Dodgers charged with $103 million competitive balance tax for 2024 payroll

For the fourth of what is expected to be several seasons in a row, the Dodgers were competitive balance tax payers. Their bill for 2024 came to $103 million, per Ronald Blum of the Associated Press.

The Dodgers payroll for competitive balance tax purposes this season was just over $353 million, again per Associated Press, which exceeded the fourth and highest threshold for 2024. The first threshold this season was $237 million, with each successive tier in increments $20 million higher, with higher tax rates at each level.

In 2023, the Dodgers had a CBT payroll of $268.2 million and paid a tax of $19.4 million.

As a repeat tax payer for at least three years in a row, the Dodgers were subject to the highest tax rates allowable by the collective bargaining – 50 percent for their first $20 million over the first threshold, 62 percent for the next $20 million, 95 percent for the n

The Dodgers had the highest payroll in MLB by competitive balance tax purposes in 2024, narrowly ahead of the Mets ($347.65 million), with Yankees in third place at $316.2 million. A total of nine major league teams paid the luxury tax in 2024, including the Phillies, Braves, Rangers, Astros, Giants, and Cubs.

By surpassing the second threshold of $277 million in payroll in 2024, the Dodgers will see their first draft pick in 2025 drop by 10 spots, as was the case in the 2022 and 2023 drafts as well.

Shohei Ohtani was the biggest splash the Dodgers made last offseason, signing a 10-year contract that will pay him a total of $700 million. His contract includes $680 million of deferred money that will be paid from 2034-43, which reduced the present value of the deal to just under $46.1 million per year for CBT purposes. The club last winter also signed Yoshinobu Yamamoto for $325 million, the largest contract ever for a pitcher, and traded for Tyler Glasnow, extending the right-hander for four more seasons as part of the deal.

The Dodgers figure to be competitive balance tax payers for the foreseeable future, with Yamamoto signed through 2035, Ohtani and catcher Will Smith through 2033, Mookie Betts through 2032, Glasnow through 2028, and Freddie Freeman signed through 2027. Added to the mix on … is pitcher Blake Snell, whose five-year, $182 million contract also includes deferrals and for CBT purposes counts as $31.4 million per year through 2029. Tommy Edman on November 29 also signed a five-year, $74 million deal through 2029, with his CBT hit measured at just over $13 million per year.

Those eight players alone count a total of $207.4 million toward the competitive balance tax annually through 2027 (the final year of Freeman’s contract). The first CBT threshold is $241 million in 2025 and $244 million in 2026, the last two years of the current collective bargaining agreement.

The team’s 2025 payroll in relation to the competitive balance tax is already estimated at roughly $329.3 million, after the signings of Blake Treinen and Michael Conforto. That total includes assumptions for the six players still eligible for salary arbitration. That puts the Dodgers in the fourth and highest tier, so any additions they make will be taxed at a 110-percent rate.

In the 11 full seasons under the current Guggenheim Partners ownership group — dating back to 2013 — the Dodgers have paid the luxury tax eight times, averaging $260.9 million in payroll per season, with a total tax paid of $337.2 million, both the most in MLB during that span. The Yankees are second in both categories, paying a total of $237.8 million in tax since 2013 with an average payroll of $243.8 million over the last dozen years.