World Series champion Dodgers top MLB luxury tax at $103 million as record 9 teams owe penalty

 

[December 21, 2024]  By RONALD BLUM

NEW YORK (AP) — The Los Angeles Dodgers topped a record nine teams owing Major League Baseball's luxury tax this year with an unprecedented $103 million penalty, and the $97.1 million bill for the New York Mets raises their tax total under high-spending owner Steve Cohen to nearly $229 million.

The World Series champion Dodgers will pay a tax for the fourth year in a row. The Dodgers' tax payroll of $353 million included $1,032,454 in non-cash compensation for Shohei Ohtani, whose contract calls for use of a suite for games at Dodger Stadium and an interpreter.

The Yankees owe $62.5 million, according to figures finalized Friday by Major League Baseball and the players' association and obtained by The Associated Press. They were followed by Philadelphia ($14.4 million), Atlanta ($14 million), Texas ($10.8 million), Houston ($6.5 million), San Francisco ($2.4 million) and the Chicago Cubs ($570,000).

The total tax of $311.3 million topped the previous high of $209.8 million last year, when eight teams paid. Tax money is due to MLB by Jan. 21.

More than $1 billion in taxes have been collected since the penalty started in 2003, with 15 teams paying $1.23 billion. The Yankees lead at $452 million, followed by the Dodgers at $350 million and the Mets.

Toronto, with a series of summer trades, cut its tax payroll to $233.9 million, under the $237 million threshold. The Blue Jays started the season projected at $244.3 million.

Chicago went just over the threshold at $239.85 million.

The Mets dropped their luxury tax payroll from last year's record $374.7 million to $347.7 million and cut their tax from last year's then-record $100.8 million. The Dodgers, Mets and Yankees ($316.2 million) were the only teams exceeding the fourth threshold, added in the 2022 labor contract and nicknamed the Cohen Tax in an initiative aimed at slowing his spending.

Among teams paying the tax, the Giants, Rangers and Cubs missed the playoffs.

Total spending on luxury tax payrolls rose 2.3% to $5.924 billion from $5.793 billion last year.

Tax payrolls are calculated by average annual values, including earned bonuses, for players on 40-man rosters along with just over $17 million per team for benefits and $1.67 million for each club’s share of the $50 million pool for pre-arbitration players that started in 2022. Deferred salaries and deferred bonus payments are discounted to present-day values.

Because they owe tax for three straight years, the Mets, Dodgers, Yankees and Phillies pay at a 50% rate on the first $20 million above the $237 million threshold, a 62% rate on the next $20 million, a 95% rate on the amount from $277 million to $297 million and a 110% amount above that.

The Braves and Rangers owe tax for the second year in a row and pay 30% on the first $20 million over and 42% on the next $20 million.

Houston is paying tax for the first time, though the Astros topped the threshold in 2020 when the penalty was suspended because of the coronavirus pandemic. The Giants are paying for the first time since 2017 and the Cubs for the first time since 2019.

The labor contract calls for the first $3.5 million of tax money to be used to fund player benefits and 50% of the remainder to fund player Individual Retirement Accounts. The other 50% of what’s left is dedicated to a supplemental commissioner’s discretionary fund that is distributed among teams that are eligible to receive revenue-sharing money and have grown their non-media local revenue. For this year, the union and MLB agreed to allow discretionary fund distributions of up to $15 million each to teams whose local media revenue has declined since 2022 or 2023.

Next year’s initial threshold is $241 million. If the Mets, Yankees, Dodgers, Phillies. Braves or Rangers go over, they would pay at the highest tax rate, rising to 110% for the amount over $301 million.

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