Dodgers: The Luxury Tax System Will Limit the Dodgers Spending

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LOS ANGELES, CA - JANUARY 07: (L-R) President and CEO of the Los Angeles Dodgers Stan Kasten, Dodgers GM Farhan Zaidi, Dave Roberts, Pitcher Kenta Maeda and Dodgers president of baseball operations Andrew Friedman attend as Los Angeles Dodgers Introduce Kenta Maeda the at Dodger Stadium on January 7, 2016 in Los Angeles, California. (Photo by Joe Scarnici/Getty Images)
LOS ANGELES, CA - JANUARY 07: (L-R) President and CEO of the Los Angeles Dodgers Stan Kasten, Dodgers GM Farhan Zaidi, Dave Roberts, Pitcher Kenta Maeda and Dodgers president of baseball operations Andrew Friedman attend as Los Angeles Dodgers Introduce Kenta Maeda the at Dodger Stadium on January 7, 2016 in Los Angeles, California. (Photo by Joe Scarnici/Getty Images) /
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The Dodgers are seen as a team that has unlimited funds to spend on its roster construction.  While the Dodgers are one of the wealthier teams in baseball, the luxury tax system will keep them in check.

The Dodgers will once again be looking for ways to improve their club this offseason and find a way to win one more game in the post-season than they did this year.  While there are big names on the free agent and trade market like Giancarlo Stanton and Yu Darvish, Dodger fans shouldn’t expect the Dodgers to splurge this off-season.  The reason for that is a luxury tax system that has stiffer penalties starting in 2018.

As it currently stands the Dodgers have exceeded the luxury tax threshold for four consecutive seasons.  The luxury tax or competitive balance tax as MLB officially named it, does have increases every year but only by a couple million.  The threshold for 2018 will be 197 million and up before jumping to 206 million dollars in 2019.  After 2019 the tax limit will increase by about two million dollars a year until that rule gets altered.

The Dodgers current projected payroll sits at 179 million dollars according to Spotrac, but this is not including raises that will come via arbitration for many of the Dodgers younger players.  This estimate also does not factor in any new acquisitions that are likely to happen in the next month.  In all likelihood, the Dodgers will once again go over the luxury tax limit in 2018.  Under the old system, it would not be a big deal as it would just cost money, but that is not the case anymore.

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If the Dodgers were to go into the 2019 season with a payroll over 230 million dollars like this season, then they would owe over 40 million dollars in luxury tax, and it would only get more expensive every year.  On top of that, the rules state that any team going 40 million or more over the luxury tax in any given season starting with 2018, will have their ffirst-roundpick moved back ten spots in the next draft.  For a contending team like the Dodgers that are selecting in the mid to late 20’s, that would knock them out of having a first-round pick.

The luxury tax system will limit the Dodgers spending, and more than likely will keep them from signing Yu Darvish, or trading for Giancarlo Stanton.  In Stanton’s case, he makes about thirty million a season and the Dodgers already have one thirty million dollar contract with Clayton Kershaw.  Yu Darvish is going to get Zack Greinke money, and if the Dodgers didn’t give that to Greinke, I don’t see them handing it over to Darvish.  Having sixty million dollars tied down to two players will more than likely push the Dodger payroll over 200 million and over the luxury tax threshold.

While the Dodgers do have tons of money coming off the books over the next two seasons, that free money is going to need to be used to give raises to Chris Taylor, Corey Seager, and Cody Bellinger if they keep playing like all-stars.  Clayton Kershaw will most likely opt out of his deal next year as well which means the Dodgers will need to give an even bigger annual salary to Kershaw.  If the Dodgers didn’t keep Kershaw, then that would change the entire outlook of their payroll, but that seems unlikely.

Next: Stanton to the Giants is Good for the Dodgers

The Dodgers do have an excellent young core of players, and they will need to count heavily on them going into the next few years.  The Dodgers will no longer be able to throw money at the top free agents every winter unless they want to pay 40-50 million in luxury tax every year and lose valuable draft position.  The Dodgers will need to build their team through the draft and crafty trades going forward as the luxury tax will limit their spending money.

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