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How Important Is the Luxury Tax To the Dodgers?

Note:  This post was prepared prior to my learning of the Miguel Rojas extension.  The $500K increase in the AAV really has no influence on the determination as to what the Dodgers may or may not do.


Yesterday, Badger brought up an article by Jack Harris on the LAD luxury tax plight.  Once the Dodgers acquired Miguel Rojas, that put the Dodgers over the threshold, with very few options to get back under.  The Dodgers were not going to hurt their on the field chances by moving either CT3 or Max Muncy.  They were not going to hurt their future by tying a prospect that a team would pay $8MM for Blake Treinen, just to get under the threshold.

Jack Harris reported that the estimated LAD payroll for 2023 is at $245MM.  Cots and Roster Resource has the AAV payroll at between $238MM and $239MM.  Spotrac has the AAV payroll at $229.5, but they are missing a significant line item of 0-3 year players, which is estimated to be $3.4MM.  They also have differing present value calculations for the deferred contracts of Freddie Freeman and Mookie Betts.

We will not know what the 2023 payroll number is until the end of the season and all of the payrolls are properly tabulated including present value calculations and any of the incentives.  But I agree that it is safe to assume that the Dodgers will go past the threshold for the third consecutive year. The estimated CBT for LAD?  If the payroll is $238MM, the tax would be $2.5MM.  If the payroll is $245MM as Jack Harris estimates, the tax would be $6MM.

The Dodgers payroll and tax for 2022 totaled $325.7MM.  If assuming the largest estimate for the LAD estimated payroll is correct (Jack Harris), the total payroll and tax amount would be $251MM.  I do believe the Dodgers can afford that level of payroll and tax.  Would they prefer not to pay the $6MM in tax?  Of course.  But it is not going to dissuade them from keeping their current roster as it currently exists, and not mortgaging their future with a Treinen trade.

Per Jack Harris’ column, AF commented on the dilemma of going over or staying under the CBT threshold:

“There’s always going to be that push-pull between pressing to be as good as we can be and figuring out when we can strategically get under without sacrificing where we are to be able to spend more on our on-field players,” Friedman said. “Is it critical [to reset the tax]? No. But it is advantageous.”

It is clear that AF believed that Miguel Rojas made the team better in 2023 than Jacob Amaya might have.  Will Amaya become a significant MLB player?  I am not prescient enough to make that assertion. Almost every talent evaluator has Amaya’s ceiling as a defensive utility infielder.  Maybe he becomes a regular for Miami (as Rojas did), but it is doubtful that the Dodgers believed he would be an everyday SS for them down the line.  They stockpile utility players, so Amaya is certainly replaceable.  I hope Amaya has a strong career with Miami.  However, I will not look back at this trade and think the Dodgers blew it.

Okay, so they do not get under the CBT threshold for 2023.  They are certainly capable of dropping below for 2024.  2024 free agents include:

  • Clayton Kershaw – $20.00MM
  • Julio Urias – $14.25MM
  • Max Muncy – $13.50MM
  • Noah Syndergaard – $13.00MM
  • D. Martinez – $10.00MM
  • Blake Treinen – $8.00MM
  • Daniel Hudson – $6.50MM
  • Miguel Rojas – $5.00MM
  • Shelby Miller – $1.50MM
  • Trevor Bauer – $24.54MM

The total contracts for 2024 free agents is approximately $116.3MM, leaving the 2024 payroll at approximately $122MM.  With the threshold escalating to $237MM for 2024, that would leave about $115MM before the 2024 options are exercised.

There are club options that can be exercised for 2024 with a range of contract amounts depending on 2023 results:

  • Max Muncy – Between $10MM and $14MM
  • Blake Treinen – Between $1MM and $7MM
  • Daniel Hudson – $6.5MM

Let’s assume that the Muncy’s option will be exercised at $14MM.  He will earn that if he surpasses 550 PA.  He reached 565 last year.  Let’s assume that Treinen will be exercised at $1MM.  Including Hudson, that would approximately equate to $21.5MM, leaving $93.5MM to resign Urias, Kershaw, and sign Ohtani (if that is what they want to do), and stay under the threshold.  I am still not convinced that the Dodgers have any intention on giving a $500MM contract to anyone.

Of course that does not take into account any arbitration increases, or players needed to fill the roster.

The Dodgers can worry about next year after this season is done.  But the idea is that if getting under the threshold is imperative, they can do it in 2024.  $6MM in tax for 2023 is not going to hurt the Dodgers financially.

I am also not convinced that the Dodgers will be making any kind of trade before or during ST.  I think they want to see what they have, especially with Lux at SS and the “kids”.  They are not going to fall out of contention by the deadline.  If they need to improve their club at the deadline, they can do so.  They just need to factor in a 50% tax on what payroll increase they incur.  That tax will not deter them from improving their club down the stretch.  The team goal is still to win a WS, and the LAD owners are not going to preclude AF/BG from acquiring the players they deem necessary to reach that goal.




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There’s also the effect on their draft picks, which is no small penalty.


Is the Rule 4 just the regular draft?


This could be Kershaw’s last year here. I think they want to make an effort to get him back into a World Series. I just don’t see that happening with this team constructed as it currently is.

I was checking projections yesterday, yes I realize those aren’t necessarily going to be accurate, but I think they are likely to be more accurate than numbers those fans projecting their fantasies right through the lineup are expecting.

Of course anything is possible. It’s possible Betts, Freeman, Smith, Lux all have career years. It’s possible both Muncy and Taylor get back to their previous production levels. Outman may be better than Bellinger. Vargas may be ROY. Kershaw, Syndegaard, Gonsolin, May all might go 150 innings of 3.0 or better. Martinez might be a monster. BUT……none of that is projected.

This will be a good team. Better than the Padres? Good enough to peak in October? I can’t help but think – no.

They were “in” on a lot of high volume players. They got nobody. If they are serious about winning it all, it’s my opinion they will need to make moves.

Last edited 1 year ago by Badger

Jeff, do you know the interest rate that is used to calculate present value?

I feel very confident with Lux’ bat and I think he will be good enough at shortstop. He doesn’t have Russel’s arm but otherwise I will guess he will be very close to Russel defensively.

I think Outman could be the most fun to watch if he can stay in the lineup.

I think both Vargas and Muncy will hit better than Muncy did last year.

If Vargas truly is the second or third fastest runner there seems to be hope that he can develop a quick step on defense, no?

San Diego has a ton of offense. Don’t tell me what I already know because I already know that a trade package that includes Soto and Urias is a leap into crazy. But if Stone and Miller excel and Outman, Taylor, Thompson flail, the Dodgers will need hitting more than pitching and the Padres might need pitching more than hitting. Crazy is more fun than reality sometimes.


It’s not like every ROY winner has a great career as evidenced by ROY winner Hollandsworth. He had a good career just not great.


He is one for you Bum, how many rookies of the year have ended up in the Hall of Fame. Remember, the award did not start until 1947. The answer is 19. Last one elected, Scott Rolen this year. There are 5 waiting their turn on the ballot who could pretty much be considered locks, Pujols, Ichiro, Trout, Posey and Verlander.


You would have been my favorite teacher. I would have received more better grades if questions came with answers.


I guessed 20.

I still get an A

RC Dodger

Good summary Jeff.
I thought the Dodgers would find a way to get under the CBT this year in order to reset for future years. But as you point out, the penalty is small for Dodgers under the current payroll. And it is feasible to get under the cap in 2024.

Despite the lower payroll this year, I am still optimistic about the roster. While the Dodgers lost a lot of free agents and big names, I think they have good replacements for the departures. JD Martinez is a younger, cheaper, and probably better replacement for Justin Turner who was mostly a DH last year. Syndergard and May offer more upside and lower cost to Anderson and Heaney. Bellinger was great as a young player, but his OPS was 654 and 542 the last two years. A combination of Outman, Thompson and Taylor should outperform Belli’s production by far. The biggest loss from last year is Trea Turner. He had a very good run with the Dodgers, but his OPS dropped from 911 in 2021 to 809 in 2022. Trea still had a really good year in 2022, but for comparison, before returning from injury on August 28, Lux had a 298 BA and a 812 OPS. Lux is capable of matching Trea’s production at SS, and for insurance the Dodgers have a better fielding SS option in Rojas.
The potential contributions of Vargas, Busch, Pepiot, Miller and Stone should also improve the Dodgers this year. While it is not reasonable to expect the Dodgers to reach the win totals of the last two years, their roster is still comparable to 2022, and one of the best in baseball. With spring training approaching, it is a good time for a positive viewpoint.


It doesn’t really work this way but if Lux replaces Trea and Vargas replaces Lux we might not wind up that far behind. JT is the guy we could miss, so lots of instant pressure on JDM to produce.

RC Dodger

I agree on JT. Would have liked to keep him for clubhouse and community contributions. In 2022, JT and JDM ended the year with similar hitting stats. JT was 278/350/788 with 13 HR, while JDM was 274/341/790 with 16 HR. However, JDM started the year very well and was hitting 312/379/872 after first half of the year. I think he had issues with injuries in second half of year, and hopefully can rebound in 2023. He had 867 OPS in 2021.


JD projects .773 OPS and a 1.4 fWAR.

But of course we expect more out of him. Justin projects 1.8 fWAR. But he was more expensive and we wanted to save mon….. never mind.


I’m guessing the Dodgers are projecting a higher fWAR for JD than for JT. JD should be healthier than he was last year and JT, well, maybe a little slower getting around on fastballs.


I thought the JD was a dollar issue. Apparently not.


Lebron is pissed. Kyrie Irving was traded to Dallas. He really wanted him on the Lakers.


If Davis can stay on the court the Lakers could make the playoffs. The seeding would probably kill their chances, but, once there, anything can happen. LaBron is likely to start running out of steam once he gets the record. Kyrie would have helped, but at what cost?


Machado is 31 and has 5 more years on his contract which pays him $30MM annually. If he opts out it is assumed he can at least add a few years to that contract. If he does opt out or if SD doesn’t extend his contract, do you think the Dodgers will try to solve their 3b puzzle via signing Machado when he is a free agent?


Nope. Machado ain’t Dodgers material.


Oh please NO!! Matt Chapman will also be a FA next year.


I was just reading about WBC being held in Phoenix in mid March. I can see why position players would be interested in this but I am not sure about Kershaw and Urias pitching such competitive innings that early in the year. Im curious what the rest of you think about this.


I think Kershaw and Urias would make great clubhouse guys for their teams.


Call me stubborn, call me wrong or call me “living on a different planet.”

I’ve been called all, and sometimes rightly.

I will think the team finds a way to get under the threshold.

Not sure how, but too many signs point to it being a business objective, and smart people tend to achieve their objectives.


Given the opportunity to get under in 2024 and maybe more easily to do so, I think it is 50 50 that they do it this year. Because they are so close to doing it this year, it just seems like if the opportunity presents itself they will do it.

The Dodgers don’t want to be fooled by hot starts by Outman, Vargas, and Thompson because until they do it for a full season they will continue to be question marks down the stretch.

If Muncy gets off to a good start then the Dodgers will be more confident that they can do without Taylor. How much of Taylor’s paycheck the Dodgers would have to pay will be based on how well he starts out in 2023 but I am guessing they will have to keep some of it to trade him.

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