The Dodgers approach the offseason with a goal of defending their 2020 World Series Championship. Unlike the previous seasons that have ended in disappointment, the Dodgers found the right mix when they went beyond the luxury tax penalties and traded for Mookie Betts. The Dodgers were anywhere from $15-$19M over the lower luxury tax penalties (we discuss those penalties soon) but the price sure seemed worth it.
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 (which they exceeded)
- 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.
The penalties for the Dodgers in 2020 have not been determined but it is their first time back over which keeps the penalties small. If they exceed the lower threshold of $210M in 2021 then the penalties get a bit worse financially. If they go over $250M then they will get penalized in the draft also.
Guaranteed 2021 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.
NOTE: The Red Sox are paying $16M per year for Price's contract. We take that into account in our final totals in a later section.
Not included are any of the Dodgers free agents. The free agents are Justin Turner, Blake Treinen, Joc Pederson, Kiké Hernandez, Pedro Baez, Alex Wood, Jake McGee, and Jimmy Nelson. If the Dodgers bring back any of these players then their salary would be added to the $139.3M.
The above values are just my estimates. Usually MLB Trade Rumors would have their estimates at this time but with all the unknowns going into the offseason they do not have them. It is possible that the Dodgers will not offer a contract to some of these players but we know the Dodgers are keeping most of them, especially the expensive ones.
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 $610K. For that group, we’ll use a total of $5.76M. 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 $16M. With the trades involving David Price and Kenta Maeda, the Dodgers will net $15,436,500.
|40 Man Minors||$2,250,000|
|CBA Tax Threshold||$210,000,000|
|Amount Under Threshold||$19,626,500|
|Draft Pick Penalty||$250,000,000|
|Amount Under Pick Penalty||$59,626,599|
With all the money that is almost guaranteed to be allocated the Dodgers have around $19M before the smaller luxury tax penalties and around $56.6M before the drastic penalties.
There are some other factors that could raise or lower those amounts. Clayton Kershaw has some contract incentives that could add a few million dollars to their payroll. However, we want Kershaw to hit those incentives.
For the sake of argument and taking into account Kershaw incentives let’s put the final total at being $13M under the beginning of the luxury tax and $53M under the harshest penalties.
Possible Impacts To The 2021 Season
With the Dodgers winning the World Series in 2020 and also going into the luxury tax I could see them wanting to reset. That would mean not spending any more than $13M on their own free agents or any others. That is not much and the team would still have some holes. One scenario could be that David Price continues to sit out in 2021 due to COVID-19 concerns. That could free up either $15M or $31M.
If the Dodgers are going to retain a free agent like Justin Turner yet want stay out of the luxury tax then they could get creative like a multi-year contract spread over 2-3 years -- similar to the Chase Utley deal a few seasons back. In reality, they will need to use the extra $40M before the harsh luxury tax and penalties to fill the roster with more than just rookies and some bargain-basement shopping. I do not see them going after someone as expensive as Trevor Bauer.
The other impending issues are that players like Corey Seager, Walker Buehler, and Cody Bellinger need to get paid. However, Clayton Kershaw's $31M and Kenley Jansen's $16M come off the payroll after 2021. I'm sure that they will retain Kershaw but it should be at a lower rate. David Price and his $31M salary come off after 2022.
It's tough to say what the Dodgers might do this offseason. It would not surprise me if they try and stay under the penalty. They have a lot of goodwill to spend after finally winning the World Series. Personally, I hope the Dodgers will retain as many of the key free agents as possible. I do think there are some worth keeping and I'd also like to see those guys get to take a victory lap.
Last offseason the Dodgers made some big plays for some high salaried players but failed initially. Then they got the biggest prize in Mookie Betts and went into the salary tax as they also took on some of David Price's contract. It absolutely paid off on the field. However, the unknowns of the 2021 season due to COVID-19 could cause the Dodgers to stay conservative. California will be one of the last states to allow fans in the stands.
The Dodgers have some big decisions to make as they move into 2021. Once we get through December I believe we'll have a decent idea of their plans. If they let all their free agents go and non-tender some arbitration eligible players then we know they will keep spending low. I sure hope that is not the case.