Dodgers’ 2017 competitive balance tax bill comes to $36.2 million

LOS ANGELES — For the fifth straight year the Dodgers will pay a hefty competitive balance tax, with their 2017 penalty coming in at $36.2 million, per the Associated Press.

The Dodgers have had a payroll higher than the tax threshold every season since 2013, with their total tax bill coming in at just under $150 million during that time, the most in baseball.

That streak could end as early as 2018, with the Dodgers’ five-player trade with the Braves on Saturday lopping off roughly $28 million from their competitive balance tax payroll, which is measured by the average annual value of contracts rather than the amounts paid in each season.

“This deal is a little more subtle in nature than most. Obviously one of the main considerations in this deal were economic,” Dodgers president of baseball operations Andrew Friedman said on Saturday. “But also the bigger picture, the long-term plan. It’s a necessary, strategic part of moves yet to come.”

For 2018 I estimated the Dodgers’ figure to be at roughly $175 million once factoring in the remaining eight players eligible for salary arbitration and the rest of the 25-man roster. The Associated Press projected a $181 million figure for the Dodgers, with the difference likely coming in the arbitration projections and that I didn’t account for the minor league salaries of the players on the 40-man roster when they are not in the majors.

Keep in mind that the 2018 number is before any earned bonuses (like Kenta Maeda’s incentive-heavy contract, for instance) or salaries added in midseason trades.

For 2017 the final Dodgers’ payroll as calculated by MLB was $253,633,893 per Maury Brown of Forbes. Here is my rough breakdown of this year’s total, which has a few estimates (in italics) and doesn’t account for minor league salaries nor the unknown amount the Mets paid for Curtis Granderson after his August trade. But as a general idea, here is where the Dodgers stood in 2017 from a luxury tax perspective:

The tax threshold in 2017 was $195 million. The Dodgers’ penalty for exceeding that figure started at 50% as a serial big spender, while a team going over the number for a first year starts at 20%. The penalties in the new collective bargaining agreement get progressively higher as the payroll increases:

With 2017 being the first year of the collective bargaining agreement, MLB allowed teams to average out their luxury tax levy under both this new system and under the 2016 system, which was (in the Dodgers’ case) a simple 50% tax on any amount over $189 million.

That puts the Dodgers at the $36.2 million they owe to MLB, which is due to the commissioner’s office by Jan. 21. The league distributes the luxury tax payments as follows per the CBA:

(a) The first $13 million of proceeds collected for each Contract Year shall be used to defray the Clubs’ funding obligations arising from the Major League Baseball Players Benefit Plan Agreements.

(b) 50% of the remaining proceeds collected for each Contract Year, with accrued interest, shall be used to fund contributions to the Players’ individual retirement accounts, as provided in the Major League Baseball Players Benefit Plan Agreements.

(c) The other 50% of the remaining proceeds collected for each Contract Year, with accrued interest, shall be provided to Clubs that did not exceed the Base Tax Threshold in that Contract Year.

Beginning in 2018, the penalties for being over $40 million over the tax threshold include moving a team’s first draft pick back 10 spots.

From 2013-17 the Dodgers’ payroll for competitive balance tax purposes has been over $1.3 billion, an average of $264 million per season. They have paid $149.7 million in luxury tax during that span.