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Dodgers competitive balance tax payroll now that Shohei Ohtani is signed

Arizona Diamondbacks defeated the Los Angeles Dodgers 11-2 to win Game 1 of a National League Division Series baseball game. Photo by Keith Birmingham/MediaNews Group/Pasadena Star-News via Getty Images

Shohei Ohtani signed a 10-year contract that will pay him a total of $700 million, a deal that was finalized on Monday night. Thanks to $680 million of that in deferred salary, we all get an impromptu math lesson. So let’s look at that means for the Dodgers payroll, especially regarding the competitive balance tax.

Those deferrals reduce the net present value of Ohtani’s contract to roughly $460 million, so instead of an average of $70 million per year, Ohtani counts for around $46 million per year. Ronald Blum at the Associated Press reported the total value of the contract, for competitive balance tax purposes, at $460,767,685 over the 10 years.

Ohtani is one of 12 Dodgers already under contract for 2024, including Joe Kelly, whose deal was also finalized on Monday, and Jason Heyward, who officially returned to Los Angeles last Wednesday.

That gives us enough to have a framework and rough estimate of what the Dodgers payroll situation looks like for 2024. As of Tuesday morning, the Dodgers payroll for competitive balance tax purposes is estimated at about $218.8 million.

Dodgers 2024 payroll after signing Shohei Ohtani

Player Pos Actual payroll CBT payroll Notes
Player Pos Actual payroll CBT payroll Notes
Shohei Ohtani DH/P $70,000,000 $46,076,769 1st yr of 10-yr deal
Mookie Betts 2B/RF $30,000,000 $25,554,824 4th yr of 12-yr deal
Freddie Freeman 1B $27,000,000 $24,699,249 3rd yr of 6-yr deal
Chris Taylor IF/OF $13,000,000 $15,000,000 3rd yr of 4-yr deal
Max Muncy 3B $12,000,000 $12,000,000 1st yr of 2-yr deal
Jason Heyward RF $9,000,000 $9,000,000 1-year deal
Joe Kelly RHP $8,000,000 $8,000,000 1-year deal
Miguel Rojas IF $5,000,000 $5,500,000 2nd yr of 2-yr deal
Tony Gonsolin SP $5,400,000 $5,325,000 2nd yr of 2-yr deal
Austin Barnes C $3,500,000 $3,500,000 2nd yr of 2-yr deal
Yency Almonte RHP $1,900,000 $1,900,000 1-year deal
Blake Treinen RHP $1,000,000 $1,000,000 Option exercised Nov 5
Will Smith C $9,150,000 $9,150,000 avg. arb projection
Walker Buehler SP $8,027,500 $8,027,500 avg. arb projection
Ryan Yarbrough LHP $3,900,000 $3,900,000 avg. arb projection
Evan Phillips RHP $3,250,000 $3,250,000 avg. arb projection
Brusdar Graterol RHP $2,525,000 $2,525,000 avg. arb projection
Dustin May SP $2,325,000 $2,325,000 avg. arb projection
Caleb Ferguson LHP $2,275,000 $2,275,000 avg. arb projection
Alex Vesia LHP $1,350,000 $1,350,000 avg. arb projection
Gavin Lux SS $1,000,000 $1,000,000 avg. arb projection
J.P. Feyereisen RHP $950,000 $950,000 avg. arb projection
Remaining 6 roster spots $4,800,000 $4,800,000 2024 minimum is $740k
Minor league salaries $2,500,000 MiLBers on 40-man roster
Pre-arbitration pool $1,666,667 $50m split by 30 teams
Team benefit costs $17,500,000
Totals $225,352,500 $218,775,008
As of December 11, 2023 Estimates in italics

Also included in the payroll above are the 10 Dodgers are eligible for salary arbitration this winter. Eleven players were eligible but one of them — Victor González — was traded to the Yankees on Monday. The estimated salary included in the payroll above is an average of projections from MLB Trade Rumors and Cot’s Baseball Contracts.

With 12 players under contract plus 10 arbitration-eligibles, that makes for 22 players on the ledger. Tony Gonsolin and Dustin May are expected to miss either all or most of the 2024 season and will both certainly open the season on the injured list, so I built in a spot to fill the remaining six spots on the 26-man active roster. The minimum salary next season is $740,000, and for now the placeholder in those slots is for $800,000 each.

There’s also the salaries for minor league players on the 40-man roster, which all counts against CBT payroll. Ricky Vanasco for instance signed a contract with the Dodgers that will pay him at a seasonal rate of $900,000 while in the majors and $250,000 in the minors in 2024. For players on their first 40-man roster, the minimum salary while in the minors is $60,300, per the collective bargaining agreement; for players with previous 40-man roster experience, the minimum salary while in the minors is $120,600.

The pre-arbitration bonus pool started in 2022 as a way to reward high-performing players and award winners with under three years of service time and not yet eligible for salary arbitration. The cost of the total pool of $50 million is split equally, with each team contributing roughly $1.67 million.

Clubs also split equally an annual required contribution to the MLB Players benefit plan, plus other benefit costs, which is counted against competitive balance tax payroll. I have not yet seen the 2023 number for this, but in 2022 each club’s share was $16,016,707.

While the Dodgers have a CBT payroll of around $219 million now, they are about $18 million shy of the $237 million threshold to pay tax again in 2024. But given that they still have an acute need for starting pitching, and that they’ve been rumored to be interested in some names or near the top end of the market, it’s almost certain that the Dodgers will pay the luxury tax again in 2024.

The Dodgers have paid the competitive balance tax for each of the last three seasons. Though the 2023 final numbers aren’t out yet, the Dodgers did avoid passing the third tax threshold, which this year was $273 million, so for the first time in three years they won’t see their first MLB Draft pick drop by 10 spots.

But as a serial tax repeater, the Dodgers are subject to the highest tax rates should they exceed the threshold in 2024:

  • For their first $20 million over $237 million, the Dodgers will pay a 50-percent overage tax
  • For the next $20 million, they’d pay 62 percent
  • For the next $20 million, they’d pay 95 percent and have their first 2025 draft pick drop 10 slots
  • For anything over $297 million, they’d pay 110 percent

As an example, should the Dodgers have a $297 million payroll in 2024, right up to the fourth and highest threshold but not over, their total tax would be $41.4 million.

The highest competitive balance tax payroll the Dodgers ever had was $298.3 million in 2015, when they paid $43.7 million in tax. In 2022 the Dodgers had a $293.3-million payroll and paid $32.4 million tax.