As we are all still recovering from the early Dodgers playoff exit to end the 2019 season it is also time to start looking forward. The new free agency class is headed by Anthony Rendon and Gerrit Cole and they won’t come cheap.
Do you believe the Dodgers will make any real attempt to sign Rendon or Cole?
— Tim Rogers – SDDODGER (@SDDodger) October 11, 2019
There could also be some interesting trade targets now that the Dodgers have some salary room. The Dodgers seem to operate on the concept of avoiding the luxury tax if they can because of “real inside baseball economic stuff“. We’ll discuss the basis for the luxury tax then go into details to look at the amount available to avoid different tax consequences.
The Luxury Tax
This summary is extracted from our Payroll Page:
- The thresholds for being taxed for the duration of the CBA are:
- 2020: $208 million
- 2021: $210 million
- There are various penalties for exceeding the CBT that begin at 20%. The number changes based on the number of consecutive years the threshold is exceeded.
- The penalties reset when a team stays under the threshold.
- A team that exceeds the threshold by $40 million or more are penalized in the draft. A team not in the top 6 of the draft will have their first pick moved back 10 spots.
- Penalties are calculated based on the Average Annual Value (AAV) of a multi-year contract.
To sum it up the Dodgers will have financial penalties if they exceed $208 million in 2020 and would have a draft pick penalty if they exceed $248 million.
Guaranteed 2020 Salaries
The players below have signed multi-year contracts and are guaranteed certain amounts of money. What we are doing in this article is using the average of their contract over the years. Some contracts pay more money in different years.
The pending free agents are not listed. The free agents are David Freese (retired), Jedd Gyorko (they will buy his option out), Rich Hill, Russell Martin and Hyun-Jin Ryu. I would expect the Dodgers to consider some of these guys so any money spent on them would be factored into what is available to spend on other players.
Projected Arbitration Salaries
The numbers below for the 12 possible arbitration players were gathered from MLB Trade Rumors and their projections.
Pre-Arbitration Salaries and Other Luxury Tax Factors
The rest of the players are at the mercy of the Dodgers for their salary. Those players will make between $550K and $600K. For that group we’ll use a total of $4.6M. Then there are players on the 40 man roster that will be in the minors. For that group we’ll factor in a total of $2.25M. Player benefits are also part of the luxury tax calculation and we’ll use $15M.
|40 Man Minors||$2,250,000|
|CBA Tax Threshold||$208,000,000|
|Amount Under Threshold||$46,691,667|
|Draft Pick Penalty||$248,000,000|
|Amount Under Pick Penalty||$86,691,667|
With all the money that is almost guaranteed to be allocated the Dodgers have almost $47M before the smaller luxury tax penalties and almost $87M before the drastic penalties.
There are some other factors that could raise or lower those amounts. In 2019 the Dodgers paid out almost $8M total to Kenta Maeda and Clayton Kershaw in incentives. I would expect something similar again. Another factor is if they decide to move one of the bigger guaranteed contracts by adding some prospects to entice another team to take that contract.
For the sake of argument let’s put the final total at being $40M under the beginning of the luxury tax and $80M under the harshest penalties. This assumes the Dodgers give themselves some room to add money at the trade deadline and room for the Kershaw and Maeda incentives.
Possible Impacts to the 2020 Season
The Dodgers have taken a lot of heat for their seemingly insistence on staying under the tax threshold.
When are the Dodgers unveiling their "38% payroll reduction since 2015" banner?
— Chris Cwik (@Chris_Cwik) October 14, 2019
I know it has been a source of frustration for many of us as we know they have one of the largest markets with plenty of sources of revenue.
The #Dodgers have an $8-billion television contract that has blacked out their games in the majority of the market. Their ticket prices continue to escalate. The FO may be mistaking attendance and loyalty for fan satisfaction https://t.co/V9XDIdvbjf
— VinScullyTribute (@VinScullyTrib) January 31, 2019
There is money, folks. Something to keep in mind, even though Dodgers were close to the luxury tax last spring they were actively making a play to add Bryce Harper at $35-40M per year for 4 years. That would have put them way over the tax so we know they will do it if they feel the right player is available.
Is Gerrit Cole or Anthony Rendon one of those players that would make the front office do something like pay the luxury tax? For both 2021 and 2022 there are more contracts coming off of the books like Clayton Kershaw, Justin Turner and Kenley Jansen. They will also need to pay players like Cody Bellinger and Walker Buehler.
As the poll stated at the beginning, 58% of the voters do not expect the Dodgers to make a major effort to sign Rendon or Cole. The fans are tired of hearing about luxury taxes and limiting payroll. The number of excuses for not winning a World Series in the 7th full season of this ownership group is no longer something that is considered acceptable.
The tradition of excellence continues with the Dodger greats of today. We are committed to building the next dynasty and strengthening Dodger pride. – Dodgers Ownership Statement from May 2, 2012
The quick exit from the 2019 playoffs should be a wake up call to Andrew Friedman and Stan Kasten. I don’t expect them to spend “stupid money” but I also don’t expect them to worry so much about crossing the luxury tax threshold. This will be a very interesting off-season, that is for sure.