The Dodgers had the second-highest payroll in baseball in 2022, coming in just below the highest luxury tax threshold. While they still have some big salaries on the roster for 2023, as of right now their projected payroll is quite a bit lower.
Dodgers insider David Vassegh was on AM570’s Petros & Money show last week, and he thinks Los Angeles might seize an opportunity to dip below the lowest luxury tax number for a season.
“The Dodgers more than likely at some point in time in the couple of years here have to reset themselves under the luxury tax and this year would be that opportune free agency (period).”
Right now, the Dodgers are estimated at just below $188 million for next year, $45 million below the first luxury tax number. That’s not an exact number because it’s based on estimates for arbitration salaries, so it could go up or down a bit. It could go down a lot if L.A. decides not to tender a contract to struggling center-fielder Cody Bellinger or to negotiate a lower-dollar deal with him, with similar calculus in deciding whether to exercise Justin Turner’s option.
The reason to drop below the first tax threshold for one year is that luxury tax penalties escalate based on how many consecutive years a team has been over. The Dodgers would be in the highest escalator if they go over again in 2023, meaning they’d pay a 50 percent tax on any overage, whereas a first-time offender would pay just 20 percent. Dropping below the threshold for a year would put them back to first-time status if they were to go over in 2024, dropping them back to the 20 percent base tax rate.
That said, it’s not as easy as just deciding to go under the threshold. Right at this moment, Los Angeles is without a starting shortstop and missing a couple starting pitchers, and they’re likely to make some noise in both the trade and free agent markets. But it could make sense for them to take advantage of their current payroll situation and reset that luxury tax with one slightly lower year.
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