NEW YORK (AP) — Chase Utley's acquisition put the Los Angeles Dodgers
close to becoming the first baseball team with a $300 million
luxury-tax payroll.
The trade Wednesday that sent the six-time All-Star second baseman
from Philadelphia to the NL West leaders raised the Dodgers' projected
payroll for tax purposes to about $298.5 million, according to
calculations by Major League Baseball. Performance bonuses for other
players and end-of-season award bonuses could make the Dodgers the first
team to reach the $300 million mark.
"That's fine. They haven't won the championship," Baltimore All-Star
outfielder Adam Jones said. "You still have to play between the lines —
same thing with the Yankees in the '90s and 2000s. It's baseball, man.
Our union is tough enough to fight for our rights and we don't have a
salary cap. Los Angeles is the second-biggest city in the United States.
They can support it. I don't have to pay it!"
Luxury tax payrolls are based average annual values of contracts for
the 40-man roster and include about $13 million per team in benefits,
such as the health and pension plan, and payroll, unemployment and
Social Security taxes paid by clubs.
Los Angeles is well above the $189 million tax threshold and will pay
at a 40 percent rate for exceeding the mark for the third straight
year. Its projected tax bill is about $44 million, which would top the
record $34 million paid by the New York Yankees after the 2005 season.
The Dodgers' luxury tax payroll includes about $40 million for players no longer with the organization.
Los Angeles paid $11.4 million in tax in 2013 and $26.6 million last year, when its tax payroll was $277.7 million.
The Dodgers' regular payroll — salaries plus prorated shares of
signing bonuses and earned bonuses — is at about $285 million, up from a
record $257 million last year.
>>>> ANALYSIS:
The takeaway from the Dodgers ownership change and massive multi-billion dollar Dodger channel cable deal (which has been a disaster for TW, the cable partner) is that owners will spend just about anything in order to win. The Tigers were the same way for the past three seasons; overpaying for star players in order to win. But rarely does one "buy" a championship.
It also has a domino effect on clubs that cannot afford free-wheeling spending. The Kershaw $210 million deal is now the gold standard for ace pitchers. More than half of the clubs now cannot even bid on a Kershaw type starter. As the top tier players get more of budget payrolls, teams will have to axe the middle tier players (who earn on average $5 million/season) to go with more unproven prospects (at the major league minimum $550k). The Cubs are banking on that protocol: pay big money for arms, grow farm bats who don't take up much payroll.
But the bubble on cable TV deals is about to burst. Other teams think they will get Dodger money will soon find out that cable operators have hit the ceiling on what subscribers will pay for channel packages. And most subscribers don't want to pay $1.00 to $5.00 a month for a baseball only channel. In fact, more and more cable subscribers are "cutting the cord" to stream live events through the internet.
When the big money well dries up, there will be a player backlash for several years. Many rookie deals are looking forward to the big payday that may not come. And generationally, if the big paydays are numbered, less youth will go into the sport as children. Instead, they will concentrate on other more potentially profitable athletic pursuits like basketball, football, or European soccer.
