Financial reality: The competitive balance tax is now Dodger reality

The flirtation with Giancarlo Stanton was glorious. It reminded me of that delicious meal that is fattening, artery clogging and unhealthy. You know you shouldn’t, but you just want to anyway.

Stanton wanted the Dodgers, and the Dodgers wanted Stanton I will explain why it just wasn’t meant to be.

While Stanton would have looked amazing in a Dodgers uniform it was not good for the organization’s long-term health. The tax implications would have been prohibitive and in the end, if the Marlins were not going to take any salary back from the Dodgers it was unfeasible.

I get all of you who are lamenting the Dodgers not getting Stanton. I really do. But, that is your emotional center talking to you and not logic. If you were listening to your head and not your heart you would understand that the being over the salary cap in baseball is not a good thing. The longer you are over that cap and it’s REALLY not a good thing, and Stanton would have made improving the rotation and bullpen very difficult.

The baseball luxury tax is called a “competitive balance tax.”  The system states that the top-5 teams in terms of salary would have to pay a tax on their salaries starting at 17.5 percent, the higher your salaries went, and the more you stayed in the top-5 in salary, that teams tax rate would PROGRESSIVELY increase. This progressive tax is where the Dodgers are sitting which made a Stanton deal nearly impossible. Something to note, the tax re-sets if you fall below the threshold for one year.  For example, the Dodgers busted the salary tax threshold in 2013 and then again in 2014. They paid 17.5 percent tax on those salaries above threshold in 13′ and 22.5 percent in 14′. But, the Dodgers went below the threshold in 2015 so they weren’t taxed. They again hit the tax threshold in 2016, when new terms stated first offenders paid a 20 percent tax. Second time offenders pay a 30 percent tax. Well, the Dodgers are having to pay a percent tax on the 49 million dollars they went over the threshold. In 2018 if the Dodgers don’t go below a 197 million dollar payroll they will have to pay a 50 percent tax on player salaries.

The Dodgers committed payroll for 2018 is 185 million dollars

How did we get here you might be asking ? Well, remember Carl Crawford ? The Dodgers just finished paying Crawford 22 million dollars to sit at home and watch games on TV for the 2017 season. Dodger fans love Andre Ethier but he was costing the team 17.5 million dollars during the 2017 season. When you throw in Howie Kendrick’s 10 million, and Alex Guerrero’s 10 million dollars,  well, you see where this is going. The Dodgers 2017 payroll was mind-jarring 244 million 661 thousand dollars.

Moving forward the Dodgers have some commitments that will make it nearly impossible to NOT pay the 50 percent in tax next year. The key for the Dodgers is to not pay the tax in 2019 as they prepare big contracts for Corey Seager and Cody Bellinger in the years to come. The good news is the Dodgers have huge dollars coming off the books next summer which should make the fiscal plan stabilize.

We love Adrian Gonzalez but his 22.3 million dollars price tag for 2018 is a tough one to swallow. His contract expires in 18′

Brandon McCarthy has been well-intentioned and it’s not his fault the front office over-paid him. He is due 11.5 million dollars in the final year of his 4-year 48 million dollar contract.

Scott Kazmir signed a back-loaded three-year deal in the winter of 2015 and the Dodgers have paid the price. He has been injured for virtually the entire deal. The Dodgers owe him a guaranteed 17.6 million dollars in 2018.

Erisbel Arruebarrena is due 6.5 million dollars in the final year of a 5-year 25 million dollar deal. Sometimes you roll the dice and some times it doesn’t pay off.

Hyin-Jin Ryu is due to make 7.8 million in the final year of his deal.

Yasiel Puig will make 9.2 million and is arbitration eligible. This is good news from a couple of standpoints. First, Puig is playing for a monster raise through arbitration in the 2018 season. If he doesn’t perform the Dodgers don’t pay as much. If he does, well he will hit the open market in 2020 and will use the 2019 season to get his huge pay-day.

It’s possible the Dodgers could be shedding 74. 9 million dollars in salary for the 2019 !

I didn’t even mention the possibility that Clayton Kershaw opts out of his 35.6 million dollar contract in 2018. I don’t even want to think about Kershaw in another uniform and when you consider he is due to make 70.2 million dollars in 2019 and 2020, I don’t think he opts out unless he has a *wink wink* agreement with the Dodgers to extend the deal but make it more club friendly in the short-term, helping the Dodgers gain flexibility.

So, be sad if you want with the Dodgers not signing Giancarlo Stanton, but the fiscal realities regarding our beloved Dodgers dictated that spending 265 million dollars over the next 10 years on a guy like Stanton was not realistic.

I pose this question. Would you rather have paid Stanton or keep Seager and Bellinger in Dodger blue during their prime seasons ?

It would have been nice, but fiscally a time bomb

 

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