Although the 2023 MLB season is in the rearview mirror, the bill just came due as MLB issued the luxury tax penalties on clubs that finished the year with a payroll above the $233 million competitive balance tax (CBT) threshold.
Prior to this season, the Los Angeles Dodgers held the record for a luxury tax bill paid. After finishing the 2015 season with the largest payroll in MLB history at $298.3 million, the Dodgers paid a record $43.7 million luxury tax bill.
However, the New York Mets now own that crown as they more than doubled the Dodgers’ record, joining seven other teams that were taxed this season, according to Ronald Blum of The Associated Press:
The New York Mets must pay a record luxury tax of nearly $101 million after a fourth-place finish in their division, among an unprecedented eight teams that owe the penalty for the 2023 season.
Although the Dodgers no longer hold the record for the largest penalty, they can at least claim title to the largest luxury tax penalty for a division winner. The Dodgers finished the 2015 season with a record of 92-70, but lost in the National League Division Series to the Mets club that ended up representing the NL in the World Series.
In addition to the Mets, the Dodgers were among the eight teams that were taxed for their 2023 payroll, facing a bill just shy of $20 million:
Other teams owing tax money are San Diego ($39.7 million), the New York Yankees ($32.4 million), the Dodgers ($19.4 million), Philadelphia ($6.98 million), Toronto ($5.5 million), Atlanta ($3.2 million) and World Series champion Texas ($1.8 million).
The Dodgers finished the 2023 season roughly $35 million over the CBT with a payroll of $268,161,290. A significant portion of that was paid to Trevor Bauer following his release after an investigation that led to a suspension as part of the MLB’s joint domestic violence, sexual assault and child abuse policy.
Bauer, who was released in prior to the 2023 season, faced a record suspension before being reinstated. Upon his return, he cost the Dodgers just north of $22.5 million. The Dodgers also had multiple injured pitchers that added to their payroll total, including Walker Buehler ($8 million), Blake Treinen ($8 million) and Daniel Hudson ($6.5 million).
In addition, the Dodgers paid more than $10 million to Noah Syndergaard before he was traded to the Cleveland Guardians.
Because they finished over the threshold for the third straight season, the Dodgers had to pay a 50% rate on the first $20 million above the $233 million threshold, a 62% rate on the next $20 million and a 95% rate on the amount from $273 million to $293 million.
2024 Dodgers luxury tax outlook
The luxury tax threshold for the 2024 season is set at $237 million, which the Dodgers are already over. The Dodgers are projected to have a payroll of $286 million for 2024 following their arbitration deals, according to FanGraphs.
The final threshold, also known as the Steve Cohen tax, where teams face the most significant penalties, is set at $297 million and would require the Dodgers to pay a 110% tax on any amount over $297 million.
Additionally, clubs that are $40 million or more above the threshold have their highest selection in the next upcoming Draft moved back 10 places unless the pick falls in the top six. In that case, the team will have its second-highest selection moved back 10 places instead.
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