Dodgers' tax bill comes due at record $43.7 million

Bob Nightengale | USA TODAY Sports

The Los Angeles Dodgers will pay a record $43.7 million luxury tax penalty after finishing the 2015 season with the largest payroll in baseball history at $298.3 million, according to salary information obtained by USA TODAY Sports.

The Dodgers — who paid about $50 million to players who never appeared for them in 2015 — are one of four teams this season to be subjected to Major League Baseball's "Competitive Balance Tax," which started in 2011 and applies to teams that surpass a certain payroll threshold. The year's threshold was $189 million. The other teams being taxed included the New York Yankees ($26 million), Boston Red Sox ($1.87 million) and San Francisco Giants ($1.33 million).

The luxury tax, which is due to MLB offices by Jan. 21, is based on payroll that is calculated as the average annual value of contracts for players on the 40-man roster, including $12.9 million in benefits, which also factors in all cash transactions in trades.

These four teams spent $935.75 million and yet none of them won a postseason series. The Dodgers and Yankees each reached the playoffs, but the Yankees lost their wild-card game against the Houston Astros, and the Dodgers fell to the New York Mets in the NL Division Series.

In fact, none of the the nine teams with the highest payroll won a playoff series. The Chicago Cubs, at $155 million, had the highest payroll of any team that won a series.

Perhaps this helps explain why the free-agent market is just heating up. On Monday, the Detroit Tigers signed right-hander Jordan Zimmermann to a five-year, $110 million contract. A day later, the Red Sox agreed with left-hander David Price on a seven-year, $217 million deal, the largest average-annual contract for a pitcher.

"It might sound silly," Tigers owner Mike Ilitch said at Zimmermann’s press conference Monday, “but I don't care about spending money. I want to get as many good players out there as possible."

Does that mean the Tigers will exceed the $189 million luxury tax threshold in 2016 after narrowly missing it this year at $181.7 million?

“I'm supposed to be a good boy and not go over it," Ilitch said, "but if I think there are certain players that could help us a lot, I'll go over it.

“Oops, I shouldn't have said that.’’

The Giants, who went over the luxury tax for the first time, also are hardly bashful about the prospects of exceeding it again next year. They will have about $25 million coming off the books, factoring in the salary increases of players on their roster, but are in negotiations with free-agent right-hander Zack Greinke and would like to add a power-hitting outfielder such as Justin Upton or Yoenis Cespedes.

“We’ll keep an eye on it, but we’re not afraid to go over it,’’ Giants president Larry Baer told USA TODAY Sports. “We’ll do what’s best for our team. In the years we won the World Series, we were not in the competitive balance tax. We believe we can win without being there.

“Having said that, if it’s the right move for us, we’ll do it.’’

Yet, of the teams with the nine highest payrolls at the conclusion of last season, only the Giants, Red Sox and Tigers have publicly declared their intention to be active in the free-agent market.

The Yankees ($241.15 million payroll), who for many years were the payroll kings until the Dodgers dethroned them in 2014, continue to shy away from pricey free agents, saying they no longer feel comfortable committing huge dollars to free agents who are over 30 years old.

“I’ve said it over and over, I shouldn’t have to have a $200 million payroll to win a world championship,’’ Yankees owner Hal Steinbrenner said last month. “It’s been proven over and over again, right?’’

Of course, the Yankees have some massive contracts expiring after the 2016 season, including CC Sabathia ($25 million, with $5 million buyout for 2017), Mark Teixeira ($23.1 million) and Carlos Beltran ($15 million).

“A couple of years from now, the payroll situation will be different,’’ Steinbrenner said. “I’ll have flexibility. We will be active on the free-agent market. But (now), I’ve got other options.’’

The Royals won the World Series with a payroll of $151.4 million, while the NL champion Mets had a $122.9 million payroll —even after adding $6.42 million in salary with the mid-season acquisitions of Cespedes and Juan Uribe.

The Mets' payroll ranked No. 20, and they one of three teams in the bottom 10 payrolls who reached the playoffs. The Astros had the second-lowest payroll at $95.8 million, and the Pittsburgh Pirates, who lost the NL wild-card game, had the ninth-lowest.

There were a record 27 teams that spent at least $100 million in payroll and benefits, with only the Tampa Bay Rays ($89.2 million), Astros and Oakland Athletics ($98.2 million) falling short.

It’s not as if the Dodgers will ever be among the lowest spending teams, not with their $8.5 billion local TV contract, but they say they plan to cut payroll in 2016.

The team's farm system is ranked among the best in baseball, according to Baseball America, and the Dodgers resisted the temptation to part with any of their top prospects at last year’s trade deadline.

“From the day this ownership arrived we have stressed the importance of becoming a player development-oriented organization," Dodgers president Stan Kasten said. "One which provides a steady pipeline of players to the major leagues, like the traditional Dodger teams.

“We are not all the way there yet, but I believe we have made real progress.’’

So the big spenders are trying to spend less.

Check back with us again after the winter meetings next week.