Dodgers Paying Additional Surcharge On Signings Due To CBT

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The Los Angeles Dodgers maintained their offseason spending spree with the signing of Teoscar Hernández to a one-year, $23.5 million contract.

This deal comes on the heels of spending more than $1.1 billion on the group of deals handed out to Shohei Ohtani, Yoshinobu Yamamoto and Tyler Glasnow.

Dodgers president of baseball operations Andrew Friedman hasn’t relented in filling out the roster, attacking it with key, impact additions, and more moves may be on the way.

While the Dodgers were already over the luxury tax number, the signing of Hernández pushed them further over the competitive balance tax threshold (CBT), so any new signings would put an added-premium on every dollar spent, per Jeff Passan of ESPN:

Because his signing will push their payroll to around $270 million, they will jump well into the second luxury-tax bracket and pay a 12.5% surcharge on top of the 50% they need to pay for spending over the $237 million threshold. Factoring in additional money spent because of the luxury tax, Hernández’s one year will cost the Dodgers more than $32 million.

If the Dodgers continue spending, they could end up in the final tier that would charge them a 110% surcharge on their spending. However, it makes sense for the club to continue going all in at this time.

Ohtani did the Dodgers a monumental favor with as much deferred money is included in his deal, which pushed his CBT salary figure to a manageable rate.

The current window the Dodgers are in also allows them to dig into their treasure trove of ownership resources while maximizing their years with Freddie Freeman and Mookie Betts.

The Dodgers remain in the market for additional pitching help, and they have so far been connected to some of the top relievers available.

What will happen if the Dodgers keep spending?

Where the Dodgers are in their current spending, the projected year-end payroll is $301.6 million, according to Cot’s Baseball Contracts.

This would put them in the ‘Steve Cohen’ tax bracket, which opens up at anything over $297 million. They’ll be required to pay 110% tax, the most significant of penalties in the current CBT. Teams that are $40 million or more above the threshold have their highest selection in the next upcoming Draft moved back 10 places, unless the pick falls in the top six.

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