1. The Los Angeles Dodgers are right against the Competitive Balance Tax
The Dodgers still have to bring back Justin Turner, too.
Major League Baseball is essentially the only American sports league that does not have a salary cap. In place of a hard salary cap is the Competitive Balance Tax, and Dodger fans who want the team to spend as much money as possible might be sick of hearing about it.
The Competitive Balance Tax threshold is set at $210 million this season and, according to Spotrac, the Dodgers are only $4.2 million under the tax.
The team definitely can go over the tax. The Dodgers play in the second-largest market in the United States and have the funds to go over, but they have to do so in moderation. Why? Here’s an explanation from MLB.com:
"“Clubs that exceed the threshold by $20 million to $40 million are also subject to a 12 percent surtax. Meanwhile, those who exceed it by more than $40 million are taxed at a 42.5 percent rate the first time and a 45 percent rate if they exceed it by more than $40 million again the following year(s).”"
So let’s have some fun with the numbers. Justin Turner is still a free agent and either re-signing him or somehow adding a right-handed bat into the mix seems to be the priority. Let’s just estimate that Turner agrees to a two-year contract with a third-year club option worth $12.5 million per season.
That puts the Dodgers $8.3 million above the tax. Then let’s say they sign Bauer. Now, to sway Bauer, they are likely going to have to give him that massive one-year deal that allows him to break the AAV record. To give us a nice, whole number, I am going to say Bauer signs a one-year, $41.7 million contract.
That’s $50 million over the tax. At 42.5% that is $21.25 million that the Dodgers have to pay in taxes after a global pandemic in which they had to issue layoffs. Talk about bad PR.
And if that’s not enough to convince you, any team that surpasses $40 million over the tax gets its first pick in the following draft moved back 10 spaces.
It just isn’t going to happen. With the additional taxes that would come, it’s hard for the Dodgers to justify spending $64 million for one season of Trevor Bauer, even as defending World Series champions.