Dodgers hit with $32.65 million competitive balance tax bill for 2021

The Dodgers will pay the competitive balance tax for the first time in four seasons, charged by Major League Baseball with a penalty of $32.65 million for 2021, per Ronald Blum of the Associated Press.

MLB deemed the Dodgers payroll this season to be $285,599,944, the highest in the sport and well beyond the $210 million CBT threshold.

The largest addition to the payroll this season was a three-year, $102 million contract to Trevor Bauer, who is currently on administrative leave during MLB’s ongoing investigation per the league’s domestic violence, sexual assault, and child abuse policy, and missed the final 81 games of the season. Justin Turner last offseason returned on a two-year, $34 million contract, and the acquisitions of Max Scherzer and Trea Turner at the trade deadline added $14.3 million to the payroll.

The Dodgers exceeded the CBT threshold for the first time since 2017.

“The moves and things we’ve done the last three years gave us a little more flexibility right now,” Dodgers president of baseball operations said in February. “We know there are some added costs associated with it, which is not ideal, and it is a cost. But we feel like with where we are and the team we have, the reward outweighs that.”

There are three levels of the competitive balance tax, and as a team that didn’t pay CBT in the previous year, the Dodgers were taxed at the lowest rate at each level. There’s a 20-percent rate on the first $20 million over $210 million, 32 percent on the next $20 million, and 62.5 percent on any amount over $250 million.

By exceeding the highest threshold, the Dodgers will also see their first pick in the 2022 MLB Draft moved back 10 slots.

At $285.6 million, this is the largest payroll for the Dodgers since 2015.

Per the collective bargaining agreement, here is how the CBT funds are distributed:

(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.

Competitive balance tax payments are due to MLB by January 21.

The Dodgers over the last nine seasons have paid $182.4 million in competitive balance tax, with an average annual payroll of $246 million during that time. Both are tops in MLB.