Ohtani's $700 million contract aftermath tax alone was 149.3 billion, but LAD rewarded by winning WS, the reason for unlimited investment
Dec 21, 2024
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According to the 2024 luxury tax status obtained and released by ESPN on the 21st (Korea time), the Dodgers topped the list with $131,06896.
The Dodgers ranks first overall this season with a payroll of $353.15,360. Including the luxury tax, this year's team's labor cost alone was $456,032,256 (about 661 billion won).
The Dodgers, which paid luxury taxes for five consecutive years from 2013 to 2017, did not pay for three years from 2018 to 2020, but became a club that paid for four consecutive years from 2021 to this year. The Dodgers are the second to exceed $100 million in luxury taxes this year after the New York Mets (144,478,419 dollars) last year.
The luxury tax was introduced in 2003 with the aim of easing power polarization among teams. This is why luxury tax is called 'comprehensive balance tax'. The luxury tax collected will be used for player welfare by taking away $3.5 million, and 50% of the rest will go to the player retirement fund for pension purposes. The remaining 50% will be allocated as supplementary funds at the discretion of the Commissioner and redistributed to clubs that receive revenue distribution.
The Dodgers applied a 50% ($587,680) basic tax rate to the excess of the $237 million luxury tax this year. The basic luxury tax rate, which is a progressive tax system, is 20% in the first year, 30% in the second year, and 50% in the third year or more. The Dodgers have been subject to a 50% basic tax rate since it has been over four years in a row.
In addition, the Dodgers will have additional tax rates of 60% ($33,609,216) for those exceeding $237 million, 45% ($9 million) for those between $40 million and $60 million, and 12% ($2.4 million) for clubs between $20 million and $40 million, bringing the combined luxury tax to $131,06896.
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The total luxury tax for these nine clubs is $311,305,310, the highest ever. This is an increase of about $88.3 million from the previous record of $222,997,486 last year. Among them, six teams have advanced to the postseason this year, including the Dodgers, Mets, Yankees, Philadelphia, Atlanta and Houston.
The payroll subject to the imposition of the body tax is the sum of each player's annual salary, incentives, bonuses, and various benefits included in the 40-man roster until the last day of the regular season. In the case of a multi-year contract player, it is included in the average annual salary (AAV).
Then, how was Shohei Ohtani's annual salary calculated and included, who signed a 10-year, $700 million contract last winter.
As is well known, Ohtani will receive $680 million, or 97.1% of the total amount, over 10 years from 2034, after the end of the contract period. The payment grace period is calculated as a present value and included in the payroll. In the case of Ohtani, the current price of AAV is $46.08 million,1476. This is why Ohtani's contract is considered to be worth $461 million, not $700 million.
After Ohtani, Mookie Betts ranked second with $30,416,667, and Tyler Glasnow ranked third with $27,312 million. Yamamoto Yoshinobu ($27.08 million), Freddie Freeman ($27 million), Teoscar Hernandez ($20.5 million), Chris Taylor ($15 million), Will Smith ($12.24 million), and Max Muncy ($12 million).
The total annual salary of four players, Ohtani, Glasnow, Yamamoto and Hernandez, who were hired last winter, was $120.977,309, accounting for 34.3% of Payroll. This year's World Series championship was the result of spending more than $1.2 billion in December last year alone.
For reference, Juan Soto, who recently signed a 15-year, $765 million contract with the New York Mets, has no deferred payment, so $51 million of AAV is included in the payroll every year and is subject to luxury taxes.
jhno@sportschosun.com
