Dodgers Pay $11.4m Luxury Tax, Do Not Care

December 17, 2013 at 5:16 pm | Posted in luxury tax | Leave a comment

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Last November, I looked at just how badly the Dodgers were going to blow past the luxury tax, guessing that it would be a little over $9 million. That was obviously at that moment in time — the team hadn’t signed Zack Greinke or Hyun-jin Ryu yet, and it’s incredibly difficult, if not impossible, to guess what sort of incentives and trades will happen over the course of the season — and was just an estimate. As it turns out, the actual bill was $11.4m, per reports, which… well, so what?

$11.4 million in today’s game, for today’s team, well, it’s just not a whole lot. That’s tough to hear for the average person, but it’s true. It’s slightly more than Dan Haren is guaranteed next year, and he’s a past-his-prime starter who probably could have made more if he’d been more willing to explore outside of California. The tax is a good thing for baseball, because it helps the smaller teams and somewhat limits the upper echelon, but it’s not something that should stop a team like the Dodgers from spending.

…For now, anyway. First-time offenders are taxed at 17.5% of their overage above the $189m limit, and that increases to 30%, then 40%, then a whopping 50%. This is why the Yankees (hit for $28m this year) are trying so hard to stay under that limit, though it seems like they’re not going to do it, and they can arguably afford the tax anyway. Ideally, you don’t keep exceeding that limit every year, because even one time under can reset you to the beginning.

That’s not going to happen for the Dodgers in 2014, since I have them down at approximately $240m already, and that doesn’t yet include Juan Uribe, J.P. Howell, anything else they might do, or the ~$11m worth of non-player administrative costs that are included as well. They’re well on their way to blowing past it in 2015 and ’16 as well, assuming that giant annual costs for Clayton Kershaw (and lord knows what else) gets counted in there.

Someday, if Stan Kasten’s vision of a big immediate splash giving way to a strong farm system comes to pass (and we’ve obviously seen huge strides in developing talent), maybe the Dodgers won’t be paying a luxury tax. But with years of Matt Kemp, Carl Crawford, Adrian Gonzalez, Zack Greinke, and Andre Ethier to come, plus possible extensions for Kershaw and Hanley Ramirez, plus future moves we can’t even theorize about at this point, it’s not going to happen any time soon. So long as that doesn’t restrict player acquisition, as it has for the Yankees, that’s a hit the team will have to live with. It seems they can, and so we should be thankful for approximately the 1,298,927th time that the Guggenheimers are here, and McCourt is not.

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