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Luxury Tax Threshold Could Impact Dodgers’ Activity In Free Agency

Jeff Spiegel
6 Min Read
Geoff Burke/USA TODAY Sports

For as long as the new ownership took over, the Los Angeles Dodgers’ strategy has (seemingly) been simple: spend, spend, and spend some more.

Last winter, the Dodgers topped the league in free agency spending — shelling out nearly $200 million on six players. The offseason prior? Much of the same — $193 million on the likes of Scott Kazmir, Kenta Maeda, Howie Kendrick and others.

So what’s on tap for this offseason? Something most fans probably won’t want to hear coming off a Game 7 loss in the World Series loss: likely not much in terms of free agency. And the reason stems from the luxury tax threshold that was imposed in the new Collective Bargaining Agreement.

The way the luxury tax works is that your tax rate increases for every year your total salaries exceed the threshold. But if a team can get below the threshold for just one year, everything resets.

For some context, the Dodgers have paid over $100 million in luxury taxes in the last three years alone. That’s despite trimming their overall salary this past season. It sat at $227.8 million heading into 2017.

The good news for the Dodgers is that plenty of dead money paid to players not on the roster is coming off the books. Specifically, Carl Crawford, who was released in 2016; and Andre Ethier, who had his $17.5 million club option for next season declined.

Heading into the offseason began, the Dodgers’ projected payroll for 2018 was at $177.7 million in guaranteed contracts. Keep in mind the luxury tax threshold is set at $197 million.

So the team, in theory, had $20 million to spend while simultaneously being able to reset themselves. Sounds easy, right? Not quite…

Logan Forsythe’s $9 million option for next season was picked up. Moreover, the Dodgers still have several players eligible for salary arbitration.

The group consists of Luis Avilan, Pedro Baez, Tony Cingrani, Josh Fields, Yimi Garcia, Yasmani Grandal, Kiké Hernandez, Joc Pederson and Alex Wood.

Like Forsythe, these players all no-brainers simply because of relative low-dollar amount that likely will be needed to avoid arbitration. Nonetheless, the grand total could run upwards of $30 million. That would send the Dodgers over the luxury tax threshold.

Now, some might be wondering why the team wouldn’t just take one more year of luxury taxes and get under in 2019. That’s when Adrian Gonzalez, Scott Kazmir Brandon McCarthy, Yasiel Puig and Hyun-Jin Ryu are all off the books.

The answer is simple: the 2019 free agent class is going to be arguably the most tantalizing in MLB history.

Bryce Harper, Manny Machado, Matt Harvey, Craig Kimbrel, Zach Britton, A.J. Pollock, Josh Donaldson, Andrew McCutchen, Adam Jones and Andrew Miller headline the group — which could also include Clayton Kershaw and David Price if they are to opt out of their contracts.

What can the Dodgers reasonably do this winter to remain among the best teams in baseball and get under the salary cap? The answer would have to come in the form of trades.

Can the Dodgers unload some of Gonzalez’s salary ($22.4 million) to a team interested in a veteran presence? Could they look to move Grandal thanks to the emergence of Austin Barnes?

What about eating some of Kazmir’s remaining salary ($17.7 million) in order to dump him? Could the same be done for McCarthy ($11.5 million)? Or, is this winter finally when the Dodgers part with Yasiel Puig ($9.2 million)?

It certainly would not be a popular move, but it would mean parting with a sizable salary and perhaps add future assets to the organization.

While all of this might sound bleak, keep in mind that even without any offseason additions, the Dodgers are in fantastic shape roster-wise.

Even without signing anyone from outside the organization, the Dodgers’ Opening Day roster would be some combination of:

Catchers: Austin Barnes, Kyle Farmer, Yasmani Grandal

Infield: Cody Bellinger, Charlie Culberson, Logan Forsythe, Adrian Gonzalez, Corey Seager, Justin Turner

Outfield: Kiké Hernandez, Joc Pederson, Yasiel Puig, Chris Taylor, Trayce Thompson, Andrew Toles, Alex Verdugo

Starting pitchers: Rich Hill, Scott Kazmir, Clayton Kershaw, Kenta Maeda, Brandon McCarthy, Hyun-Jin Ryu, Brock Stewart, Ross Stripling, Alex Wood

Relief pitchers: Luis Avilan, Pedro Baez, Tony Cingrani, Josh Fields, Yimi Garcia, Kenley Jansen, Adam Liberatore

The only pieces really missing from the World Series run would be Brandon Morrow (who might be re-signed), Yu Darvish and Watson.

The truth is, this is all a lot to take in and the possibilities here are truly endless — not to mention often unpredictable.

Dodgers president of baseball operations Andrew Friedman and general manager Farhan Zaidi have done a tremendous job to this point in rebuilding the organization from the bottom-up without sacrificing a single year of competitiveness.

And 2018 shouldn’t break from that. This winter it might just look a bit different…

Jeff Spiegel was raised in California but currently resides in Portland, Oregon. After graduating from the University of Oregon, he worked in sports before entering journalism full time — first as a Sports Reporter and then as the Associate Editor of a local newspaper. Online, he has been writing about both the Dodgers and Raiders since 2012 — having written for DodgersNation.com and SBNation.com prior to joining both DodgerBlue.com and RaidersNation.com. He left full-time journalism in 2012 to become a pastor. Jeff can be found on Twitter at @JeffSpiegel. Favorite Dodger I'm going past and present (sort of) on this one. Recently, I was a die hard Yasiel Puig guy. The energy he played with was amazing and the hope and expectation he brought every single night was captivating. Whether it was a rifle from the warning track to throw a guy out at second, an aggressive bat flip or licking his bat, I was here for ALL of the Yasiel Puig era. Past tense, I'd go with Eric Gagné. This wasn't so much about Gagné himself as it was the experience of cheering for him. Yes, he was on steroids — but the dude was unlike any pitcher I've ever seen — he was NASTY. I still stand by the claim that if I needed one out and my life depended on it, and could choose any pitcher from any era to get me that out, I'm taking roided up Gagné in a heartbeat. Favorite Dodger Moment A few jump to mind immediately. Being born in November of 1988, I missed the last World Series by weeks — which also meant I didn't get to see the Dodgers win a playoff game until I was nearly 16. They had made the playoffs in 1995 and 1996, but were swept both times. In 2004, though, I got to see them win behind a complete game shutout from Jose Lima, and that was pretty freaking special. The next in-person moment that came to mind was the Manny Ramirez bobblehead night pinch-hit grand slam from 2009. Vin Scully claimed it was the loudest he had heard Dodger Stadium in 20 years, and it's hard to disagree. As far as ones I didn't get to see live, I'll throw one more out there: the back-to-back-to-back-to-back home runs that tied a game against the Padres in 2006 (plus the walk-off from Nomar Garciaparra in extra innings) was an all-timer. Obviously, the impending Dodgers World Series will quickly jump to the top of this list...