The reigning World Series champion Los Angeles Dodgers are one of a record nine Major League Baseball teams that must pay their luxury tax bills by Jan. 21, according to the Associated Press.
The Dodgers are $103 million in debt and are one of three teams with a luxury tax bill of more than $50 million: the New York Mets ($97.1 million) and New York Yankees ($62.5 million). It has become one. All three of these teams made it to at least the League Championship Series, and then the Dodgers and Yankees went on to the World Series.
Other teams that will owe luxury tax bills over the next month include the Philadelphia Phillies ($14.4 million), Atlanta Braves ($14 million), Texas Rangers ($10.8 million) and Houston Astros ($6.5 million). ), San Francisco Giants ($2.4 million), and Chicago Cubs ($570,000). The total amount owed by MLB teams is $311.3 million, which is also higher than last year’s $209.8 million.
MLB’s luxury tax (competitive balance tax) is a mechanism designed to stop runaway spending. This calculation is not based on the actual salary of the players on the 40-man roster, but rather on each player’s average salary. A player on a two-year, $20 million contract is counted as $10 million per season. Actual failure is not the issue. Teams are also billed for benefits and severance.
The luxury tax system has multiple tiers, with multipliers applied as teams achieve repeat offender status. Last season’s tax line was $237 million (next season, that number increases to $241 million). Teams that exceed the threshold by more than $40 million also suffer from having their top draft pick moved 10 spots down (unless the team drafts in the top six).
