Accusations of favoritism toward the Dodgers are nothing new in Major League Baseball. However, in recent days a debate has resurfaced pointing to alleged hidden financial benefit.
According to the newspaper Essentiallysports, a special tax scheme would allow the team to save more than $60 million a year in taxes related to television rights. This has sparked a debate about whether it is really an unfair privilege or a consequence of agreements signed more than a decade ago, as many media outlets claim.
Where does the controversy over MLB’s treatment of the Dodgers come from?
For years, the Dodgers have been singled out for their enormous financial power, high payroll and constant sporting prominence. This is compounded by perceptions of favorable arbitration or rules applied more flexibly. Now on this occasion, the discussion revolves around how MLB taxes its regional television revenues.
Sports journalist Joon Lee claimed that, after the team’s bankruptcy in 2011, the league agreed to record its television revenues as if the club were still in financial crisis, allowing it to keep around $66 million extra per season until 2039.
The TV deal that made the difference in MLB
In 2011, the Dodgers filed for bankruptcy and applied for a $150 million loan to sustain their operation. As part of the bailout, MLB established “special terms” for the calculation of TV rights taxes.
Under these conditions, the annual income from the television contract was set at approximately $84 million, with 4% annual increases, a figure used to calculate revenue sharing with small-market teams.
The deal with Spectrum SportsNet LA is actually worth an estimated $8.35 billion over 25 years. Even so, for tax purposes, MLB does not take the full amount into account, allowing the Dodgers to pay less in this area than other large-market teams.
The Dodgers and the biggest luxury tax bill in history
While the television scheme favors the Dodgers, the outlook changes when analyzing the luxury tax. By 2025, the team paid around $169.4 million in Competitive Balance Tax (CBT), a record figure in MLB.
By exceeding the salary threshold for the fifth consecutive year, the Dodgers face a 110% rate for every additional dollar, even surpassing the entire payroll of more than a dozen franchises.
This luxury tax money is redistributed among smaller market teams, meeting the goal of competitive balance. In comparison, the Mets paid close to $55.7 million, well below Los Angeles.
Basically, the Dodgers do have an advantage in their television tax, but they are also the main financial support of the MLB parity system. So the balance is that, rather than favoritism, the case reflects how the rules of the past continue to impact the present of baseball.
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