s office on January 21, 2017.