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Dodgers will pay $32.4 million in competitive balance tax for 2022

LA’s first 2023 draft pick will drop 10 spots, to No. 36

Division Series - Workout Day Photo by Harry How/Getty Images

The Dodgers will pay competitive balance tax for the second year in a row, hit with a $32.4-million bill from Major League Baseball, per Ronald Blum at The Associated Press.

In the first year of the collective bargaining agreement, the initial threshold to pay competitive balance tax rose to $230 million in 2022, up from $210 million the year before. The Dodgers payroll for competitive balance tax purposes was $293,330,382, per the AP.

The Dodgers had the second-highest payroll in MLB, trailing the Mets, though Los Angeles would have held the top spot for a second season in a row had Trevor Bauer not been suspended. Bauer’s three-year contract averaged $34 million per season, but his unpaid suspension that began on April 29 wiped out roughly $29.9 million (the final 160 days of a 182-game season).

In 2021, the Dodgers paid $32.65 million in luxury tax.

As a repeat tax payor, the Dodgers pay higher rates this year than last. The new fourth tier of penalties, which was just added in the new collective bargaining agreement, started at $290 million in 2022, a threshold the Dodgers exceeded by $3.3 million.

Dodgers 2022 competitive balance tax

Payroll Amount Tax rate Tax amount
Payroll Amount Tax rate Tax amount
$230-$250 million $20,000,000 30.0% $6,000,000
$250-$270 million $20,000,000 42.0% $8,400,000
$270-$290 million $20,000,000 75.0% $15,000,000
over $290 million $3,330,382 90.0% $2,997,344
Totals $293,330,382 51.2% $32,397,344

For exceeding the second tax threshold, the Dodgers will also have their first draft pick in 2023 moved back ten spaces. As the Division Series loser with the best record, LA’s first-round pick was slated for No. 26 overall, and will now slide to 36th. The Dodgers also had their 2022 first-round pick moved back ten spots for exceeding the highest tax threshold, and drafted power-hitting catcher Dalton Rushing out of Louisville 40th overall.

$293.3 million is the second-highest Dodgers payroll ever, up slightly from $285.6 million in 2021 and behind only the $298.3-million payroll in 2015 in team history.

The Mets, Dodgers, Phillies, Yankees, Padres, and Red Sox all paid competitive balance tax this year, per Blum. According to the collective bargaining agreement, here is how the taxes are distributed:

50% of CBT proceeds will be distributed to Players’ retirement accounts and 50% will be distributed under a new Supplemental Discretionary Fund, with distributions made to Payee Clubs under the Revenue Sharing Plan in the Commissioner’s discretion based on criteria including growing their non-media local revenue over a multi-year period.

The Dodgers over the last 10 seasons have paid just shy of $215 million in competitive balance tax, with an average payroll of $250 million. Both are the highest in MLB during that time.

Dodgers competitive balance tax history

Year CBT threshold LA payroll Tax Rate
Year CBT threshold LA payroll Tax Rate
2013 $178,000,000 $243,234,050 $11,415,959 17.5%
2014 $189,000,000 $277,737,083 $26,621,125 30.0%
2015 $189,000,000 $298,320,297 $43,728,119 40.0%
2016 $189,000,000 $252,551,634 $31,775,817 50.0%
2017 $195,000,000 $253,633,893 $36,209,572 61.8%
2018 $197,000,000 $195,039,730 $0 0.0%
2019 $206,000,000 $204,918,530 $0 0.0%
2020* $208,000,000 $204,653,651 $0 0.0%
2021 $210,000,000 $285,599,944 $32,649,965 43.2%
2022 $230,000,000 $293,330,382 $32,397,344 51.2%
*2020 is full-season payroll (not pro-rated to 60 games)

The initial competitive balance tax threshold increases to $233 million for 2023. If the Dodgers exceed the threshold for a third straight year, they would face higher tax rates — 50 percent for the first threshold, then 62.5 percent, 95 percent and 110 percent.

The Dodgers this offseason have operated like a team angling to get under the first tax threshold. They brought back Clayton Kershaw for one year and $20 million, and the other three free agents — Noah Syndergaard ($13 million), J.D. Martinez ($10 million), and Shelby Miller ($1.5 million) — signed modest one-year contracts. They also traded for Miguel Rojas, who will earn $5 million this season.

At the moment, the Dodgers estimated CBT payroll for 2023 is roughly $235.3 million, which would put them over the first threshold.