Now that the Los Angeles Dodgers have acquired Chase Utley from the Philadelphia Phillies in a waiver trade, online betting fans will see an MLB first: The Dodgers are set to be the first team in the league’s history to put a team with a luxury-tax payroll of $300 million on the field.
— Philly Inquirer (@PhillyInquirer) August 24, 2015
According to league calculations, the trade moves the Dodgers’ payroll to $298.5 million. Performance bonuses that the team is contracted to pay, along with bonuses for end-of-season awards, could push them over the $300 million mark.
The Dodgers aren’t the first team to spend at a level more lavish than the rest of baseball. The Yankees had huge payrolls in the 1990s and 2000s, and while it did bring them some trips to the World Series, it didn’t bring as many as then-owner George Steinbrenner probably would have liked. These immense payrolls are a testament to the power of the baseball players’ union, which has successfully kept a hard salary cap – which is a way of life in the NBA, NHL and the NFL – out of the national pastime. The Dodgers will have to pay a luxury tax by going over the maximum tax-free amount, but given their position in the second largest city in the United States (with a correspondingly huge TV deal), they have the money to pay it.
A team’s luxury tax payroll is calculated on the basis of mean yearly values of the contracts of all the players on the 40-man roster. You also add in approximately $13 million per team for the pension and health plan, as well as Social Security and unemployment taxes that the teams have to pay. This season, the threshold for payroll is $189 million. Teams with a larger payroll than that have to pay a 40 percent rate on any spending above that threshold. Right now, the Dodgers are projected to owe approximately $44 million, which would smash the record that the Yankees set at the end of the 2005 season ($34 million). The Dodgers paid $26.6 million after the 2014 season and $11.4 million after the 2013 season.
So how does Utley figure into this? He will receive $1.13 million from the Phillies as an assignment bonus for waiving his no-trade clause. The Phillies have also agreed to pay the $2 million buyout should the Dodgers fail to carry the team option for the 2016 season, and to give the Dodgers $383,661, to help with a part of the rest of the salary due Utley for the 2015 season. The Phillies also agreed to pay Utley’s roster bonus, which will be $5 million so long as he does not suffer from a knee injury and head to the disabled list for a minimum of 15 days.
That’s a lot of money from the Phillies to get rid of Utley – but the Phillies are in full rebuilding mode and have a young second baseman ready to take Utley’s spot. The Dodgers basically get a World Series veteran who has come along lately with some timely hitting as the Phils have played a little better in the second half. So it’s a win-win, but it will put the Dodgers’ luxury tax payments even higher.