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Dodgers’ trade with Braves creates luxury tax flexibility

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LA poised to potentially stay under $197 million threshold in 2018

MLB: NLCS-Workouts Jayne Kamin-Oncea-USA TODAY Sports

LOS ANGELES — The Dodgers gained an enormous amount of payroll flexibility in their five-player trade with the Braves on Saturday, with getting under the competitive balance tax threshold suddenly a real possibility even as soon as 2018.

For both teams, it seems the trade was less about the players involved in the deal — Matt Kemp is back with the Dodgers, with Adrian Gonzalez, Brandon McCarthy, Scott Kazmir and Charlie Culberson sent to the Braves — and more about reallocating resources.

Atlanta designated Gonzalez for assignment, and moving Kemp freed up a potential spot for top outfield prospect Ronald Acuna at some point next year. With the Dodgers sending money in the deal to equalize the remaining salaries, the total money was a wash for both teams but the Braves are spending their cash in 2018, keeping 2019 more flexible as they are further along in their rebuild.

“It puts us in an even greater financial position going forward and going into next offseason as well,” Braves general manager Alex Anthopoulos told the Associated Press.

For the Dodgers, it was the opposite. They were able to spread out the money owed to three of their most onerous contracts from all in 2018 to the remaining two years on Kemp’s contract.

With all due respect to the players in the trade, all five were extras in a sense that they were on the outside looking in on the depth chart. None project to be regulars in 2018, at least not with the Dodgers, who may still move Kemp to shed even more salary obligation.

Kazmir was hurt all of 2017 and McCarthy was probably the sixth starter, behind Clayton Kershaw, Rich Hill, Alex Wood, Kenta Maeda and Hyun-jin Ryu. There is also Brock Stewart, Ross Stripling, Trevor Oaks and Walker Buehler waiting in the wings, plus the eventual return of Julio Urias at some point in 2018 after shoulder surgery.

“Anytime you trade two starting pitchers, often times you’re not in a position to do that,” Dodgers president of baseball operations Andrew Friedman said. “But we felt really good about the depth we have.”

We took a look back at the 2018 luxury tax implications in November, but this trade changes things drastically so let’s update the Dodgers’ situation.

The competitive balance tax counts the average annual value of guaranteed money in contracts, so Kemp for instance has a tax number of $20 million because of his eight-year, $160 million contract rather than the $21.5 million he will actually receive in 2018.

Here is a rough estimate of where the Dodgers stand for next year, including MLB Trade Rumors projections for the eight remaining players eligible for salary arbitration this winter:

2018 Dodgers competitive balance tax payroll estimate

Pos Player 2018 $$ Comments
Pos Player 2018 $$ Comments
SP Clayton Kershaw $30,714,286 7 years, $215 million
OF Matt Kemp $20,000,000 8 years, $160 million
SP Rich Hill $16,000,000 3 years, $48 million
3B Justin Turner $16,000,000 4 years, $64 million
CL Kenley Jansen $16,000,000 5 years, $80 million
2B Logan Forsythe $9,000,000 option exercised
SP Kenta Maeda $3,125,000 8 years, $25 million
RF Yasiel Puig $6,000,000 7 years, $42 million
SP Hyun-jin Ryu $6,000,000 6 years, $36 million
C Yasmani Grandal $7,700,000 MLBTR arbitration projection
SP Alex Wood $6,400,000 MLBTR arbitration projection
LHP Luis Avilan $2,300,000 MLBTR arbitration projection
LHP Tony CIngrani $2,200,000 MLBTR arbitration projection
RHP Josh Fields $2,200,000 MLBTR arbitration projection
LF Joc Pederson $2,000,000 MLBTR arbitration projection
RHP Pedro Baez $1,500,000 MLBTR arbitration projection
IF/OF Kiké Hernandez $1,300,000 MLBTR arbitration projection
RHP Yimi Garcia $630,000 1-year deal
Money to Braves $4,500,000 payment to Atlanta in Culberson trade
Andre Ethier $2,500,000 buyout of 2018 option
Minor leaguers on 40-man $3,000,000
Team benefit costs $15,000,000 estimate
Totals $174,069,286

Another note: Erisbel Arruebarrena and Yaisel Sierra, a pair of Cuban defectors who signed major league deals with $5 million average annual values, both remain in the organization but aren’t on the 40-man roster and don’t count toward the Dodgers’ taxable payroll.

The Dodgers are at just over $174 million for luxury tax purposes for 19 players on the active roster, plus estimates for minor leaguers on the 40-man roster. Filling out the rest of the 25-man roster with players near the minimum salary ($545,000 in 2018) puts us at roughly $178 million.

That’s well below the $197 million threshold for 2018, which means they have some room to make more moves and still avoid the tax. One of those may be the reported one-year deal for Tom Koehler, which hasn’t been finalized yet.

The Dodgers might also find themselves in play in the deeper end of the talent acquisition pool. Ken Gurnick of MLB.com had a few ideas, as an example:

McCutchen is due $14.75 million with the Pirates in 2018, while Cain is a free agent.

The Dodgers might also want to keep space for the ability to add players in trades during the season. In 2017 for instance, the Dodgers added roughly $7.2 million in the midseason trades for Yu Darvish, Tony Watson, Tony Cingrani and Curtis Granderson (lessened slightly by the unknown amount sent by the Mets in the Granderson trade).

The bottom line though is that this deal gave the Dodgers more financial freedom in the short term.

“Obviously one of the main considerations in this deal were economic. But also the bigger picture, the long-term plan. It’s a necessary, strategic part of moves yet to come,” Friedman said. “Whether that’s this offseason, in July or next year, this move allows for increased flexibility going forward at a time when we have some depth.”

The Dodgers have paid the luxury tax for five straight years, and are taxed at a 50% rate for any payroll amount over the threshold. If they are able to stay under the threshold for one year, the initial tax rate should they exceed it again would be 20%, then 30% for a second year and 50% for a third year.

Getting under the tax threshold in 2018 would allow the Dodgers to be relatively uninhibited in next winter’s free agent class, which is expected to include Bryce Harper, Manny Machado, Josh Donaldson, Charlie Blackmon, Dallas Keuchel, Andrew Miller and Craig Kimbrel, to name a few. Oh, and also Kershaw, if he decides to opt out of the two years and $65 million remaining on his contract after next season.

Any of these players could sign extensions with their teams before next offseason, but even removing a few players from that list above still makes it a much better free agent class than the 2017-18 offseason.

As expected, Friedman played coy when asked about future plans.

“I didn’t notice. Is there a big free agent class next winter?” he joked.

Though quite a popular and obvious pairing, it might be foolish to assume the Dodgers will sign Harper, who will only be 26 in 2019 with plenty of road ahead on his Hall of Fame track. But now they are at least much better positioned to make such a move. Or perhaps their next big addition will be something none of us saw coming.

Kind of like Saturday’s trade.