The Los Angeles Dodgers are leading a record nine teams in paying Major League Baseball’s luxury tax this year, with an all-time high penalty of $103 million. The New York Mets follow with a $97.1 million tax bill, bringing their total under high-spending owner Steve Cohen to nearly $229 million.
The World Series-winning Dodgers will pay the tax for the fourth year in a row. Their tax payroll of $353 million includes $1,032,454 in non-cash compensation for Shohei Ohtani, who has a contract that includes the use of a suite at Dodger Stadium and an interpreter for games.
The Yankees owe $62.5 million, according to finalized figures from Major League Baseball and the players’ association, which were obtained by The Associated Press. Other teams on the list include Philadelphia ($14.4 million), Atlanta ($14 million), Texas ($10.8 million), Houston ($6.5 million), San Francisco ($2.4 million), and the Chicago Cubs ($570,000).
The total tax for the year is $311.3 million, surpassing last year’s record of $209.8 million, when eight teams paid. Tax money is due by January 21.
Since the penalty started in 2003, more than $1 billion in taxes have been collected, with 15 teams paying a total of $1.23 billion. The Yankees have paid the most at $452 million, followed by the Dodgers at $350 million, and the Mets.
Toronto reduced its tax payroll after a series of trades in the summer, lowering it to $233.9 million, just below the $237 million threshold. The Blue Jays had been projected to have a payroll of $244.3 million at the start of the season.
Chicago’s payroll slightly exceeded the threshold at $239.85 million.
The Mets decreased their luxury tax payroll from last year’s record $374.7 million to $347.7 million, reducing their tax from $100.8 million. The Dodgers, Mets, and Yankees were the only teams that exceeded the fourth threshold, which was added in the 2022 labor contract and is sometimes called the Cohen Tax due to its aim to slow Cohen’s spending.
Among the teams paying the tax, the Giants, Rangers, and Cubs did not make the playoffs.
Luxury tax payrolls overall rose by 2.3%, from $5.793 billion last year to $5.924 billion this year.
Tax payrolls are based on average annual values, including earned bonuses for players on 40-man rosters, as well as benefits and each team’s share of the $50 million pool for pre-arbitration players, which began in 2022. Deferred salaries and bonus payments are adjusted to present-day values.
Teams that owe tax for three consecutive years, such as the Mets, Dodgers, Yankees, and Phillies, are taxed at a 50% rate on the first $20 million over the $237 million threshold. They pay 62% on the next $20 million, 95% on the amount from $277 million to $297 million, and 110% on any amount above that.
The Braves and Rangers are paying tax for the second year in a row, at 30% on the first $20 million over and 42% on the next $20 million.
Houston is paying the tax for the first time, although they exceeded the threshold in 2020 when the penalty was suspended due to the coronavirus pandemic. The Giants have been paying the tax for the first time since 2017, and the Cubs have been paying for the first time since 2019.
Under the labor contract, the first $3.5 million of tax money is used to fund player benefits, with 50% of the remaining money going to player Individual Retirement Accounts.
The other 50% is used for a supplemental discretionary fund, which is distributed among teams eligible for revenue-sharing money and that have increased their local non-media revenue. This year, MLB and the union agreed that teams whose local media revenue has dropped since 2022 or 2023 could receive up to $15 million from the discretionary fund.
Next year’s tax threshold is $241 million. Teams like the Mets, Yankees, Dodgers, Phillies, Braves, or Rangers that exceed it would pay at the highest tax rate, rising to 110% for amounts over $301 million.
