Dodgers payroll advantages and the Mets luxury tax struggle
The Los Angeles Dodgers utilize deferred contract strategies like Shohei Ohtani's $700 million deal to manage a $393,807,413 payroll. Meanwhile, Steve Cohen's New York Mets face heavy penalties after exceeding the third luxury tax threshold with a $306,776,397 projected payroll.
The Los Angeles Dodgers maintain a payroll of $393,807,413, which exceeds the payroll of the Milwaukee Brewers, Tampa Bay Rays, and Cleveland Guardians combined. This massive spending leaves the Dodgers with an estimated tax bill of $63,484,448. While the Dodgers focus on winning a third consecutive title, the New York Mets face a different financial reality under Steve Cohen. The Mets currently project a payroll of $306,776,397, which puts them into the third luxury tax threshold.
The Ohtani contract math
Shohei Ohtani signed a 10-year, $700 million deal that relies heavily on deferred payments to manage the Dodgers’ immediate costs. He will receive only $20 million during his playing years, while the remaining $680 million arrives from 2034 to 2043. This structure allows the Dodgers to keep his average annual value at $2 million for competitive balance tax purposes. Andrew Friedman, the Dodgers president of baseball operations, says the club feels a responsibility to remain aggressive with roster additions following this deal.
The deferred money provides the Dodgers with significant flexibility to sign players like Yoshinobu Yamamoto to a 12-year, $325 million contract and Tyler Glasnow to a five-year, $136.5 million deal. This strategy effectively lowers the yearly payroll figure used to calculate tax penalties. Even with these savings, the Dodgers paid $169,375,768 in luxury taxes last season. The team also benefits from a roster rule that allows Ohtani to pitch without counting toward the 13-pitcher maximum. This exception lets the Dodgers use a six-man starting rotation including Ohtani without sacrificing bullpen depth. Cubs manager Craig Counsell called this exception "bizarre" because it gives one team different rules for a specific player.
| Threshold Level | 2026 Base Amount | Surcharge Tier 2 | Surcharge Tier 3 | Surcharge Tier 4 |
|---|---|---|---|---|
| First Threshold | $244M | $264M | $284M | $304M |
Mets spending and the Cohen tax
Steve Cohen refuses to limit his spending to small-market levels, often triggering the highest penalty brackets. The Mets face a fourth luxury tax tier, a level some call the "Steve Cohen tax" because it targets owners who spend aggressively. This fourth tier applies to teams exceeding the threshold by $60 million, imposing an 80% tax on the first $60 million of overage. The Mets also carry Juan Soto on a 15-year, $765 million contract with a $51 million average annual value. Unlike the Ohtani deal, this contract includes no deferred money, so every dollar counts toward the Mets’ tax calculations.
The Mets deal with heavy penalties because they have exceeded the luxury tax threshold in every season since 2022. They paid $91,637,501 in luxury taxes last year on a payroll of $346,670,456. If the Mets attempt to sign high-priced free agents like Michael King or Framber Valdez, they will likely surpass the $284 million threshold and trigger draft penalties. Such penalties move the team’s first overall selection back ten spots. Can the Mets maintain this level of spending without exhausting their resources?
The financial gap between the Dodgers and their World Series rivals remains massive. The Dodgers payroll of $393,807,413 towers over the $146 million Brewers or the $74 million Guardians. While the Dodgers use deferred money to stack talent, the Mets use direct cash to pursue stars like Juan Soto. Both teams prove that high spending creates advantages, even if the luxury tax attempts to penalize such behavior. The Dodgers have already paid more in CBT penalties than half the league.
