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Dodgers will pay $19.4 million in competitive balance tax for 2023

Brandon Gomes, left, General manager of the Los Angeles Dodgers watches batting practice with Mark Walter, part-owner and chairman of the Los Angeles Dodgers prior to Game 1 of a National League Division Series baseball game between the Los Angeles Dodgers and the Arizona Diamondbacks at Dodger Stadium in Los Angeles on Saturday, October 7, 2023.
Brandon Gomes, left, General manager of the Los Angeles Dodgers watches batting practice with Mark Walter, part-owner and chairman of the Los Angeles Dodgers prior to Game 1 of a National League Division Series baseball game between the Los Angeles Dodgers and the Arizona Diamondbacks at Dodger Stadium in Los Angeles on Saturday, October 7, 2023.
Photo by Keith Birmingham/MediaNews Group/Pasadena Star-News via Getty Images

The Dodgers are competitive balance tax payors for the third year in a row. levied with a $19.4 million bill from Major League Baseball, per Ronald Blum at The Associated Press.

For competitive balance tax purposes, the Dodgers payroll last season was deemed to be $268,198,867, the fourth-highest in MLB, and an 8.6-percent decrease from last year’s CBT payroll of $293,330,382. Only the Mets, Yankees, and Padres — who all missed the postseason — had higher payrolls

Per the collective bargaining agreement, the initial luxury tax threshold in 2023 was $233 million, with three initial thresholds in increments of $20 million, taxed at a higher rate. Because the Dodgers were a tax payor for a third consecutive season, their tax rates were higher in 2023 than in 2022, including 50 percent for the first $20 million over the initial threshold, up from 30 percent last year.

Dodgers 2023 competitive balance tax

Payroll Amount Tax rate Tax amount
Payroll Amount Tax rate Tax amount
$0-233 million $233,000,000 0.0% $0
$233-253 million $20,000,000 50.0% $10,000,000
$253-273 million $15,198,867 62.0% $9,423,297
Totals $268,198,867 55.2% $19,423,297
Source: Associated Press

In both 2021 and 2022, the Dodgers exceeded the second tax threshold, which resulted in an additional penalty of having their first pick in the next draft drop 10 selections. In 2022, their No. 30 pick fell to 40th overall, which was used to select catcher Dalton Rushing out of Louisville. In 2023, their 26th pick fell to No. 36, which was used to take speedy high school outfielder Kendall George.

By keeping the 2023 payroll under the second tax threshold, the Dodgers’ first-round pick will remain No. 25 overall.

In all, eight MLB teams paid the competitive balance tax for 2023, led by the Mets at a whopping $100.8 million, per the Associated Press.

Tax payments are due to MLB by January 21. The first $3.5 million of the total tax collected is used to defray costs associated with teams’ funding of the players benefit plans. The rest is split up as follows, per the collective bargaining agreement:

(a) 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.

(b) The other 50% of the remaining proceeds collected for each Contract Year, with accrued interest, shall be used to fund a Supplemental Commissioner’s Discretionary Fund.

The Dodgers have paid luxury tax in eight of the last 11 seasons, totaling $234.2 million in taxes alone, with an average CBT payroll of $252.5 million, both figures the highest in MLB dating back to 2013.

Dodgers competitive balance tax history, 2013-23

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%
2023 $233,000,000 $268,198,867 $19,423,297 55.2%
*2020 is full-season payroll, not the pro-rated 60-game version

In 2024, the first competitive balance tax payroll threshold is $237 million.

In the last two weeks alone the Dodgers have committed $1.162 billion in guaranteed salaries to Shohei Ohtani, Tyler Glasnow, and Yoshinobu Yamamoto.

Once the $325 million Yamamoto contract is finalized, the Dodgers will have 15 players under contract for a total CBT payroll of just shy of $224 million. Adding in an average of projections from MLB Trade Rumors and Cot’s Baseball Contracts for the 10 remaining unsigned arbitration-eligible players, plus a few estimates for player benefits, minor league salaries, and the MLB-wide pre-arbitration bonus pool, that puts the Dodgers’ 2024 CBT payroll at roughly $280.8 million at the moment.

Should the Dodgers exceed the threshold again next year, their tax rates will remain the same a third-time payor, beginning with 50 percent for the first $20 million over $237 million, up to 110 percent for anything over $297 million.